Paris summit: Development banks can boost lending by $200 billion

John Irish & Leigh Thomas

Multilateral development banks (MDBs) like the World Bank are expected to find $200 billion in extra firepower for low-income economies by taking on more risk, a move that may require wealthy nations to inject more cash, world leaders said on Friday.
 

The leaders, gathered at a summit in Paris to thrash out funding for the climate transition and post-Covid debt burdens of poor countries, said their plans would secure billions of dollars of matching investment from the private sector. An overdue pledge of $100 billion in climate finance for developing nations was also now in sight, they said.
 

Many in attendance, however, said over the two-day summit that the World Bank and the International Monetary Fund were increasingly ill-suited for tackling the most pressing challenges and needed a broad revamp.
 

“We ... expect an overall increase of $200 billion of MDBs’ lending capacity over the next ten years by optimising their balance sheets and taking more risks,” the summit's final statement said.
 

“If these reforms are implemented, MDBs may need more capital,” it added, recognising in a final summit document for the first time that wealthy nations may have to inject more cash.
 

US Treasury Secretary Janet Yellen had said ahead of the summit that development banks had to first squeeze out more lending themselves before the possibility of capital increases was considered.
 

The final summit document called for each dollar of lending by development banks to be matched by at least one dollar of private finance, which analysts said should help international institutions to leverage an additional $100 billion of private money in developing and emerging economies.
 

The announcements mark a scaling up of action from the development banks in the fight against climate change and set a direction for further change ahead of their annual meetings later in the year.
 

However, some climate activists were critical of the results.
 

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