‘MDBs need to spend $3 tn extra’

“The international development finance system should be designed to support this spending by providing $500 billion in additional annual official external financing by 2030, of which one-third is concessional funds and non-debt-creating financing and two-thirds in the form of non-concessional official lending,” the report said. Singh and Summers are co-conveners of the expert group on strengthening MDBs.

While Singh is a former Indian civil servant and economist who served as the chairman of the 15th Finance Commission of India, Summers is an American economist who served as the US treasury secretary under President Bill Clinton.

G20 members will now discuss the recommendations of the report. As the current holder of the G20 rotating presidency, India aims to utilize the forum to enhance the effectiveness of MDBs for developing nations.

“It should also help mobilize and catalyze an equivalent part of private capital, implying a total additional external financing package of $1 trillion,” the report said.

“MDBs should provide an incremental $260 billion of additional annual official financing, of which $200 billion in non-concessional lending, and help mobilize and catalyze most of the associated private finance,” it added.

Mint has reviewed a copy of the report’s summary. A second part of the report will be released at Marrakech, Morocco, on 13 October, during the 2023 Annual Meeting of G20.

The first part of the report recommends that a large part of the concessional assistance should be directed through MDBs, which have started optimizing their balance sheets.

“We urge the fullest implementation of the recommendations made in the G20 capital adequacy framework report that could generate headroom to lend $80 billion more each year,” the report said.

“Leverage in each MDB can be increased further by better accounting for callable capital, preferred creditor treatment, and removal of statutory lending limits while protecting their credit ratings,” it added.

The report also said implementing the capital adequacy framework (CAF) recommendations and preparation for a general capital increase (GCI) would balance the risks facing MDBs.

“While MDBs can mitigate risks by helping countries improve the environment of private investment and by strengthening growth in client countries, the measures proposed here to increase leverage and to engage in new ways with the private sector will inevitably raise the risks to MDBs,” it added.

However, the report acknowledged that one of the greatest opportunities for transformation is in MDB’s engagement with the private sector,

“There is considerable innovation and energy behind new ways of attracting private capital into sustainable infrastructure, and MDBs must complement, rather than compete with, these efforts,” the report said.

While the report acknowledged that MDBs have a key role in supporting reforms and resources, it said MDBs will have to transform themselves to transform development.

“The window for action is closing fast,” it said.

“The threats of today can be transformed into an opportunity for tomorrow,” it said, adding that radically reformed and strengthened MDBs are essential to address the immense global challenges in today’s world.

The Union finance ministry didn’t comment on Mint’s queries on the contents of the report.

Updated: 18 Jul 2023, 11:49 PM IST