MULTILATERAL DEVELOPMENT BANKS - ECONOMY
News: G20 expert group constituted for
strengthening MDBs
What's in the news?
● Under
the aegis of India’s G20 Presidency, an 11-member
expert group has been set up to suggest measures to strengthen multilateral
development banks (MDBs).
Key takeaways:
● Professor
Lawrence Summers (President Emeritus, Harvard University) and N K Singh (Former
Chairperson, 15th Finance Commission of India) are co-convenors of the G20 Expert Group on strengthening MDBs.
Objectives of the group:
● The
panel would work on making a road map
for an updated MDB ecosystem for the 21st century, touching upon all
aspects of MDB evolution, and mechanisms for coordination among such banks to
address and finance global development and other challenges more effectively.
● The
panel would also evaluate various estimates regarding the scale of funding
required by and from MDBs for addressing their and member countries’ increased
financing needs for SDG and transboundary challenges.
● The
expert group will submit its report to the Indian Presidency of G20 before June
30, 2023.
Major Initiatives discussed in the forum:
● Expansion
of MDBs mission and new ways to boost
its financial capacity.
● New global financial pact
- A French initiative to build a new
contract between global north and global south to enable greater financing.
● Green pact
that can be devoted to climate financing.
Substantive challenges:
● Finding
ways to balance and reconcile the
traditional mandate of the MDBs, especially the World Bank, with newer
challenges.
○ Example,
along with the world bank's two main objectives of eradicating extreme poverty
and boosting shared prosperity, newer challenges like climate financing should
also be considered.
● Concessional finance and
the future of the International Development Association,
which is the Bank’s arm to help the poorest countries through grants and
low-interest loans.
● How
much and in what manner can private capital be garnered.
● Finding
a way to ensure capital increase without affecting the balance of power will be
yet another challenge for the group.
Go back to basics:
Multilateral Development Banks:
● A
multilateral development bank (MDB) is an international
financial institution chartered by two or more countries for the purpose of
encouraging economic development in poorer nations.
● Multilateral
development banks consist of member
nations from developed and developing countries.
● MDBs
provide loans and grants to member nations to fund projects that support social
and economic development, such as the building of new roads or providing clean
water to communities.
● Examples:
a. World
Bank
b. International
Monetary Fund
c. Asian
Development Bank
d. European
Development Bank
e. New
Development Bank