President Donald J Trump named David Malpass, currently US Treasury Undersecretary for International Affairs, as the US candidate for the Presidency of the World Bank – formally the International Bank for Reconstruction and Development, or IBRD – on February 6 after current President Jim Yong Kim resigned unexpectedly from the position on February 1.

Washington doesn’t have the only word

Although not a hard and fast requirement, the US selected for the IBRD’s lead position is almost invariably awarded the job in view of the decisive role the US played in setting up the development-focused IBRD at the end of World War II, as well as hosting it in Washington DC, along with the IMF. A European has traditionally been designated to run the IMF, which proved to be a wise move as it was called on to play a major role in the Eurozone crisis.

Nevertheless, this is not a done deal. The IBRD’s board will accept nominations until March 14 and hopes to have the new President designated at the regular spring meeting of the IBRD/IMF in April. Voting weight on the board is determined by a member country’s financial contributions, so although the US is the biggest shareholder based on contributions, the White House cannot install a new IBRD President unilaterally.

Reports have surfaced of staff-level opposition to the Malpass selection as well as unhappiness of some IBRD member countries, but these are not expected to be sufficient to derail the appointment.

In a final twist, Washington based media are reporting that Malpass’ eldest son, Robert, a newly-hired employee of the International Finance Corporation, itself a subsidiary of the IBRD, has offered to step down from his entry-level job if his father takes the reins.

President Trump cares

The good news is that Trump was convinced that a US-directed IBRD is better than the punching bag it might have become if one listened to Trump’s “America first” campaign pronouncements, which took aim at most multilateral organisations the US participated in throughout the postwar era. Malpass himself had been a major IBRD critic prior to assuming his current position at the Treasury Department.

Important reforms achieved

In recent negotiations for $13 billion in IBRD replenishment funding, Malpass and the US Treasury secured management reforms that carry significant weight with the sceptical United States Congress that ultimately must approve US funding. The reforms include limits on staff salaries and other benefits, a tremendous issue in Congress and around Washington where the international financial institutions based there are seen to spend substantially more than the US Federal Government does for comparable staff salaries and benefits, generating continuing resentment and mistrust.

Whether it is true or not, some global players will see the Malpass nomination as part of a broader new China “containment” strategy from the US. At Treasury, Malpass has been critical of the Chinese and their use of the IBRD for project finance in view of its massive reserves and a surging economy. He may now be in a position to do something about this.

In addition, last October, Trump created a new foreign assistance agency named the United States International Development Finance Corporation – the IDFC. While still in a formation stage that will last most of this year, the IFDC was designed to help Washington counter Beijing’s influence globally, especially in the developing world.

One should expect to see the IBRD under Malpass to begin aggressively partnering with the IFDC to give developing countries new project financing options instead of the traditional “take it or leave it” Chinese financing offers available to them at present.