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Terming the steps taken towards the multilateral development banks’ (MDB) reforms suggested under India’s G20 presidency as “disappointing”, a G20 independent expert group has said the pace and ambition of implementation falls well short of what is required even though every institution has embarked on a programme of reform.
“Major shareholders of the MDBs must shoulder the main responsibility for this disappointing performance…Our judgement is that we are still falling well short of ‘good enough progress’,” the G20 Independent Expert Group Report Card on strengthening MDBs titled ‘An incomplete grade’ said.
The report card comes a year after the G20 independent expert group on Strengthening MDBs had made its recommendations for reforming these institutions.
It added that shareholders signalling of support for the overall agenda has not been matched in the implementation phase or in the provision of additional resources.
Authored by the co-convenors of the G20 expert group Lawrence Summers, former United States secretary of the Treasury, and Nand Kishore Singh, chairperson, Fifteenth Finance Commission of India, it highlighted that despite some commendable improvements, such as the expanded use of guarantees, the aggregate volume of private capital mobilisation at about $70 billion in the last year shows an incremental approach, not a radical transformation of business mode.
“Changing MDB relationships with the private sector has proven to be hard and difficult,” the report said.
The expert group in its report last year had said that an additional spending of some $3 trillion per year is needed by 2030, a part of which can come from leveraging the current balance sheets and implementing the capital adequacy framework. The report said that there is an inescapable need for a significant increase in new equity of $100 billion across all MDB institutions.
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The report card presented on the sidelines of the annual meetings of the International Monetary Fund and World Bank in Washington DC said that the MDBs have put in place measures to expand annual sustainable lending by making better use of their balance sheet and attracting additional capital through innovative channels. However, it noted, that the volumes involved - about 30 per cent of current lending volume – fall far short of the tripling they need, given their enlarged mandate.
“We had also recommended a tripling of concessional finance channelled through MDBs to the poorest countries, but we see few signs of any meaningful rise. Expanding mandates with insufficient financial resources will not work effectively,” the report said.
It said that the short-sighted approach of waiting until a crisis hits before acting forcefully on MDB reform will turn out to be a costly misjudgment. “Time is not on our side,” the report added.
In its report on MDB reforms, the independent expert group last year had recommended “a triple mandate” for MDBs to acknowledge their role in providing support to the poorest people within each country, in fostering national economic growth and shared prosperity, and now, in expanding the borrowing countries’ contribution to planetary health in line with their international commitments.
It has also stressed that the size of MDB lending has to be made commensurate with their anticipated contributions to the global goals and country outcomes.
The report card of the progress made by MDBs while citing a few examples of innovation, risk taking and evolution in both large and smaller MDBs said these steps did not yet reflect the system wide transformation that is needed for MDBs to play the role dictated by science and societal goals.
From the report
Major MDB shareholders are criticised for failing to back reform efforts with adequate resources
Only $70 billion of private capital mobilised last year, highlighting a conservative rather than transformative approach
An estimated $3 trillion annually by 2030 is required for global goals, with MDBs needing $100 billion in new equity
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