Banga, Ajay

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Fragile Global Economy Faces New Crisis in Israel-Gaza War

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A war in the Middle East could complicate efforts to contain inflation at a time when world output is “limping along.”The International Monetary Fund said on Tuesday that the pace of the global economic recovery is slowing, a warning that came as a new war in the Middle East threatened to upend a world economy already reeling from several years of overlapping crises.The eruption of fighting between Israel and Hamas over the weekend, which could sow disruption across the region, reflects how challenging it has become to shield economies from increasingly frequent and unpredictable global shocks. The conflict has cast a cloud over a gathering of top economic policymakers in Morocco for the annual meetings of the I.M.F. and the World Bank.Officials who planned to grapple with the lingering economic effects of the pandemic and Russia’s war in Ukraine now face a new crisis.“Economies are at a delicate state,” Ajay Banga, the World Bank president, said in an interview on the sidelines of the annual meetings. “Having war is really not helpful for central banks who are finally trying to find their way to a soft landing,” he said. Mr. Banga was referring to efforts by policymakers in the West to try and cool rapid inflation without triggering a recession.Mr. Banga said that so far, the impact of the Middle East attacks on the world’s economy is more limited than the war in Ukraine. That conflict initially sent oil and food prices soaring, roiling global markets given Russia’s role as a top energy producer and Ukraine’s status as a major exporter of grain and fertilizer.“But if this were to spread in any way then it becomes dangerous,” Mr. Banga added, saying such a development would result in “a crisis of unimaginable proportion.”Oil markets are already jittery. Lucrezia Reichlin, a professor at the London Business School and a former director general of research at the European Central Bank, said, “the main question is what’s going to happen to energy prices.”Ms. Reichlin is concerned that another spike in oil prices would pressure the Federal Reserve and other central banks to further push up interest rates, which she said have risen too far too fast.As far as energy prices, Ms. Reichlin said, “we have two fronts, Russia and now the Middle East.”Smoke rising from bombings of Gaza City and its northern borders by Israeli planes.Samar Abu Elouf for The New York Times Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said it’s too early to assess whether the recent jump in oil prices would be sustained. If they were, he said, research shows that a 10 percent increase in oil prices would weigh down the global economy, reducing output by 0.15 percent and increasing inflation by 0.4 percent next year. In its latest World Economic Outlook, the I.M.F. underscored the fragility of the recovery. It maintained its global growth outlook for this year at 3 percent and slightly lowered its forecast for 2024 to 2.9 percent. Although the I.M.F. upgraded its projection for output in the United States for this year, it downgraded the euro area and China while warning that distress in that nation’s real estate sector is worsening.“We see a global economy that is limping along, and it’s not quite sprinting yet,” Mr. Gourinchas said. In the medium term, “the picture is darker,” he added, citing a series of risks including the likelihood of more large natural disasters caused by climate change.Europe’s economy, in particular, is caught in the middle of growing global tensions. Since Russia invaded Ukraine in February 2022, European governments have frantically scrambled to free themselves from an over-dependence on Russian natural gas.They have largely succeeded by turning, in part, to suppliers in the Middle East.Over the weekend, the European Union swiftly expressed solidarity with Israel and condemned the surprise attack from Hamas, which controls Gaza.Some oil suppliers may take a different view. Algeria, for example, which has increased its exports of natural gas to Italy, criticized Israel for responding with airstrikes on Gaza.Even before the weekend’s events, the energy transition had taken a toll on European economies. In the 20 countries that use the euro, the Fund predicts that growth will slow to just 0.7 percent this year from 3.3 percent in 2022. Germany, Europe’s largest economy, is expected to contract by 0.5 percent.High interest rates, persistent inflation and the aftershocks of spiraling energy prices are also expected to slow growth in Britain to 0.5 percent this year from 4.1 percent in 2022.Sub-Saharan Africa is also caught in the slowdown. Growth is projected to shrink this year by 3.3 percent, although next year’s outlook is brighter, when growth is forecast to be 4 percent.Staggering debt looms over many of these nations. The average debt now amounts to 60 percent of the region’s total output — double what it was a decade ago. Higher interest rates have contributed to soaring repayment costs.This next-generation of sovereign debt crises is playing out in a world that is coming to terms with a reappraisal of global supply chains in addition to growing geopolitical rivalries. Added to the complexities are estimates that within the next decade, trillions of dollars in new financing will be needed to mitigate devastating climate change in developing countries.One of the biggest questions facing policymakers is what impact China’s sluggish economy will have on the rest of the world. The I.M.F. has lowered its growth outlook for China twice this year and said on Tuesday that consumer confidence there is “subdued” and that industrial production is weakening. It warned that countries that are part of the Asian industrial supply chain could be exposed to this loss of momentum.In an interview on her flight to the meetings, Treasury Secretary Janet L. Yellen said that she believes China has the tools to address a “complex set of economic challenges” and that she does not expect its slowdown to weigh on the U.S. economy.“I think they face significant challenges that they have to address,” Ms. Yellen said. “I haven’t seen and don’t expect a spillover onto us.” More

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    New World Bank President Ajay Banga Leads at a Pivotal Moment

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    The incoming president will be under pressure to juggle the global institution’s ambitions to combat climate change and fight poverty.Ajay Banga officially became the 14th president of the World Bank on Friday and urged staff to join him in developing a “new playbook” for a global institution whose relevance has come into question in recent years.The ascension of Mr. Banga to be the next leader of the bank comes at a pivotal moment in its 77-year history. The global pandemic reversed decades of progress in poverty reduction, Russia’s war in Ukraine continues to be a threat to economic stability and the World Bank is under new pressure to become a more ambitious player in the fight against climate change.“Making good on our ambition will require us to evolve to maximize resources and write a new playbook, to think creatively, take informed risks and forge new partnerships with civil society and multilateral institutions,” Mr. Banga wrote in a note to staff that was viewed by The New York Times.Mr. Banga was nominated by President Biden in February after the resignation of David Malpass, the outgoing World Bank president who had been selected by former President Donald J. Trump. The World Bank’s executive board approved Mr. Banga in May following an extensive listening tour that included visits to eight countries and dozens of meetings with government officials around the world.In his message to staff, Mr. Banga defined the bank’s mission as aspiring to “create a world free from poverty on a livable planet.”It is the second part of that mission by which Mr. Banga will be likely be judged.Mr. Malpass left the job a year early after failing to sufficiently demonstrate his commitment to combating global warming amid a renewed emphasis from the Biden administration broadening the bank’s focus on the environment.However, Mr. Banga, a former chief executive of Mastercard, does not bring extensive climate credentials to the job and will be under pressure to demonstrate progress on the bank’s environmental agenda. He has described the tasks of dealing with climate change and poverty as intertwined.“The World Bank’s challenge is clear: 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; it must embrace risk but do so prudently,” Mr. Banga wrote in a statement to World Bank’s executive board that accompanied his memo to staff.Activists protest during meetings of the International Monetary Fund and World Bank in April.Yuri Gripas for The New York TimesClimate activists plan to appear outside the World Bank on Friday and attempt to hand postcards to staff with demands that they want Mr. Banga to heed during his first 100 days on the job. They continue to be frustrated that the World Bank finances coal, oil and gas projects despite its pledges to prioritize clean energy projects.Mr. Banga is expected to use his expertise to amplify the resources of the World Bank and build new partnerships between the private and public sectors. The former finance executive added in his memo that accomplishing the World Bank’s many goals will require an annual global investment of trillions of dollars.Mr. Banga will also face a difficult diplomatic task as he seeks to satisfy the climate ambitions of the United States and Europe while facing skepticism from some developing countries. He will also confront the delicate task of urging China, a major World Bank shareholder and creditor, to allow poor countries that have borrowed huge sums from Beijing to restructure their debts.The World Bank president is traditionally chosen by the United States; the managing director of the International Monetary Fund is selected by the European Union.Mr. Banga met on Thursday with Treasury Secretary Janet L. Yellen. They discussed ways to refine how the bank operates and make it more agile and responsive, according to a summary of their conversation released by the Treasury Department. More

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    Biden’s World Bank Pick Looks to Link Climate and Development Goals

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    Ajay Banga will begin a monthlong “global listening tour” to drum up support for his nomination to be the bank’s next president.The Biden administration’s nominee to be the next president of the World Bank, the international development and climate institution, is embarking on a monthlong sprint around the globe to solidify support for his candidacy.It will be the first opportunity for the nominee, Ajay Banga, to share his vision for the bank, which has been aiming to take on a more ambitious role in combating climate change while maintaining its core commitment to alleviating poverty.Mr. Banga, who has had a long career in finance, faces the challenge of convincing nations that his decades of private-sector experience will help him transform the World Bank.He will begin his “global listening tour” on Monday with stops in Ivory Coast and Kenya, the Treasury Department said on Friday. In Ivory Coast, he will meet with senior government officials, leaders of the African Development Bank and civil society organizations. In Kenya, he will visit the Kenya Climate Innovation Center and a World Bank-backed project that helps local entrepreneurs find ways to address climate change.Mr. Banga will focus on how finding development solutions can be intertwined with climate goals and emphasize his experience working on financial inclusion in Africa, where he helped expand access to electronic payments systems while chief executive of Mastercard, a Treasury official said.The whirlwind campaign will also take Mr. Banga to Asia, Latin America and Europe.The White House nominated him last week after the unexpected announcement last month that David Malpass will step down as World Bank president by the end of June, nearly a year before the end of his five-year term. Mr. Malpass, who was nominated by President Donald J. Trump, ignited a controversy last year when he appeared to express skepticism about whether fossil fuels contribute to global warming.During a briefing at the Treasury Department this week, Mr. Banga made clear that he had no doubts about the causes of climate change. “Yes, there is scientific evidence, and it matters,” he said.Careful to strike a balance between the bank’s growing climate ambitions and its poverty-reduction goals, Mr. Banga emphasized that both issues were interconnected and equally important.“My belief is that poverty alleviation, or shared prosperity, or all those words that essentially imply the idea of tackling inequality, cannot be divorced from the challenges of managing nature in a constructive way,” Mr. Banga added.The World Bank’s nomination process runs through March 29, and other countries may offer candidates. But by tradition, the United States, the bank’s largest shareholder, selects an American to be its president. The executive board hopes to choose a new president by early May.A climate protest in Munich on Friday. Mr. Banga will focus on how finding development solutions can be intertwined with climate goals.Anna Szilagyi/EPA, via ShutterstockIf approved by the board, Mr. Banga will face an array of challenges. The world economy is slowly emerging from three years of pandemic and war that have slowed global growth and worsened poverty. Emerging economies face the prospect of a cascade of defaults in the coming years, and the World Bank has been vocal in calling for debt reduction.The Biden administration has pointed to China, one of the world’s largest creditors, as a primary obstacle in debt-restructuring efforts. Mr. Banga was careful not to be critical of China and said he expected to travel there in the coming weeks.“Today I’m the nominee of the United States, but if I’m lucky enough to be elected, then I represent all the countries who are part of the bank,” Mr. Banga said on Thursday. “Having their points of view known, understood and openly discussed — maybe not agreed to, but openly discussed — is an important part of leading a multilateral institution.”His nomination has won both praise and skepticism from climate activists and development experts.Some climate groups have lamented Mr. Banga’s lack of direct public-sector experience and expressed concern about his affiliation with companies that invest in the oil and gas industries.“Many question whether his history at global multinationals such as Citibank, Nestlé, KFC and Mastercard will prepare him for the huge challenges of poverty and inequality,” Recourse, a nonprofit environmental organization, said in a statement this week. Recourse has been critical of the World Bank’s policies on gas transition, its exposure to coal and its pace of action on climate change.Other prominent activists have praised Mr. Banga, including Vice President Al Gore, who predicted that he would bring “renewed leadership on the climate crisis to the World Bank.”And others viewed Mr. Banga as a natural choice to bridge the gap between the bank’s broad mandates.“Throughout discussions of the World Bank’s evolution, borrowing countries have consistently communicated that financing for climate should not come at the expense of other development priorities,” Stephanie Segal, a senior fellow with the Economics Program at the Center for Strategic and International Studies, wrote in an essay this week. “In nominating Banga, whose candidacy does not lead with climate, the United States has signaled agreement that the bank’s development mandate cannot be abandoned in favor of a ‘climate only’ agenda.”The Biden administration has also faced questions about why it did not choose a woman to lead the bank, which has had only men serve as its full-time president.Mr. Banga asserted that as someone who was born and educated in India, he would bring diversity and a unique perspective to the World Bank. He also emphasized that at Mastercard, he had demonstrated a commitment to empowering women and elevating them to senior roles.“I think that you should credit the administration with taking a huge leap forward into finding somebody who wasn’t born here, wasn’t educated here,” Mr. Banga said. “I believe that giving people a level playing field is our job.”He added: “And that means whether you’re a woman, your color, your sexual orientation, growing up on the wrong side of the tracks, it doesn’t matter.” More