Why is it in the news?
- The G20 expert panel, tasked with strengthening Multilateral Development Banks (MDBs) like the World Bank and the Asian Development Bank, has put forth a crucial proposal.
More about the news
Shift in the approach
- They recommend a fundamental shift in the approach of these institutions, moving away from financing individual projects and instead prioritizing comprehensive programs that align with sectoral goals and long-term transformation plans outlined by national governments.
- This strategic shift aims to enhance the effectiveness and impact of MDB operations by closely aligning them with a nation’s highest-priority sustainable development goals (SDGs).
- This approach emphasizes the commitment of country leadership and the level of national investment as key determinants in shaping MDB initiatives.
|Multilateral Development Banks (MDBs)|
· Multilateral Development Banks (MDBs) are institutions comprising multiple developed and developing countries.
· They provide financing and technical assistance for development projects across various sectors.
· Typically, developed countries contribute to the lending pool, while developing countries primarily borrow from these institutions to fund their projects.
Experts advocating for reforms within MDBs
- Experts argue that global challenges, such as the climate crisis, require coordinated efforts on a global scale, especially in emerging markets and developing economies (EMDEs).
- Reformed MDBs can equip stakeholders to address these global challenges more effectively.
- Reforms aim to align MDBs with the developmental priorities of individual nations and increase private sector engagement.
- Greater coordination among multiple stakeholders, including national governments, is crucial to mitigate coordination failures and address global challenges.
Traditional way of Multilateral Development Banks lending to countries such as India
- MDBs have played a significant role in financing infrastructure projects in India with longer gestation periods.
|Multilateral Development Bank (MDB)||Total Commitment in India||Major Allocations in Sectors|
|World Bank||$97.6 billion||– Public Administration: $18.7 billion|
|– Agriculture: $14.8 billion|
|– Transport: $10.6 billion|
|Asian Development Bank (ADB)||$59.7 billion||– Transport: $20.2 billion|
|– Energy: $15 billion|
|– Urban Infrastructure: $6.7 billion|
|Asian Infrastructure Investment Bank (AIIB)||$9.9 billion||– Transport: $4.2 billion|
|– Energy: $1.4 billion|
|– Economic Resilience: $1.25 billion|
|European Investment Bank (EIB)||Euro 4.5 billion||– Transport: Euro 2.45 billion|
|– Energy: Euro 1.5 billion|