Trump pick Malpass surprises with early exit from World Bank

Malpass, appointed by former President Donald Trump, will depart the multilateral development bank, which provides billions of dollars a year in funding for developing economies, by the end of June. His five-year term was due to end in April 2024.

The former investment banker informed U.S. Treasury Secretary Janet Yellen of his decision on Tuesday, a source familiar with the matter said.

Malpass, who survived multiple calls for his resignation last fall and was not expected to be offered a second term, gave no specific reason for the move, saying in a statement, "after a good deal of thought, I’ve decided to pursue new challenges."

Malpass has been under pressure from Yellen in recent months to accelerate reforms aimed at changing the way the World Bank operates to ensure broader lending to combat climate change and other global challenges.

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."

The U.S. Treasury chief 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."

Yellen last month declined comment when asked if the United States would support a second term for Malpass.

Malpass is expected to stay at least through the April meetings of the World Bank and International Monetary Fund, but could leave his post before the end of June, given the timeline for nominating and confirming a successor, one source said.

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.

Nadia Daar, who heads the Washington office of Oxfam International, said the process should be opened to more candidates to improve the credibility of the institution.

"If shareholders really want to ‘evolve’ the @WorldBank, Malpass’ successor must be hired based on an open and merit-based selection process," she said on Twitter.

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. Before that, he served as the chief economist for the now-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.

Leaving at the end of the fiscal year at the end of June was a natural time to step aside, a source familiar with Malpass's thinking said. Doing so will give his successor time to put their imprint on the reforms before the joint meetings of the World Bank and the IMF in Morocco in October.

Two of the top contenders for the post are Samantha Power, who currently leads the U.S. Agency for International Development (USAID) and served as U.S. ambassador to the United Nations under President Barack Obama, and Rajiv Shah, former USAID administrator under Obama and currently president of the Rockefeller Foundation, a philanthropic group.

The World Bank's governors are expected to approve the bank's "evolution roadmap" for reforms incorporating U.S.-requested changes, such as balance sheet adjustments that free up an additional $2 billion for lending in fiscal 2024, at the spring meetings of the IMF and World Bank set for mid-April.

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 U.N. Secretary-General on Climate Change Selwin Hart called out the World Bank for “fiddling while the developing world burns” and called the institution 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.

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.