G20’s Crucial Role

Unlocking Trillions for Development and Climate Action

The forthcoming G20 sum- mit in New Delhi will not only be a gathering of world leaders but also a platform where pivotal discussions on strengthening multilateral de- velopment banks will take cen- ter stage. Success in this en- deavor could yield trillions of dollars that are essential for combating poverty and ad- dressing the climate crisis. Development banks are linchpins in the battles against poverty and environmental degradation, playing a crucial role in the global economy by extending financial support to nations facing financial chal- lenges or coping with disas- ters.

The journey to bolster these multilateral development banks began with the G20’s 2016 action plan, urging banks to optimize their balance sheets to increase lending without compromising finan- cial stability. Building on this foundation, Italy, during its G20 presidency in 2021, initiat- ed an independent review of multilateral development banks’ Capital Adequacy Frameworks, assessing their fi- nancial capabilities. Under India’s presidency this year, G20 Finance Ministers and Central Bank Governors recognized the evolving nature of transbound- ary challenges and the grow- ing demand on multilateral de- velopment banks. They called for these institutions to en- hance their vision, incentive structures, operational ap- proaches, and financial capaci- ties to maximize their impact in addressing global chal- lenges, all while advancing the Sustainable Development Goals (SDGs).

To chart a path forward, an International Expert Group was convened, with a mission to prepare a roadmap for an updated development banking ecosystem. The group outlined a triple agenda, aimed at har- nessing the full potential of these banks. This agenda com- prises eliminating extreme poverty, fostering shared pros- perity, contributing to global public goods, tripling sustain- able lending levels by 2030, and establishing a third funding mechanism to facilitate inno- vative arrangements with sup- portive investors. The urgency of the situation is evident in the figures pre- sented by the International Expert Group. An additional annual expenditure of approx- imately USD 3 trillion is re- quired by 2030, with USD 1.8 trillion earmarked for climate action and USD 1.2 trillion for other SDGs. This entails a four- fold increase in climate-related funding compared to 2019 and a 75% surge in investment in health and education.

The responsibility of mobi- lizing financing on this scale falls on the global development finance community, which must provide an additional USD 500 billion each year until 2030. This effort includes con- cessional funds, non-debt-cre- ating financing, and non-con- cessional official lending, with the potential to mobilize up to USD 1 trillion in private capi- tal. Multilateral development banks are at the forefront of this undertaking. They are tasked with supplying an in- cremental USD 60 billion in ad- ditional annual official financ- ing, with USD 200 billion dedi- cated to non-concessional lend- ing. In parallel, these banks are expected to mobilize and cat- alyze significant private fi- nance. Critical to achieving these goals is the tripling of sustain- able lending levels by multilat- eral development banks by 2030.

This entails targeting USD 300 billion annually in non-concessional finance, along with USD 90 billion an- nually in concessional finance. For these ambitious objec- tives to be realized, G20 mem- bers must step up, particularly concerning the International Development Association, the World Bank’s soft-lending arm. Contributions to this fund must increase significantly to triple its funding pool by 2030. Moreover, the International Expert Group underscores the importance of creating a fi- nancing instrument that pro- vides swift, automatic conces- sional assistance to countries in need, including middle-in- come nations struck by major natural disasters.

It is evident that these rec- ommendations will reshape the landscape of concession- ary lending from multilateral development banks. Donor pledges for the latest International Development Association funding cycle fell below expectations, raising concerns about these banks’ capacity to provide debt relief to countries in dire need, po- tentially hindering their devel- opmental efforts. The G20 summit in New Delhi carries the responsibili- ty of reaffirming the signifi- cance of multilateral develop- ment banks and garnering po- litical support for their en- hancement. These institutions hold the key to realizing the SDGs, particularly through the provision of concessional fi- nance to developing economies. The summit pro- vides an opportunity to under- score their pivotal role in shap- ing a sustainable and equitable global future.

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Central Chronicle is daily English Newspaper of Chhattisgarh. Central Chronicle has own website www.centralchronicle.in it is first news website in Chhattisgarh.

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