New Delhi: Key for assisting developing countries with a combination of expertise, staying power, low-cost financing, leverage, and knowledge-sharing capabilities, multilateral development banks (MDBs) will need to transform themselves to effectively impact changes, Lawrence Summers and NK Singh have said in an article on Project Syndicate, a digital media platform.
For the first time in nearly half a century, the global economy is fracturing rather than coming together due to high interest rates, threats of pandemic, and high debt burden.
"These realities shaped the recommendations that we have just made to the G20 through a special expert group on development financing (which we co-chair). Our central conclusion is that this uniquely challenging moment requires a dramatic transformation of the operations of the multilateral development banks (MDBs), starting with the World Bank," Summers and Singh said in the Project Syndicate report.
"Even as developing countries face much larger financing needs to meet development and climate goals, MDBs’ disbursements have not kept pace, and the degree to which they now transfer resources to developing countries is unacceptably low," the report said.
Singh and Summers are co-conveners of the G20 expert group on strengthening MDBs. Singh, a former Indian civil servant and economist, is chairman of the 15th Finance Commission of India, and Summers is an American economist who served as US treasury secretary under President Bill Clinton.
The first part of a report on reforms recommended for MDBs, as mandated by the G20 was released on 18 July.
It suggested that MDBs will need to increase their annual spending by $3 trillion by 2030, including $1.8 trillion for additional climate action and $1.2 trillion for achieving other sustainable development goals (SDGs).
“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.
In the Project Syndicate article, Summers and Singh have called for action on three fronts to revitalise MDBs.
"First, the MDBs should embrace a triple mandate by adding global public goods (GPGs) to their current goals of eliminating extreme poverty and boosting shared prosperity," Summers and Singh said in the article.
"Second, stakeholders should provide MDBs with the requisite resources. By our calculations, sustainable lending levels at the MDBs need to triple by 2030, rising to about $400 billion annually," they said.
"A top priority is to persuade donors to provide an additional $30 billion per year in grants and concessional funding for low-income countries (LICs). That would allow for a threefold increase in the International Development Association’s funding by 2030, which is essential for helping LICs fulfill their development goals, manage global shocks, and pursue strong adaptation and resilience plans within sustainable debt frameworks," they added.
