Ajay Banga: world must focus on creating jobs

0:00This BBC podcast is supported by ads outside the UK. If journalism is the first draft of history, what happens if that draft is flawed? In 1999, four Russian apartment buildings were bombed, hundreds killed. But even now, we still don't know for sure who did it. It's a mystery that sparked chilling theories. I'm Helena Merriman, and in a new BBC series, I'm talking to the reporters who first covered this story. What did they miss the first time? The History Bureau Putin and the apartment bombs Listen on bbc.com or wherever you get your podcasts From the Winter Olympic and Paralympic Games To the European Athletics Championships The 2026 sporting calendar is packed full of big events Keep up with all the action with More Than The Score The podcast that goes beyond the score sheet Join expert BBC sports journalists every Monday to Friday For interviews with sports stars, big talking points and the stories behind the headlines.

1:07More Than The Score from the BBC World Service. Listen now, search for More Than The Score wherever you get your BBC podcasts.

1:20Hello, I'm BBC journalist Rahul Tandon and this is the interview from the BBC World Service. The best conversations coming out of the BBC. people shaping our world from all over the world. There have been so many disagreements between me and my family. Putting on a show, that is what it means to be Lady Gaga. Only the things that you can't solve with government and private sector is where you bring philanthropy in. There's no place in the world where women are equal. Every generation, every generation has to fight to maintain democracy. For this interview, I met Ajay Banga, president of the World Bank.

2:02We spoke via video call. He was in his office in Washington, D.C. Born in India in 1959, Mr Banga's career in business began in the early 1980s when he started out as a management trainee with the food multinational Nestle. He then made the move into finance over a decade later when he joined the Citigroup Bank. He quickly rose through the ranks to become the chief executive of the bank's Asia-Pacific business, before then moving on to Mastercard, where he eventually became the CEO. During this time, Mr Banga, who became a US citizen in 2007, also advised a number of senior US politicians, including President Barack Obama and later Vice President Kamala Harris.

2:49It was Harris's boss, President Joe Biden, who subsequently nominated him to lead the World Bank in 2023. The World Bank is a group of international organisations, such as the International Development Association and the International Finance Corporation, that provides grants and loans to low - and middle-income countries for the purpose of their economic development. As some of these countries are considered to be too high risk by the international financial markets, the World Bank is an important source of financial support. Since the middle of the last century, the group has navigated multiple global political and economic challenges, adapting along the way to ensure that financial support continues.

3:33Going forward, Mr Banga believes there's an overriding priority for sustainable development, and that is jobs. I think the development banks of the world and governments have to start kind of thinking, stepping back from the let's build a clinic, let's build a bridge, let's build a road, let's build a skilling institute. Those are important. And don't get me wrong, those are how you get things done. But jobs don't get created only by building a school or by a bridge. It's by the complex interwoven fabric of a basket that all this comes together. It's not just the right regulations and policy and governance.

4:11It's also the enablement of the private sector, mostly small and medium, because that's where the jobs get created.

4:21Welcome to the interview from the BBC World Service with Ajay Bangar. You are somebody who is very much into focusing on global job creation to get people out of poverty. The more that we see of trade barriers being put up, the harder that is, isn't it? This is not good for the global economy. At the end of the day, the reality is that the alleviation of poverty over the past three or four decades has worked through a certain model. And that model was built on reducing barriers to trade and creating more movement of goods and services across the world, relying on where they could be made cheaper, faster, better, and bringing that into other countries.

5:03That's been the model. The T-shirt being made in North Carolina then got made in Vietnam because first it was cheaper for labor, Then also logistics cost improved. And finally, that became the model. And the guy in America got a T-shirt cheaper. That's been a model of growth that's taken tens of millions of people out of poverty in many countries around the world. I think the underlying issue there is twofold. One is the nature of this global model of trade has actually been changing over the last 15, 20 years while we've been watching. You know, trade has quadrupled in the past 20 years. But at the same time, regional and bilateral trade deals, 340 of them are in existence.

5:45And by the way, 100 of them were signed in the last 10 years alone. That is true. But if the world's biggest economy is putting up tariffs, in some ways putting up barriers to products coming into its country, that is going to affect the poorest countries in the world. This is not good for them, is it? That's not directly, collectively relatable. First of all, the poorest countries in the world are very low exporters to the United States. And so that's actually not the correct way to think about it. In fact, to me, and that's the point I was going to make, this thing of regional and bilateral deals leads you to think about some things.

6:18Some of the poorest countries in the world actually have higher tariffs, both numerical and non-tariff kind of barriers. And it's worth thinking about if you believe that open trade allows you to grow, trade with your neighbors and other like-minded partners. What can you do yourself for your countries? That's one of the pieces of advice I give most of them. The second piece is look at intra-regional trade. If you look at the way trade is quadrupled and the role of developing markets in the global trade system has multiplied many times over, yet across Africa, intra-Africa trade is less than 15 % of their trade.

6:53Across South Asia, intra-South Asian trade is less than 10 % of their trade. Even in Latin America, across the Latin American countries, intra-Latin American trade is a very small percentage. So it's time to think also about how to work with trade with your neighbors in a way that makes sense for countries that are closer to each other as well. In my bigger picture on job creation, one of the things I'm saying is that we don't have to create jobs in the developing world only by looking to create outsourcing of jobs from the developed world in the form of creating bigger trade opportunities and bigger manufacturing opportunities.

7:30That's what I'm arguing for. I think the fixation on only one model of growth is the wrong fixation. I understand the challenge of today's tariff conversations and disruption. But you look at IMF today, the IMF just upgraded the world's growth forecast because they see some of the tariff uncertainty going behind them. I saw some figures that I'd seen you quoted talking about, which is over the next 10 years, 1.2 billion people entering the job market. I think by a lot of figures, we may create 400 to 500 million jobs. So there's a huge gap there at the moment. That's a very good point. So 80 % of the working population will actually be living by 2050 in what we today call developing economies, 80%.

8:15And that's just another number to take a deep breath on and understand the opportunity and the challenges there. There is another challenge that we have to throw into the job market, which is AI, particularly white collar jobs. Now, I know there's not so many of those yet in those emerging markets that you talk about, but that is an area that's growing. That is a problem, isn't it? Yeah, so AI, I think, is a bigger issue to be thought through, the pluses and minuses, again, the two sides of the coin in the developed world, because it's not just a question of white-collar jobs. It's also a question of where can AI make the biggest difference?

8:49Remember, to benefit from AI or to have AI grow in size and scale in the country, you need four things. You need computing power, lots of it. You need electricity, lots of it. You need data, lots of it, kept in its simplest form and shared across multiple types of geographies to create the most predictive power of that data. And then you need people who understand how to use and manipulate that data. Tell me how many emerging markets do you know have those four things? Is there a danger? Your key aim is poverty alleviation. You want to do that through jobs. But in terms of the gap between the so-called developed and developing world, could AI widen that gap?

9:31It could, but you could think about small AI differently from big AI. Big AI leads to another challenge, which is the feeling of national security around the data of your citizens. How much are countries willing to allow their citizens' data to be pooled and kept somewhere? Data cross-border sharing is quite an issue. So that's yet another issue with big AI. Small AI, on the other hand, uses localized models, smaller computer systems, maybe a simpler phone. I'll give you an example. I'm a farmer. Back to my one of the verticals in which jobs could get created. I'm a small farmer. I cannot possibly be educated enough to recognize every disease on every plant.

10:14But I know I've got a problem with my corn plants. I point my phone at it. That photograph with small AI can help me understand what insecticide spray or healthy spray I need from my farmers cooperative to be able to fix that. That's small AI at work. It keeps the citizenry of the developing world in link with the idea of AI, but done differently. Another one, if I'm a doctor being shared across 15 healthcare clinics in remote areas, Could I use technology like a phone and photographs to be able to diagnose a rash and help a nurse on the ground? Or can I get that to be used for making my governance more transparent as a government?

10:57These are ways to involve citizenry with small AI, even as big AI develops over the coming decades. So, you know, you raise the point about opportunity and challenge. Think about AI the same way, opportunity and challenge.

11:15You're listening to the interview from the BBC World Service. People shaping our world from all over the world. If journalism is the first draft of history, what happens if that draft is flawed? In 1999, four Russian apartment buildings were bombed, hundreds killed. But even now, we still don't know for sure who did it. It's a mystery that sparked chilling theories. I'm Helena Merriman, and in a new BBC series, I'm talking to the reporters who first covered this story. What did they miss the first time? The History Bureau, Putin and the apartment bombs. Listen on bbc.com or wherever you get your podcasts.

11:57From the Winter Olympic and Paralympic Games to the European Athletics Championships. The 2026 sporting calendar is packed full of big events. Keep up with all the action with more than the score. the podcast that goes beyond the score sheet. Join expert BBC sports journalists every Monday to Friday for interviews with sports stars, big talking points and the stories behind the headlines. More Than The Score from the BBC World Service. Listen now, search for More Than The Score wherever you get your BBC podcasts.

12:37World. For this episode of The Interview, I'm speaking to Ajay Banga, President of the World Bank. The World Bank is made up of a number of different international organisations, one of which is the International Development Association, or IDA. It focuses on assisting low-income countries, and Mr Banga spoke quite a lot about the role of the organisation during our conversation. It was a friendly conversation that we had before we began the interview. We're both huge cricket fans. India were playing a test match. We're both fans of India. So we had a good conversation about that before we got down to issues that he's passionate about, those issues of trying to alleviate global poverty and how difficult that is when we're probably seeing more economic changes now than we ever have done before.

13:24Sure. OK, let's return to my conversation with Ajay Banga. Can we talk a little bit more in detail about Africa? Because that is such a huge part of what the World Bank is doing at the moment. Let's just start with a general question, which is, you know, as well, that people have talked about this being Asia's century. When will it be Africa's century? Because the demographics are in their favour, aren't they? Very good question. That will depend on whether Africa can take advantage of one aspect, which is population, but it has other aspects that are really interesting. It has lots of land and water, and therefore the ability to feed not only its own people, but also meet the demand for greater food across the world.

14:08As you know, the growing middle class is creating a demand for greater food, and Africa could be a source of that, just as Asia has been for the last few years. A third aspect is it has excellent resources of minerals and metals, which are all going to need, not just for our energy transition, but even for other users, as you know. And then the fourth aspect of this is they have the ability, because of what nature has given them, sun, wind, and the like, to be able to access a hydro, to get access to create the energy they need for themselves. And some of them have natural gas, too, as you saw in Mozambique when I was recently.

14:48They've got natural gas as well. So they've got a good mix of capabilities across a wide spectrum. Can they take advantage of that in a way that creates the right infrastructure on the ground, both physical and human, the right policies and regulations that enable the growth to take advantage of these natural resources? And then can they create the right circumstances for the private sector with catalytic financing and insurance markets and SME credit and all that, which allows the private sector to grow? That is where jobs get created. Well, let's pick up on some of those points there, because you've raised lots of different ones on Africa's ability to develop economically.

15:30A key part of that is people having power, electricity. Yes. That is one of the big challenges facing the continent over the next few years. there are hundreds of millions of people without power. Yeah, so the issue is that, you know, in that first pillar of infrastructure I was talking about, one of those key ones is electricity. And I think of electricity as a human right. And if you have 600 billion people in one continent without any power, not brownouts or blackouts, just zero power, that's a problem. That is today's situation. And what the World Bank and the African Development Bank have committed together to do is to connect 300 million of those 600 to power, to productive use of power, not just one fan and one light, but the ability to use that power to be a productive part of society.

16:17Start a business, digital, open a pharmacy shop, install a freezer for medicines, open a hair salon, and actually be able to afford hair drying systems and the like for that. Where does the money come for this? Because it can't all come from governments, can't all come from organizations like yourself, can it? There was 30 to 40 billion from us. There's about somewhere between 15 and 20 billion from the African Development Bank. There will be some money from the IMF's Resilience and Sustainability Trust, which can't be used for projects, but can be used to enable governments to get fiscal headroom, to enable their utilities to be liquid and the like.

16:58That's a good thing. The rest 30 to 40 billion may have to come from the private sector. They will not bring the money without the right understanding of predictable regulations and rules in place. Second, we are using our financing on a pay for results model, meaning you change the rules you committed to change and we'll give you the money for your budgetary support. We won't give it in advance. And so already 50 plus percent of the money we use and put out this way is going on a pay for results way. That's higher than it was some years ago. So that's part of the toolkit we're trying to use to incentivize countries to create a level playing field for local and overseas private sector to play a role.

17:39It's quite important for local players to come in too. I don't think you can do electrification only with overseas players. So it's that mix of things that we're working on. And as part of that process of electrification for governments to be able to invest more money, one of the challenges facing many African economies is debt, isn't it? Are things improving in that sector because the dollar is getting a little bit weaker? Interest rates are coming down? Yeah, well, that's the unintended consequence of what's going on with the topic we started with, right? And that has led to some change in the dollar and maybe over time some change in interest rates.

18:17We don't know that yet enough because overall interest rates haven't gone down enough yet to make an impact on that. But I think the other part of this is, remember, 30 to 40 billion from IDA. IDA is deeply concessional financing. These countries cannot afford commercial financing for the whole amount of what they need to put together. And so the replenishment of Ida was actually a very critical part of getting this to get off the ground, because Ida essentially gives away one third of its financing every year, completely free of cost, no interest, no capital repayment. The other two thirds is deeply concessional, both in terms of actual pricing, but also in terms of its tenor.

18:56You know, it can be given for longer periods than commercial finance would come. And effectively, that creates concessionality. So it's kind of important to remember that the mix of funding will also be quite critical in getting countries to this point. Just to remind people, an idea is the International Development Association. There's other stuff to be done, too, on debt. You know, I mean, you know, we're working our way through the G20 common framework. And four countries, Chad, Ethiopia, Ghana and Zambia, have now gone through that framework. And as they've gone through it, it's got faster than the first one.

19:28There's still things to do to improve that speed. But those four countries, during the period they were going through the framework, the only institution giving them financing was us. We gave them close to$18 to$19 billion in these four years, half of which was pure grants and half of which was net positive flows. meaning that was the system that the G20 in its wisdom created to enable these countries to come to the framework and get addressed both by commercial creditors, but also bilateral creditors and the old Paris Club, but also the newer bilateral creditors that over the last 15, 20 years have become quite important in the overall debt sustainability analysis of countries.

20:11And the IMF and the World Bank work this together with the G20. And, you know, there's more to do. Don't get me wrong. Not easy. There's, I think, an equally important thing to do, which is to really look at the challenges of liquidity rather than solvency. A lot of countries in Africa have debt that will come due for maturity over the coming four or five years. To help them roll that over at a better price is really a good way to help them not get into deeper challenges. So to give you an example, in Kota Va, we just executed a very substantial debt for development swap. We took older education loans they had and said, we will reissue them in the market, but with a World Bank IBRD guarantee attached to them, meaning the risk of not getting repaid comes down in the eyes of investors.

20:57And when you do that well, you were able to bring the cost of them raising that debt down substantially from what it was pressed at. And the difference in the two is€300 million to€400 million. And that is being used for investing in education. We have now done that. We're going to use that for another nine or ten countries. We've got them in the pipeline. But that's just the current pipeline. I think over the coming year or two, this could become a really useful instrument to help with getting liquidity addressed, not just solvency. But just going back to the point you made earlier, you are worried, aren't you, about the fact that we could see, because of those liquidity problems, a lot more African countries getting into problems in the near future?

21:39Well, it's not near future. It's over the coming three to five years. It's not just in the next year. But absolutely, I think that it's not just Africa, it's other emerging markets as well. The IMF and the World Bank are trying to really get ahead of that by having a three-pillared approach on this. One pillar is about their own spending reviews and domestic resource mobilization. A number of these countries have a relatively low percentage of their requirements coming from their own domestic resources. If you look at Mozambique, it is one of the better ones, but it's still low. It has got a good tax rate.

22:16It doesn't need to increase its tax rates. It needs to find a way to cut across the base of taxation so they can bring more people into paying taxes. That requires digitization. It requires the right implementation systems. We're actually helping a number of countries think their way through that in a fair way for their citizenry. It requires better governance, doesn't it? It does. That's part of the first topic. The second part of this is, can we help them with thinking through net positive flows? as in, you know, people like us who give them money, let's not give them money, which is only used to repay the prior loan.

22:53That doesn't make sense. That is crucial, isn't it? Because that has been the continuing problem. Mission critical, mission critical. And that's why when I gave you the example of those four countries, I emphasized not just grants, but net positive flows for more than half of what we gave them. You need to do that for them so they can actually take the net positive flows of deeply concessional capital and do something to create the right infrastructure, the right regulations, and enable their private sector to succeed. Their own private sector, small, medium, large, their own, not just global companies.

23:24Last question. What is your biggest challenge facing the World Bank at the moment? You've been there some time now. What is the number one challenge? What is it that keeps you awake at night the most? Jobs. Jobs for young people. I think institutions like the development banks of the world, DFIs, the MDBs, and governments have to start kind of thinking, stepping back from the let's build a clinic, let's build a bridge, let's build a road, let's build a skilling institute. Those are important. And don't get me wrong, those are how you get things done. But I think delivering on jobs is going to become really important.

24:01And jobs don't get created only by building a school or by a bridge. It's by the complex interwoven fabric of a basket that all this comes together. I described it in Mozambique as an orchestra playing. You need the musicians, but you need to get the orchestra to play real music. And that requires a combination of factors to come together. That combination is not just physical and human infrastructure. It's not just the right regulations and policy and governance. It's also the enablement of the private sector, mostly small and medium, because that's where the jobs get created. And I think getting those three things right is really hard in the circumstances of most countries.

24:44But if you look at the developed world, how they succeeded in creating jobs or how China succeeded in creating jobs over the last three to four decades is they got these three things right. You may not agree with the model each of them may have used to get there, but they got these three things right. That's what enables the jobs to get created. Thank you for listening to the interview from the BBC World Service. You'll find more in-depth conversations on The Interview wherever you get your BBC podcasts, including episodes with the US President Donald Trump, Carsten Brewer, Germany's Chief of Defence, and Bishop Goli Francis de Cani, one of the leading candidates to become the next Archbishop of Canterbury.

25:31Until the next time, bye for now.