Pakistan, Afghanistan no longer part of World Bank's South Asia region; Johannes Zutt to be new head
New Delhi: The World Bank has turfed out Pakistan and Afghanistan from of its South Asia administrative region, said two people aware of the development, even as India presses multilateral banks to stop lending to Islamabad for its role in fomenting terrorism.
The people cited above said Pakistan and Afghanistan will now be grouped under the bank's Middle East and North Africa (Mena) region, which would leave the South Asia group with six countries—India, Bangladesh, Bhutan, the Maldives, Nepal and Sri Lanka.
Other than Pakistan and Afghanistan, the bank's Mena region includes Lebanon, Libya, Syria, the West Bank and Gaza, and Yemen, among other nations—a geographically distinct region from South Asia.
However, the World Bank clarified that the two nations had been classed as part of Mena to enable 'managerial oversight" of two of its group institutions—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
'The decision to move the managerial oversight of the Afghanistan and Pakistan IBRD/IDA programs to the Middle East and North Africa Region has been made to align with how the International Finance Corporation (IFC) is organized and reflects common practice outside the World Bank Group, including at the IMF," a World Bank spokesperson said in an emailed response.
The IBRD and the IDA lend to public sector projects and government-led development programmes.
In a related development, the World Bank named Dutch national Johannes Zutt as the new head of its South Asia region. He starts 1 July as its new vice president and will be based in India.
The bank also did away with its country director position for India. Zutt, currently country director for Brazil, will take charge of the operations India, along with the regional hub.
India is a member of World Bank Group institutions—the IBRD, the IDA, the IFC and the Multilateral Investment Guarantee Agency (MIGA).
The move comes amid Indian opposition to multilateral institutions' loans to Pakistan, including a $2.4 billion financial aid approved in May by the International Monetary Fund (IMF), citing misuse of aid for arms procurement by Pakistan.
India wants to ensure that the loans Islamabad secures from multilateral agencies are used for their stated purposes and not for funneled into its army.
India has also demanded that Pakistan be put back in the grey list of the Financial Action Task Force (FATF), the global agency that combats money laundering and terror financing. It grades nations according to the extent of their involvement in terror financing.
Meanwhile, a bank spokesperson said in an emailed response, 'The World Bank has appointed Johannes Zutt as the new Vice President for the South Asia Region, succeeding Martin Raiser. His appointment is effective from July 1, 2025."
Zutt will be based in New Delhi, 'which will serve as the new regional hub for the South Asia region, in line with the World Bank's decentralization to be closer to clients and enhance service delivery," the spokesperson added.
Zutt joined the World Bank in 1999 and was country director for Bangladesh, Bhutan and Nepal, as well as for Türkiye, Comoros, Eritrea, Kenya, Rwanda, Seychelles and Somalia. He has also worked as the director for strategy, results, risk and learning in the operational policy and country services (OPCS) vice presidency.
'As the regional Vice President for South Asia, Mr. Zutt will manage World Bank's relations with Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka, and oversee a portfolio of projects, technical assistance and financial resources worth $39 billion," the spokesperson added.
The World Bank's India portfolio as of 23 October 2024 comprises 83 projects with a net commitment of $18.15 billion. The projects are spread across sectors such as agriculture, education, energy, environment, finance, governance, health, infrastructure, macroeconomics, social, transport, urban, water and digital development, according to India's finance ministry.
'I am delighted to see the strong development progress that South Asia has achieved in the 10 years since I last worked in the region," said Zutt in a statement shared by the World Bank spokesperson in the emailed response.
Queries emailed on Friday morning to India's finance ministry spokesperson weren't answered till press time.
India holds Pakistan responsible for the 22 April terrorist attack in Pahalgam, in which 26 people were killed.
On 9 May, the IMF cleared immediate disbursal of $1 billion to Pakistan for economic reforms under a package approved last year and another $1.4 billion to reduce vulnerabilities to natural disasters, despite protests from India. According to the IMF, Pakistan has 'delivered significant progress in stabilizing the economy" and made 'important progress in restoring macroeconomic stability despite a challenging environment."
In a strongly worded statement on that day, India raised concerns over the efficacy of IMF programmes in Pakistan.
'Pakistan has been a prolonged borrower from the IMF, with a very poor track record of implementation and of adherence to the IMF's program conditions…. India pointed out that rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values," the finance ministry stated on 9 May.
Mint earlier reported about India also strongly objecting to the Asian Development Bank's decision to extend financial support to Pakistan, warning that the funds could be misused amid rising defence spending, a shrinking tax-to-GDP gross domestic product ratio and stalled economic reforms.
The FATF has said it will soon come out with a thorough analysis of trends in terror financing, while condemning the Pahalgam terror attack.
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