BackPolitical will an issue for expanding capital in MDBs: Summers
To date, less than $1 billion has been moved in terms of actual provision of financing to poor countries
PremiumNew Delhi: Political will is an issue when it comes to expanding and augmenting the capital of multilateral development banks (MDBs) due to large financial deficits and strong nationalistic sentiments in member countries, Lawrence H Summers, former US Secretary of the Treasury, said on Saturday
A multilateral development bank is an international financial institution chartered by several countries to encourage economic development.
Speaking at a CII event in the national capital, Summers, who along with economist and former bureaucrat NK Singh, is the co-convener of the G20 expert group on strengthening MDBs, said that MDB shareholders are right to insist on the immensity of the challenge of reforms within the institutions.
"There are no fundamental obstacles, if it (expanding and augmenting capital) is done in most efficient ways, the level of leverage can be very very large," Summers said. “There are issues of political will at a time when deficits are large, at a time when nationalist forces are running strong."
Summers pointed out that there was enormous fuss over the reallocation of SDRs (Special Drawing Rights) for the IMF.
The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries.
"Out of all that, to date, less than $1 billion has been moved in terms of actual provision of financing to poor countries," he said. "We need to make absolutely certain when difficult things are done politically, rapidly, there is impact on the ground.'
According to Singh and Summers, reforming the MDB agenda and scaling them appropriately are matters that require immediate action.
The roadmap submitted by them, in the first part of their report titled 'Strengthening Multilateral Development Banks: The Triple Agenda' recommends G20 members agreeing on the vision of the triple agenda and initiating a process within each institution to identify the best ways to achieve the goal of tripling non-concessional commitments and doubling concessional contributions by 2030.
The second part of the report will be released in October for discussion by finance ministers ahead of the G20 Annual meeting at Marrakesh (Morocco). It will also suggest a new foreign currency hedging mechanism, system-wide collaboration, and the proposed global challenges funding mechanism.
Summers also said that India has the potential to grow 8% annually to bring about transformative changes in the lives of millions of people by around 2050.
"I think it is something to target as India defines its greatness in this next century," Summers added.
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