An International Expert Group (IEG) headed by Singh, an economist and former bureaucrat, along with Lawrence Summers, an economist and former US treasury secretary, has released a two-part report on strengthening Multilateral Development Banks, with the second part released at the annual general meeting of the World Bank and International Monetary Fund (IMF) at Marrakesh, over a fortnight ago.

The first part of the Singh-Summers report suggested an increase in MDBs’ 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 second part of the report stated the need for MDBs to mobilize $240 billion in private capital by shifting from risk avoidance to informed risk-taking, apart from introducing new lending instruments like pooled portfolio guarantees and hybrid capital.

Interestingly, Summers had in September said politics remains an issue when it comes to expanding and augmenting the capital of multilateral development banks due to financial deficits and strong nationalistic sentiments in member countries.

“I was pleasantly surprised to see far greater political risks being demonstrated in Marrakesh than I had bargained for. If you see the joint statement made by the MDBs as a whole, it will give you a pretty good idea (about the political will to achieve MDB reforms),” Singh said.

“This (joint statement from MDBs) would not take place if their own shareholders and management would not have backed it up. They represent, therefore, the political will….,” Singh added.

In a joint statement at Marrakesh a fortnight ago, MDBs, including the World Bank, agreed on the need for transformative changes in the operating models and financing capabilities of MDBs as suggested by the expert committee headed by Singh and Summers.

“We encourage MDBs to enhance private capital mobilisation through supporting enabling conditions, innovative risk-sharing instruments and new partnerships to maximise their development impact,” it added.

The International Financial Architecture Working Group, one of the streams under the G20 Finance Track that focuses on strengthening the international financial architecture, will deliberate on the expert group’s recommendations along with MDBs and suggest a way forward by April 2024. Next year, MDB reforms will be taken up again in Brazil, whom India had formally handed over the G20 presidency in September.

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Updated: 27 Oct 2023, 10:37 PM IST