Business Standard

MDBs' lending resources to face more pressure: FM Nirmala Sitharaman

Sitharaman says G20 under India's presidency to touch upon all aspects of MDB evolution

Sitharaman, FM Sitharaman

Photo: Bloomberg

Ruchika Chitravanshi New Delhi

Listen to This Article

Finance Minister Nirmala Sitharaman on Thursday said multilateral development banks’ (MDBs’) lending resources would face increased pressure as non-borrowing shareholders were asking them to expand their mandate to address transboundary challenges.

Sitharaman was speaking at a roundtable discussion on ‘Evolving the model of MDBs to address 21st century challenges’ in Paris, France.

Click here to connect with us on WhatsApp


The minister said based on the current pace of implementation of the capital adequacy framework and its recommendations, it was estimated that an additional lending capacity of over $100 billion would be generated by the MDBs over 10 years. “However, given the scale and scope of the global development and financing challenges, this is not enough, much more needs to be done,” Sitharaman said.
 
She said the issue needed a multipronged approach and work on capital adequacy framework recommendations would enable MDBs to utilise their existing resources more effectively. The review of the equity loan ratio by World Bank, the recalibration of the shareholders’ risk appetite by the Asian Development Bank are recent examples in this context.

Under the Indian G20 presidency, an expert group on strengthening MDBs will touch upon all aspects of MDB evolution, the FM said. This would include incentive structure, operational approaches, and financial capacity so that MDBs are better equipped to finance a wide range of sustainable development goals and transboundary challenges, such as climate change and health. 

The first part of the group’s recommendations is expected by the end of this month. 

Highlighting the contribution of G20 India Presidency on Capital Adequacy Framework and the G20 Expert Group on Strengthening MDBs, the finance minister said: “The Indian presidency is hopeful that this group can provide inclusive, ambitious and pragmatic guidance on the MDB reform agenda,” she added.

The MDB system, by virtue of its global reach and financial firepower, the FM said, had historically been a critical pillar of support for much of the developing world.

The FM said the Paris Summit front-runs the G20 New Delhi Summit and the CoP28 Summit. “The momentum will fuel ongoing efforts in addressing development and transboundary challenges faced by humanity,” she said. 

Sitharaman is in France to attend the two-day summit in Paris that will discuss a new global financing pact.

Co-organised by France, Barbados, and India, the summit’s objective is setting the foundations for a new global financing architecture beyond the Bretton Woods system to address climate change, biodiversity crisis and development challenges, and help countries achieve their sustainable development goals.

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Jun 22 2023 | 8:40 PM IST

Explore News