During its G20 presidency, India will continue to prioritize reforming and strengthening multilateral development banks (MDBs) to reflect the altered geopolitical landscape and the rise of the Global South.
A brief about India is focusing on reforming multilateral development banks during the G20 Leaders’ Summit
Senior officials have emphasized that India hopes the Leaders’ Declaration will include MDB reforms, but they have also said that such a reform process would be “longish” and not provide results right away. US Vice President Joe Biden and other influential figures are anticipated to back the idea.
On September 9 and 10, the G20 Leaders’ Summit will be held in New Delhi and will be the conclusion of India’s 12-month G20 Presidency.
Multilateral development institutions like the World Bank and the International Monetary Fund, which were established over 80 years ago in the immediate post-World War II period, are considered as needing an update given the rapidly shifting global economic and financial dynamics.
According to the report of the Independent Expert Group on MDB Reforms, which is led by Lawrence Summers, President Emeritus, Harvard University, and NK Singh, Chairperson of the Fifteenth Finance Commission of India, “radically reformed and strengthened MDBs are essential to address the immense global challenges in today’s world.”
Goals for sustainable development are likewise off course, despite the fact that climate change has emerged as a pressing problem that needs attention now more than ever. By 2030, it is predicted that spending will need to increase by around $3 trillion annually. Of this, an additional $1.8 trillion would be needed for investments in climate action, and an additional $1.2 trillion would be needed for spending on other SDGs.
The analysis has underlined how MDBs as a system are contracting even as the difficulties and gaps between developed and developing countries widen. In 2019, their gross outlays represented less than 0.3% of the GDP of recipient countries outside of China, which is less than half of the amount of 0.55% in 1990. It has been noted that net transfers from MDBs may potentially become negative in the current environment of rising interest rates.
It is anticipated that these reforms will affect all such institutions, not only the bigger ones like the World Bank and the International Monetary Fund, even though the report does not provide a uniform definition for an MDB.
In all, 17 MDBs are mentioned in the report. African Development Bank, Asian Development Bank, European Bank for Reconstruction, Inter-American Development Bank, and Asian Infrastructure Investment Bank are more MDBs.
Notably, the World Bank is already considering a number of reforms, including new financial tools like hybrid capital and portfolio guarantee platforms to give the bank more leverage. These are anticipated to contribute to more resources being available for lending to developing nations.
The third G20 conference of central bank governors and finance ministers in July “took note of Volume 1’s recommendations.” In order to increase the efficacy of MDBs, it had also stated that the MDBs could decide to discuss these ideas as appropriate and necessary in the future within their governance frameworks.
If it is a component of the Leaders’ Declaration, greater advancement on this front is anticipated. The second volume of the report, which is anticipated to include more nuanced recommendations on the reforms, including engagement with the private sector, will be delivered to the G20 Leaders in October during the World Bank-IMF meetings in Marrakech.
