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Recognising that the world faces a “global polycrisis”, 10 multilateral development banks (MDBs) have committed to work together to scale up their financial and lending capacity, collaborate on climate action, enhance country-level engagement, strengthen co-financing and step up their private sector engagement.
The commitment of the 10 MDBs came in the backdrop of a concerted effort under the Indian G20 presidency to push the agenda of reform and strengthening of the international financial institutions. The presidency set up an independent expert group, led by former US treasury secretary Lawrence Summers and veteran Indian policymakers NK Singh on the subject — the group submitted a two-volume report, including the final one at the G20 finance ministers and central bank governors meeting held in Marrakech on Thursday and Friday. Morocco is hosting the annual meeting of the World Bank and International Monetary Fund.
On Friday, the heads of 10 MDBs, including the African Development Bank, Asian Development Bank, Asian Infrastructure Investment Bank, Council of Europe Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, Islamic Development Bank, New Development Bank and World Bank Group, issued a statement where they recognised that the world faced a polycrisis, progress towards sustainable development goals had been “painfully slow”, climate emergency was intensifying, and a scaled-up effort was needed “to eradicate poverty, accelerate inclusive socioeconomic development, and tackle transboundary challenges”.
Recognising that MDBs play a critical role in responding to global challenges, the leaders of the banks said they will explore ways to expand their lending capacity and believed that capital adequacy frameworks measures, with contributions from shareholders, could yield an additional lending headroom of $300-400 billion in the next decade. MDBs acknowledged that G20 leaders, in the New Delhi Declaration, had endorsed the need for “better, bigger and more effective MDBs”, welcomed the deliberations of the G20 Independent Expert Group and their reports, and committed to strengthen their financing capacity, increase the speed and agility of their operations, and improve the way they worked together as a system. In particular, they identified five areas of collaboration.
The first is scaling up financial capacity, where MDBs said they will explore financial innovations to stretch their balance sheets, such as portfolio guarantees, hybrid capital and channelling of Special Drawing Rights through MDBs, while safeguarding their long term financial sustainability, robust credit ratings and preferred creditor status.
The second is boosting joint action on climate, where MDBs said they would collaborate to implement a joint approach to align financing flows with the goals of the Paris Agreement. “We are working to enhance our approaches to tracking and reporting climate outcomes, while continuing to jointly report our climate finance commitments. As we set ourselves for a successful COP28, we will pursue the launch of several activities and initiatives, including a joint MDB facility to support clients’ Long-Term Strategies (LTS),” the heads of the MDBs said in the statement.
The third area was enhancing country-level collaboration to ensure that their joint efforts are systemic, leverage development partnerships, catalyse private sector investment and deliver greater impact. The fourth is strengthening co-financing, by harmonising and mutually recognising each other’s policies and standards.
And finally, MDBs committed to deepen their collaboration to boost private capital mobilisation. “We reaffirm the critical role MDBs must play in upstream engagement to build investment-enabling economic and regulatory environments, develop project pipelines, and provide early-stage investments. We recognize the need to explore further avenues for strengthening mobilization of private capital. We reiterate our commitment to delivering on the transformation of the Global Emerging Markets Risk Database (GEMs) and to releasing new and more comprehensive statistics in early 2024.”
Prashant Jha is the Washington DC-based US correspondent of Hindustan Times. He is also the editor of HT Premium. Jha has earlier served as editor-views and national political editor/bureau chief of the paper. He is the author of How the BJP Wins: Inside India’s Greatest Election Machine and Battles of the New Republic: A Contemporary History of Nepal.