Multilateral devt banks need transformative reform

April 20, 2023

In a meeting with the G20 expert group on strengthening multilateral development banks (MDBs), Union finance minister Nirmala Sitharaman called for a “transformative” rather than incremental change in the banks; a “holistic” rather than fragmented approach to reform; and the need for more financing to achieve both developmental and climate goals, without viewing them as mutually exclusive.

Sitharaman met the group, led by former United States (US) treasury secretary Lawrence Summers and veteran Indian policymaker N.K. Singh over the weekend in Washington DC before departing for India.

People familiar with the conversation said the group recognized that the FM had given “visionary” targets, especially that there was no getting away from the fact that the World Bank’s twin goals eradicating extreme poverty and boosting shared prosperity needed to remain in place, but accompanied by a focus on “global public goods”. And at the moment, there weren’t enough finances for both. Resolving this puzzle is set to be the group’s biggest challenge. The experts, however, believe that a mix of creative leveraging of the Bank’s current capital, with fresh capital infusion, can make a significant change to lending capacity.

During the spring meetings of the World Bank and International Monetary Fund last week, and through India’s G20 presidency, the issue of reforming MDBs has gained renewed traction. This is happening in the backdrop of an internal evolution road map prepared by the Bank itself, a leadership change in the offing with US nominee Ajay Banga set to take over as the Bank president later this summer, the everyday challenge that Bank staffers are facing in meeting the financing demands of client countries, Prime Minister Narendra Modi’s clear directive that MDB reform should be a top priority, and the constitution of the G20 expert group.