Will suggest tangible ways to optimise World Bank balance sheet: N.K. Singh

The independent panel set up by the G20 to reform multilateral development institutions will make tangible recommendations to optimise the balance sheet strength of the World Bank and to step up lending capacity of other such bodies in a big way, said N.K. Singh, who co-chairs the panel.

In a speech delivered at the convocation of the Indira Gandhi Institute of Development Research (IGIDR) in Mumbai on Wednesday, Singh said that in order to make a meaningful dent on poverty, achieve shared prosperity and fund global public goods, these institutions must become relevant to the growth and development needs of all developing countries. 

There is a need to expand their mandate to finance these larger goals without reducing development financing. Singh co-chairs the panel with former US treasury secretary Lawrence Summers.  

The group was tasked to prepare a roadmap for an updated multilateral development bank ecosystem for the 21st century. The idea is to make these institutions financially more robust to be able to deal with challenges like climate action, energy transition and future pandemics that impinge on growth and development.  "This is not a research committee, I can assure some sceptics. We intend to come out with a set of recommendations, which are tangible and can make a decisive difference. We certainly intend to give suggestion on the optimisation of the balance sheet strength of the World Bank. We certainly intend to be cognizant of the leveraging ability of multilateral institutions," said Singh in the speech.

Singh said that the World Bank which has a capitalization of just over $20 billion had successfully lent over $800 billion. "To increase the lending capacity, the need for recapitalisation, in some form or the other, is inescapable. It is curious that the International Bank for Reconstruction and Development (IBRD)" (a World Bank arm) "is an institution which does not have any replenishment cycle. This deserves serious consideration," Singh said.

The committee will also examine how other multilateral institutions can substantially enhance their lending capabilities to meet challenges such as meeting the Sustainable Development Goals (SDGs), eliminating extreme poverty, and promoting shared prosperity. This will involve leveraging more of their internal resources and optimizing their balance sheets for higher lending.

The World Bank group also estimates that the total average annual public and private spending needs to address the global challenges of climate change, conflict, and pandemics are $2.4 trillion per year for developing countries between 2023 and 2030, said Singh.