News: The World Bank makes it official for Ajay Banga

Thursday, May 4, 2023

The World Bank makes it official for Ajay Banga

May 04, 2023

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Hi, I’m Zach Warmbrodt, POLITICO’s financial services editor, co-author of our Morning Money newsletter and your guide this week for coverage of the Milken Institute Global Conference.

As this year’s annual Milken conference came to a close, Russia-Ukraine tensions ratcheted up over an alleged drone assassination attempt in Moscow, and the World Bank took the next step in its leadership transition (with its own Russia drama). Here’s the latest.

THE WAR IN UKRAINE

THE NEW FLASHPOINT: Ukraine denied that it tried to assassinate Russian President Vladimir Putin in a drone attack at his official residence. Russia threatened retaliation for what it called a terrorist action. POLITICO was unable to verify the Kremlin’s claims.

“We don’t attack Putin or Moscow. We fight on our territory. We are defending our villages and cities,” Ukrainian President Volodymyr Zelenskyy said during a visit to Finland.

WHAT’S NEXT: The escalation comes amid a stalemate on the ground in Ukraine, where both sides have been slowed by the winter.

NATO Admiral Rob Bauer told POLITICO editor-in-chief Matt Kaminski on stage at Milken this week that it will probably take until mid-May for the terrain to become more favorable to vehicle movement and potentially enable the Ukrainians to start a counteroffensive. (More below on how world leaders at Milken are gaming out the potential end of the conflict.)

THE WORLD BANK

OUT WITH THE OLD, IN WITH THE NEW: The World Bank’s board on Wednesday agreed to make Ajay Banga the organization’s next president, setting the stage for a revamp sought by U.S. officials. His start date is June 2.

The World Bank’s leading members signed off on Banga with minimal drama, outside of Russia’s decision to abstain from the vote. No country pushed a competing candidate to challenge the former Mastercard CEO.

President Joe Biden nominated Banga in conjunction with a call by Treasury Secretary Janet Yellen to make the World Bank tap more private funding and tackle broader global problems like climate change.

Banga put the challenge this way in a recent speech: “It must pursue both climate adaptation and mitigation, it must reach out to lower-income countries without turning its back on middle-income countries, it must think globally but recognize national and regional needs. The task is great.”

FAREWELL FROM MALPASS: Outgoing World Bank President David Malpass will now be in the mix as a potential Treasury secretary if Republicans retake the White House in 2024. He reflected on his tenure at Milken on Wednesday.

Malpass told Michael Milken that what surprised him as World Bank president was that “each time there was a crisis, there seemed to be another one following it that was a bigger challenge.”

The crises under Malpass’s watch included Covid-19, the Afghanistan evacuation, the Ukraine conflict’s disruption of food supplies and what he describes as a sharp falloff of investment into developing countries.

“The surprise is that you can keep adding to the burden,” he said. “I’m very worried about that. We’re facing a dangerously slow global growth outlook.”

Malpass was anything but upbeat as he prepared for his exit. He warned that governments need to put guardrails on their spending and that central banks like the Federal Reserve should reconsider whether it makes sense to keep buying bonds.

He put the World Bank’s challenge in stark terms.

“Poverty’s getting worse, not better,” he said. “I’m hugely disappointed in that.”

HAPPENING TODAY

India will host the foreign ministers of members of the Shanghai Cooperation Organization in Goa

DON’T MISS THE POLITICO ENERGY SUMMIT: A new world energy order is emerging and America’s place in it is at a critical juncture. Join POLITICO on Thursday, May 18 for our first-ever energy summit to explore how the U.S. is positioning itself in a complicated energy future. We’ll explore progress on infrastructure and climate funding dedicated to building a renewable energy economy, Biden’s environmental justice proposals, and so much more. REGISTER HERE.

GLOBAL RISKS AND TRENDS

MILKEN ROUNDUP

‘WE DON’T HAVE A GOOD PLAN’: WHAT WILL EUROPE DO AFTER THE UKRAINE CONFLICT?: Munich Security Conference CEO Benedikt Franke said the end of the Ukraine war “will take ages” but he called for Europe to spend more time planning for that day.

“The question really is … at what time do you prepare for the afterlife?” he said. “At what time do you prepare for the negotiations? Do we now have a plan in Germany, in Europe, for what we’re going to do if Putin falls, if Zelenskyy dies, if a cease fire is agreed on?”

“We don’t have a good plan,” he said. “While the Ukrainians fight bravely, we need to prepare the ground for that.”

NATO deputy secretary general Mircea Geoană said Russia and Ukraine are too far apart politically to enter negotiations. He warned that those views are now “ingrained in the public opinion of both countries” – with or without Putin and Zelenskyy in charge.

“That’s something we need to be prepared for,” he said.

CLEAN ENERGY INVESTORS BRUSH OFF U.S. DEBT FIGHT’S THREAT TO CLIMATE SPENDING: House Republicans want to gut Biden’s signature climate investment law, the Inflation Reduction Act, in exchange for raising the government’s borrowing authority. But Colin le Duc, founding partner at the sustainability-focused Generation Investment Management, said he’s not sweating it.

He said the bigger problem the U.S. has is just getting money out the door.

“My impression from entrepreneurs is that they’re really struggling to get access to the capital because the bureaucracy is so intense,” he said. “I don’t see the debt ceiling as an issue.”

Foreign companies also don't see Republicans slowing the law down. They're continuing to worry that its generous incentives will pull investment away from other markets.

"How can any other country in the world compete?" said Vineet Mittal, chair of Mumbai-based renewable energy developer Avaada Energy, which is interested in developing green hydrogen. "They're creating a lopsided market."

Rep. Brendan Boyle of Pennsylvania, the top Democrat on the House Budget Committee, told our Sam Sutton that he expects lawmakers to vote to raise the debt ceiling before a June 1 deadline. But he said that too many investors at the conference conveyed a “breezy, false confidence” about Washington’s ability to resolve the impasse.

BRAIN FOOD

SAUDI ARABIA TRIES TO LURE BANKERS WITH BIG BUCKS: Bloomberg reports that banking jobs and salaries are surging in Saudi Arabia as the industry faces layoffs and smaller bonuses elsewhere in the world. The boom is being driven by Crown Prince Mohammed Bin Salman’s push to make his economy a financial juggernaut. The big problem: It’s proving hard to attract talent in part because of Saudi Arabia’s restrictive social rules.

ONE FUN THING

BEHIND THE SCENES OF A KING’S CORONATION: WSJ digs into the guest list for Saturday’s coronation of King Charles III, reporting that it “reflects the monarch’s drive to keep the institution relevant through diversity and a greater connection with ordinary Britons, even if that means quite a few aristocrats have been snubbed.”

The guest list includes Lionel Richie, U.S. first lady Jill Biden, the magician Dynamo and Max Woosey, a teenager who camped in his garden for three years to raise money for charity.

Thanks to Sam Sutton, Debra Kahn, editor Heidi Vogt and producer Sophie Gardner.

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