DEVELOPMENT COMMITTEE (Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries) NINETY-FIFTH MEETING WASHINGTON, D.C. – APRIL 22, 2017 DC/S/2017-0012(E) April 22, 2017 Statement by H.E. Michel Sapin Minister for the Economy and Finance France Statement by H.E. Michel Sapin Minister for the Economy and Finance France 95th Meeting of the Development Committee April 22, 2017 Washington, D.C. In Lima, we agreed to a roadmap that outlined a common vision for the World Bank Group and its shareholders. It stressed the need to achieve the Sustainable Development Goals of the 2030 Agenda while pursuing the World Bank’s twin goals of ending extreme poverty by 2030 and promoting shared prosperity. With the Forward Look process to shape the vision for the World Bank Group towards 2030, we have already made progress in that direction. I would like to start out by conveying my support for all efforts made in implementing the priorities we collectively set ourselves. Implementing them is a goal we must pursue, whatever we ultimately decide on increasing the financing capacity of the institutions that make up the World Bank Group. The first priorities that come to mind have to do with doubling the presence of the International Development Association (IDA) in fragile and conflict-affected States, strengthening the support provided by the International Bank for Reconstruction and Development (IBRD) to lower middle-income countries, the new strategy of the International Finance Corporation (IFC) and the implementation of the Bank’s Gender Equality strategy. Furthermore, I am also thinking of the fight against climate change and the urgent need to carry out the Paris Agreement. The target of raising climate financing to 28 percent of World Bank funding in 2020 must not be called into question, and an all-out effort must be made to move closer to it, year by year. France favorably acknowledges the successful completion of the International Development Association’s eighteenth Replenishment. Thanks to the considerable resources provided by donor countries, IDA can now raise funds from capital markets and significantly step up the volume of its financing for the poorest, most fragile, and most vulnerable countries. In such countries, above all in Sub- Saharan Africa, the needs are immense at a time when climate, security, economic and health shocks have become increasingly frequent and intense. The World Bank must now take steps to ensure that quality projects emerge and achieving that will require greater staff presence on the ground. Meanwhile, discussions on increasing IBRD’s capital are already well under way. We need to continue those discussions in a pragmatic frame of mind, examining all the options available to us so that at future Annual Meetings we can agree on a consistent set of measures that will lead to greater financial sustainability. Firstly, it is essential to forge ahead with efforts to optimize the balance sheets of all Bank Group institutions. We have achieved tangible results through exposure exchange agreements and increased leverage for IBRD, for example. A change in lending rates would also be productive over the medium term. After all, even IDA determines its lending terms based on the recipient country’s GNI per capita and the maturity of the loan. Moreover, incentives for staff across different institutions to cooperate, along the lines of those between IFC and the Multilateral Investment Guarantee Agency (MIGA), are essential to fully implement the “cascade” approach and to create new markets in the most troubled countries. This would ensure that the World Bank Group’s operations are in accordance with the subsidiarity principle. Cooperation also means that the net income of the Bank Group’s institutions must be used to assist the poorest countries. In transferring our dividends to finance IDA, we exemplify good finance. Special attention must likewise be paid to the graduation policy. The World Bank Group’s role is to help countries along through the various stages in their development by continually providing them with tools and resources that are appropriate to their status, income levels and access to financial markets. In other words, the World Bank’s primary mission is to render itself unnecessary! Graduation by any country from IDA or IBRD should be welcomed as good news, because it is a proxy for how much concrete progress has been made on the road to development. It also entails new responsibilities for countries graduating from IDA, since it means that they in turn must help finance the institution. IDA addresses the graduation issue at each three-year replenishment. On several occasions, it was decided that additional funding should be shifted from IDA’s concessional window for the poorest countries to counter the shortcomings in the graduation process. France favors a reform of that process based on a coherent approach so that the transition can begin as soon as a country still receiving IDA support gains access to IBRD resources. The situation at IBRD is perhaps not as clear-cut. Per capita income in twenty of the fifty countries eligible to borrow from it already exceeds the graduation threshold, and those higher-income countries receive nearly 40 percent of all IBRD resources. France feels that more must be done to assist the poorest countries. I would also like to stress the need to further strengthen our efforts to improve internal management in the World Bank Group. It will be important to meet the established budget anchors starting in the 2018 fiscal year and to achieve all the savings identified in the Expenditure Review. Once those targets have been met, annual budget reviews for the various units must continue and new budget targets must be set. Furthermore, given the many sources of uncertainty today, particularly regarding the volume of future World Bank funding, we would also do well to take a prudent approach to short-term budgeting. Significantly and swiftly increasing the IBRD workforce would be an unjustifiable move, contrary to what was announced in the strategic staffing plan. Lastly, the Bank needs an educated, efficient, and committed staff. Excessive dependence on short-term consultants makes it hard to achieve that goal. Given that employees working under such contracts are unlikely to stay on, the Bank is in danger of losing the skills they have acquired and the relationships they have developed with clients. Before I conclude, I wish to acknowledge the effective coordination of work between the World Bank and the International Monetary Fund (IMF). Results from that cooperation helped shape the principles for effective coordination between international financial institutions recently adopted by the G20 Finance Ministers and Central Bank Governors. Nevertheless, we face major challenges going forward. In a world of growing uncertainty, it is our collective responsibility to work further toward policy coordination and a multilateral approach to 2 reducing poverty as well as advancing the cause of economic development. France has always maintained that the World Bank has both the ability and the duty to achieve excellence. I have no doubt that the responses you provide, combined with all of your staff members, will be equal to the challenges and ambitions that characterize the world today. So let me say in conclusion that France fully supports the work of the World Bank, and will continue to do so. 3