A report by the independent expert group co-chaired by former US treasury secretary Larry Summers and 15th Finance Commission chairman N K Singh has called for widening the mandate to deal with global public goods, such as climate change, increasing the resources for poor and developing countries by innovative financing measures, tapping into private pool of capital and increasing the equity base by up to $100 billion. Singh told the FMs that the report had sought to “establish more definite linkages between mandate, finance, operating model, and congruency of the MDB system”.
Apart from the triple mandate, he said, the recommendations included generating $1 trillion in additional external financing, of which $260 billion was to come from MDBs. “The most efficient and fair solution would be a general capital increase. Given the timelines for capital increase, the new equity cannot be concurrent, nor congruent with balance sheet optimisation. However, an early initiation would send the right signal to credit rating agencies, the market and other stakeholders,” Singh is learnt to have said at the meeting. Economic affairs secretary Ajay Seth said MDBs will discuss the plan in their boards, while FM Nirmala Sitharaman said that countries expected to take a call once the roadmap is clearer and the independent expert group submits its second report, which will deal with tapping private capital.
Summers, who attended the meeting virtually, pitched for an overhaul.
“Given the criticality of the issue, this was the time for ‘discontinuity’. Only ‘discontinuity’ leading to transformational changes can enable MDBs to reinvent their relevance to respond to challenges,” said a source, quoting Summers.
The former treasury secretary is said to have underlined the need to take every possible effort to improve the efficiency of MDBs and suggested that capital infusion is necessary.
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