Pity the World Bank. Challenged by other lenders in its key role of providing finance to developing countries, it is battling for legitimacy as it tries to reflect the rising influence of emerging markets and grappling with discontent among its staff. On top of this comes hostility from the administration of Donald Trump, who has threatened to cut the US funding contribution.
The response of Jim Yong Kim, the bank’s president, appears to be to put bank services at Mr Trump’s disposal. He has offered to set up and administer a fund for women’s entrepreneurship championed by Ivanka Trump, the US president’s daughter, and offered to provide expertise for Mr Trump’s planned infrastructure plan.
Looked at narrowly, neither of these actions is outside the bank’s remit, and pursuing them may be politically astute. But such an obvious trading of favours for funding falls well short of required standards of probity, particularly for an agency that insists its borrower countries improve governance.
The initial capital for the fund, $200m from Saudi Arabia and the United Arab Emirates, justifiably raised some eyebrows, given the Saudis’ record on women’s rights and the bank’s commitment to gender equality. And although the bank already administers a number of standalone funds, making a deal with a president’s daughter presents a conflict of interest. The bank will have political difficulty pulling out if the fund underperforms.
Mr Trump’s fondness for mixing public policy with personal considerations is not the least of his many flaws. But for the bank, securing continuing funding from the US is not worth the blow to its credibility that such a quid pro quo would deliver.
The bank’s legitimacy is already compromised by the time-honoured stitch-up whereby an American always holds the presidency, purely in order to persuade Congress to sign off continued US funding for the institution. This attempt to curry favour with the US administration strengthens the argument for a truly merit-based appointment. Mr Kim was not the best candidate when he was appointed in 2012, but the unspoken US lock on the presidency carried the day.
One suggestion to deal with the current problems, admittedly an ambitious one, does present itself. Angela Merkel, the German chancellor, said over the weekend Europe should take a stronger role in global governance. Filling a funding gap at the bank created by a US withdrawal would be an excellent way to show that Europe is serious.
Mr Kim is in a difficult position. The World Bank does not normally have to deal with a White House that seems so indifferent to its continued existence. But risking the bank’s credibility by appearing to engage in personal favours for the US president is not the way to proceed.