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FM Sitharaman backs ‘holistic’ approach to multilateral development bank reforms

New Delhi: India backed a “holistic” approach to multilateral development bank reforms while pitching a staggered timeline for a capital increase to make it more acceptable to the membership.

In her interaction with the G20 expert group on Multilateral Development Bank (MDB) reforms in Washington DC, finance minister Nirmala Sitharaman emphasised the need for a “transformative and not incremental” approach.

The group is headed jointly by India’s 15th Finance Commission chairman NK Singh and former US treasury secretary Larry Summers.

She also told the group that any expansion of MDB’s mandate should be in line with their ability to fund them without compromising on the development financing, people familiar with the deliberations told ET.

She also pointed out that a staggered timeline for the capital increase may enhance acceptability among members.

Sitharaman also impressed upon the group to look at how the operating model of MDBs should internalise private capital mobilisation and this should not be restricted just to their private sector arms. They should also leverage complementarities across the MDB ecosystem.

At the Bengaluru finance ministers and central bank governors meeting, the G20 had set the expert group to firm up a road map for an “updated” MDB ecosystem for the 21st century, including improving the ability of such institutions to fund a wide range of sustainable development goals and global challenges, including climate change and health-related issues.When contacted Singh, who is currently in Washington DC, told ET that there was widespread support among the MDB group members on the finance minister’s emphasis that incremental changes now needed to be replaced by transformational and structural changes.

“The daunting challenges of meeting not only the traditional twin objectives of poverty elimination and shared prosperity had now an added third dimension of global public goods,” he said adding that the financing needs were far more challenging now considering that resources for global public goods will not come at the expense of the original twin objectives which have been the guiding feature within the MDB family.

He said the need to improve efficiency in utilisation of capital, rationalisation in the functions and procedures, increasing use of technology to improve outcomes, and greater harmonisation in approaches within the MDB family was emphasised by many members.

The expert group will submit its recommendations during the 3rd meeting of Finance Ministers and Governors of Central Banks to be held in Ahmedabad on the 17th-18th of July.

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