Need for World Bank’s governance indicators to be transparent: CEA

“So, in other words the easiest way in which multilateral development banking system can help their member countries to access capital for global challenges and development needs is to ensure that their World Governance Index is transparent, less subjective and less arbitrary, more suited to the context, involves participation of developing countries, and also make sure that it’s limitations are very well understood by the credit rating agencies,” he added.

He said this one change, which does not require the consent of shareholders but the management of the World Bank, can help many emerging economies be assessed objectively by credit rating agencies. “If their credit rating improves, or at the minimum stops being downgraded, the amount of financing cost it will save in the global capital markets will run into billions of dollars which can then be spent on development needs and global public goods as well,” he said.

In November last year, Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister had also in a paper written about “serious” methodology problems plaguing the computation of perception-based indices – such as Freedom in the World Index and the Economist Intelligence Unit (EIU) Democracy Index – that feed into sovereign ratings via the World Bank’s Worldwide Governance Indicators.

The World Bank’s Worldwide Governance Indicators provide a ranking of 215 countries territories based on six dimensions of governance: ‘Voice and Accountability’; ‘Political Stability and Absence of Violence’; ‘Government Effectiveness’; ‘Regulatory Quality’; ‘Rule of Law’ and ‘Control of Corruption.’