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World Bank’s Malpass surprises with early exit

Yellen said the US would soon nominate a replacement for Malpass

World Bank President David Malpass on Wednesday said he would leave his post by the end of June, months after running afoul of the White House for failing to say whether he accepts the scientific consensus on global warming.

Malpass, appointed by former President Donald Trump, will vacate the helm of the multilateral development bank, which provides billions of dollars a year in funding for developing economies, with less than a year remaining in a five-year term. He offered no specific reason for the move, saying in a statement, “after a good deal of thought, I’ve decided to pursue new challenges.”

Treasury Secretary Janet Yellen thanked Malpass for his service in a statement, saying: “The world has benefited from his strong support for Ukraine in the face of Russia’s illegal and unprovoked invasion, his vital work to assist the Afghan people, and his commitment to helping low-income countries achieve debt sustainability through debt reduction.”

Yellen said the United States would soon nominate a replacement for Malpass and looked forward to the bank’s board undertaking a “transparent, merit-based and swift nomination process for the next World Bank president.”

By long-standing tradition, the U.S. government selects the head of the World Bank, while European leaders choose the leader of its larger partner, the International Monetary Fund.

Malpass took up the World Bank helm in April 2019 after serving as the top official for international affairs at U.S. Treasury in the Trump administration. Formerly, he was the chief economist for defunct investment bank Bear Stearns for more than a decade. In fiscal 2022, the World Bank committed more than $104 billion to projects around the globe, according to the bank’s annual report.

A source familiar with his thinking said Malpass had informed Yellen of his decision on Tuesday.

The end of the fiscal year at the end of June was a natural time to step aside, the source said. The World Bank’s governors are expected to approve the bank’s roadmap for reforms with only minor changes at the spring meetings of the IMF and World Bank set for mid-April.

Still, World Bank sources said they were surprised by his decision to step down before the joint meetings of the World Bank and the International Monetary Fund in Morocco in October.

FEELING THE HEAT ON CLIMATE

Pressure to shake up the leadership of the World Bank to pave the way for a new president who would reform the Bank to more aggressively respond to climate change has been building for over two years from the United Nations, other world leaders and environmental groups.

In November 2021, Special Adviser to the UN Secretary-General on Climate Change Selwin Hart called out the World Bank for “fiddling while the developing world burns” and said that the institution has been an “ongoing underperformer” on climate action.

Pressure on Malpass was reignited last September when the World Bank chief fumbled answering a question about whether he believed in the scientific consensus around climate change, which drew condemnation from the White House.

In November, Special Envoy on Climate Change John Kerry said he wants to work with Germany to come up with a strategy by the next World Bank Group meetings in April 2022 to “enlarge the capacity of the bank” to put more money into circulation and help countries deal with climate change.

Environmental groups cheered his departure. “This is great news. It is hard to think of a worse fit for World Bank President than an alleged climate denier and the chief economist of Bear Stearns ahead of the 2008 recession,” said Bronwen Tucker, Global Public Finance Campaign Co-Manager at Oil Change International.

More recently, Yellen has launched a major push to reform the way the World Bank operates to ensure broader lending to combat climate change and other global challenges.

According to the bank’s 2021 annual report, Malpass earned $525,000 in annual net salary that year, and the bank made more than $340,000 in annual contributions to a pension plan and other benefits. — Reuters