Multilateral development banks not fit for purpose in 21st century: Blog
Former Fifteenth Finance Commission chairman N K Singh and former US Treasury Secretary Lawrence Summers, in a blog post on Tuesday, said there is a general recognition that multilateral development banks (MDBs) like the World Bank and the International Monetary Fund are not fit for purpose in the 21st century and unable to meet challenges like climate change, pandemics, fragility, and migration, which require new finance capacity and new approaches.
“The total flow of support from the World Bank and other MDBs to developing countries was $192 billion in 2022. While this is a substantial figure, it is a third less than the share of developing country gross domestic product attained in 2009 (during the global financial crisis), even as the need for investments in assuring that development is sustainable has greatly increased,” Singh and Summers said in a post on the website of the Indian Council for Research on International Economic Relations.
The two men have been tasked by the Group of Twenty (G20) — headed by India this year — to be in charge of an expert group to formulate a detailed plan for reforms in multilateral institutions. The panel will submit its report before the meeting of G20 Finance Ministers and Central Bank Governors in Gandhinagar in July. Singh and Summers have invited suggestions from the general public in the blog post.
The panel will come up with a report presenting a road map for an updated multilateral ecosystem for the 21st century, with milestones and timelines, including vision, incentive structure, operational approaches, and financial capacity.
This will enable MDBs to be better equipped to finance a wide range of sustainable development goals and transboundary challenges such as climate change and health.
The panel will also do an “evaluation of various estimates regarding the scale of funding required by and from MDBs for addressing their and member countries’ increased financing needs, alongside other important sources such as the private sector and public sector funds”, the statement said.
“Countries all over the world are turning to MDBs as they contend with ever more urgent, even existential, challenges. Progress in reducing poverty has stalled and in some countries reversed. Globally, more than 800 million people are now food insecure. The growing costs of climate change are all around us. Putting off development and climate-related investments will increase, not reduce, risks,” Singh and Summers said on Tuesday.
“The expert group will draw on the work of others and the best ideas from many sources. We intend to reach out to hear and benefit from the perspectives of diverse stakeholders,” they said.
“We will listen with three criteria in mind. Solutions must recognise the interests of all countries, and not pit some against others. Proposals must rest on careful and credible analysis, and responsibility for success must be shared. MDBs cannot fill all finance gaps. Rather their finance and other forms of support must be targeted to maximise impact and to unlock even larger flows from other sources,” they said.
The high-profile panel will include senior minister in the Singapore government Tharman Shanmugaratnam, Nicholas Stern from the London School of Economics, mining giant AngloGold Ashanti Chairperson Maria Ramos and former governor of Brazil’s central bank Arminio Fraga, among others.
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