PARIS – Multilateral development banks are expected to unlock $200 billion in extra firepower for emerging economies by running their balance sheets more tightly and taking on more risk, world leaders meeting at a summit in Paris said on Friday.
Many of the around 40 leaders gathered in Paris voiced concerns that the World Bank and the International Monetary Fund were increasingly outdated for tackling challenges like climate change and post-COVID debt burdens of poor countries.
“We … expect an overall increase of 200 billion (dollars)of MDBs’ lending capacity over the next ten years by optimizing their balance sheets and taking more risks,” the summit’s final statement obtained by Reuters said.
“If these reforms are implemented, MDBs may need more capital,” it added.
French President Emmanuel Macron speaks during the Alliance for Entrepreneurship thematic, as part of the New Global Financial Pact Summit at the Palais Brongniart in Paris, France, June 22, 2023. Emmanuel Dunand/Pool via REUTERS
U.S Treasury Secretary Janet Yellen said in Paris ahead of the summit that efforts to squeeze more lending from the development lenders had to be carried out before considering the possibility of capital increases.
The U.S. is the largest shareholder of the IMF and World Bank.
The Paris summit, hosted by French President Emmanuel Macron, gathered around two dozen leaders from Africa, China’s prime minister and Brazil’s president had gathered to give impetus to a new global finance agenda.
At the summit, wealthy nations finalised an overdue $100-billion climate finance pledge to developing countries and created a fund for biodiversity and the protection of forests.
The summit aims to create multifaceted roadmaps that can be used over the next 18-24 months, ranging from debt relief to climate finance. Many of the topics on the agenda take up suggestions from a group of developing countries, led by Barbados Prime Minister Mia Mottley, dubbed the ‘Bridgetown Initiative’.
“There is the political consensus that this issue is bigger than each of us and we have to work together and multilateral development banks will have to change how they do business and that is accepted,” Mottley said at the summit’s final panel.
“We leave Paris not with speeches simply, but a commitment to get down into the granular details to make sure that what we agree here can be executed.”
Leaders were also hoping to reform post-war financial institutions and free up funds to tackle climate change by getting consensus on how to promote a number of initiatives struggling in bodies like the G20, COP, IMF-World Bank and United Nations.
The $100 billion pledge falls far short of poor nations’ actual needs, but has become symbolic of wealthy countries’ failure to deliver promised climate funds. This has fuelled mistrust in wider climate negotiations between countries attempting to boost CO2-cutting measures.
“If we can’t shape the rules in this time like others before, then we will be accountable for what potentially can be worst reality of mankind,” Mottley said.
Additional reporting by Casey Hall in Shanghai and Simon Jessops in London; editing by Toby Chopra
