In Profile: Kristalina Georgieva,CEO of the World Bank

Published: February 2, 2018

After running the humanitarian aid brief for the European Union, Kristalina Georgieva has stepped up to become the first CEO of the World Bank with a mission to get the private sector to deliver development finance, writes Phil Thornton.

For someone who lost the race to become Secretary General of the United Nations, becoming chief executive officer of the World Bank might be second prize. But for Kristalina Georgieva the appointment is an opportunity she has seized to push through major reforms to meet humanitarian goals she has pursued for much of her life.

The role of CEO that Georgieva, 64, assumed on 2 January 2017 is a new one. She was appointed by World Bank president Jim Yong Kim as part of his shake-up of the top levels of the multilateral lender. {mprestriction ids=“*”}

While she effectively replaces Sri Mulyani Indrawati, the bank’s chief operating officer who returned to Indonesia to become finance minister, the new title makes clear she is in charge of delivery of the president’s mission.

“Georgieva has been put in charge of daily administration of the Bank to free up the president to do more strategic thinking,” says Luiz Vieira, coordinator of the NGO Bretton Woods Project (BWP). “She will be very focused on value for money and streamlining processes.”

At the heart of her agenda is achieving the multilateral’s goals of eliminating extreme poverty by 2030 and boosting shared prosperity. Poverty has come down in recent decades: in 1981, more than two-fifths of the world’s population or 4.5 billion people were poor. Fast forward 35 years and the number of poor people has shrunk to 800 million or 10 per cent.

“This is really impressive,” she says, but adds: “If you are one of the 800 million still living in poverty, success somewhere else doesn’t mean much to you. While we have poverty going down globally, there are places on this planet where extreme poverty is rising.”

Georgieva is well aware much of the hard work on poverty reduction has been done in China where industrialisation, urbanisation and the embracing of global trade have cut the number of poor Chinese from 660 million to 25 million.

The reason why the percentage of people living in extreme poverty has gone up in 12 countries while another 18 nations have seen the absolute numbers of poor people rise often comes down to war and natural disaster — things that the World Bank or any other aid agency can do little about.

The good news is that government shareholders have found a record US$75bn to fund the work of the International Development Agency (IDA), the arm of the bank that works with the poorest countries. But Georgieva concedes: “Our $75 billion, as good as it is, is not good enough.”

She says the challenge is to get the private sector to overcome fear of risks and be more active in more vulnerable countries. This ties in with the strategy president Kim outlined earlier this year in comments reported by EMEA Finance in our April-May edition.

Rather than provide direct funding as a first response, the Bank will use its resources to “crowd in” the private sector. 

Kim said that with trillions of dollars “sitting on the sidelines, earning little interest”, the Bank would mobilise investors looking for better opportunities to help it meet the rising aspirations across the developing world.

Innovative finance
Georgieva has started to put flesh on the bones of the strategy. One goal is to increase the use of innovative finance such as insurance, building on the catastrophe bonds it started issuing eight years ago. This year its Caribbean Catastrophe Risk Insurance has paid out US$50mn since the start of the 2017 hurricane season.

This year the Bank issued a pandemic bond in order to ensure rapid delivery of finance to the front line in the wake of criticism of agencies’ slow response to the Ebola outbreak. While investors who buy the bond get an 11 per cent yield — a big reward in today’s low yield world — if an outbreak reaches predetermined levels of contagion they are liable for US$550mn that can be used immediately.

Georgieva, who was EU Commissioner for Humanitarian Aid, sees her mission as turning this instrument into an “incentive for people to do the right thing”. 

“If a country has a lend-management policy for forestry to be protected, not to be chopped down, then the insurance premium ought to have a discount. As a donor, as a finance community, we are funding this discount.”

The other angle is to focus on middle income countries — where 50 per cent of poor people still live — and especially in higher-risk economies where the task is to make sure that jobs are created. “We are concentrating on how to get the private sector to overcome fears of risks and be more present and active in more vulnerable countries — how to give the certainty that they can invest, reap the benefits of investment and, by doing so, improve the lives of people.”

But involving private finance raises concerns for some who monitor the Bank. Vieira at BWP is concerned about what happens if a project goes under. “Whatever the contract says, the government will have to step in particularly if it is for essential services.”

Robert Wade, professor of political economy at the London School of Economics, highlights the growth in lending by the International Finance Corporation, the arm of the Bank that works with private finance. “Most IFC loans are to companies based in the rich countries for projects in the middle-income countries and not low-income countries,” he says.

Georgieva is quick to stress she is CEO of the World Bank rather than IFC, but acknowledges the Bank has made investments that “might not have had the best possible development outcome”. 

“But that needs changing and I want to be clear that this is not your grandfather’s World Bank Group. It is a different place.

“We have to buckle up and be there when it is unlikely the private sector would otherwise invest. It is not easy and not comfortable but the majority of our people are totally on that page. They work for the World Bank because they care about development.” {/mprestriction}