More Critical Than Ever: Strengthening Growth and Resilience through the Multilateral Development Banks

In 2023, building on the Triple Agenda report,^[1] G20 Finance Ministers tasked the International Financial Architecture Working Group to put forward recommendations for better, bigger and more effective multilateral development banks (MDBs). The ensuing 2024 G20 Roadmap for MDBs laid out 13 recommendations on operational reforms and harmonization of processes to work as a system with national partners, on private capital mobilization, on expanding headroom through changing risk management policies and assessments, and on allocating concessional resources.^[2] This agenda was reinforced by the Circle of Finance Ministers led by Brazil with strong emphasis on the central role of MDBs in driving climate action and sustainable development.

The MDB response has been broad-based and under normal circumstances the actual changes could even be considered as dramatic compared to prior years of much talk and little action. MDB balance sheet headroom has been expanded while preserving credit ratings, mostly through internal policy changes on risk management. Hybrid capital instruments, portfolio guarantees, co-financing and guarantee platforms and new approaches to private capital mobilization are enabling MDBs to reach record levels. MDBs are also working more together: they routinely publish joint reports on climate finance, private mobilization, reform roadmaps, and digital platforms. They have signed mutual reliance agreements for procurement and safeguards that have been much appreciated by clients. A variable geometry of MDBs have made joint commitments on climate finance, dialogue with credit rating agencies, and sector specific initiatives such as M300 and Water Forward. Individual organizations have retooled knowledge and advisory functions, shortened internal lending processes (from 19 months to 9 months for some projects), and stepped-up partnerships in support of transformative change.

Welcome as it is, this pace of progress still falls short of what is necessary in 2026. In terms of direct financial support, aggregate MDB commitments have grown by only 1% per year in real terms since 2000 and much of the expanded headroom for additional lending remains unexploited. Private capital mobilization (PCM) shows more impressive progress in aggregate numbers but remains modest in comparison with needs and, more worryingly, has fallen in low-income countries.

Most importantly, developing countries have been caught in a downward spiral of decelerating growth and increased vulnerability. The World Bank laments that by end-2026 “one-quarter of developing economies, one-third of low-income economies, and half of fragile and conflict-affected economies will be poorer than they were in 2019 on the eve of the COVID-19 crisis.”^[3]

There is an urgent imperative to deliver on sustainable growth, climate and resilience through a push on investments in sustainable infrastructure and human capital. With sharp declines in investment, many developing countries are constrained in seizing this opportunity because of lack of fiscal space.

In this context, MDBs have become more important than ever

First, because financing for development from other sources has fallen in volume and become more expensive. Higher global interest rates and lower appetite for EMDE risk have resulted in a sharp fall in commercial finance. Net issuance of EMDE corporate Eurobonds in 2025 was probably negative for the fourth consecutive year, although sovereign issuances rebounded. China, which was a large net capital provider for many developing countries has shifted to being a net capital extractor. And the dramatic fall in official development assistance--minus 23% in 2025, and with further declines expected in 2026 and 2027--has already caused human and financial disaster in many of the poorest countries that depended on this donor support. One implication of this is that MDBs have become more critical players in the development finance architecture. With aid and bilateral official lending in retreat, they are the only institutions that combine technical depth and convening power with long-term finance on affordable terms and the capacity to mobilize private finance.

Second, MDBs are now more important because of a geopolitical context characterized by multiple international conflicts, sharpened tensions on international trade and security, and a questioning of multilateralism and the institutions that operationalize it. As vehicles for multilateral cooperation, the MDBs are having to navigate these troubled waters and demonstrate their added value to clients and shareholders in more direct and immediate terms.

Third, the role of MDBs in supporting countries to deal with energy security, artificial intelligence (AI) and climate change has become more nuanced. On the one hand, with energy security and affordability becoming much more important concerns, there has been a push for the MDBs to be more open to supporting all energy sources, including fossil fuels, that advance these aims. At the same time, technological advances in the energy transition have brought down prices of key renewables components – solar panels, batteries, and EVs, for example – with important implications for their likely uptake in developing countries. MDBs can help countries design and finance appropriate transition paths that take advantage of new technological opportunities, including AI. Finally, the evidence that adaptation and nature investment are here-and-now fiscal and ecological emergencies, not future contingencies, has strengthened materially. MDBs need to buttress their capacity to help countries respond to shocks and to scale up investment in adaptation and resilience.

Balancing these considerations, and the different weights attached to them by individual shareholders, has complicated the task of MDBs. MDBs need guidance and consensus support from their shareholders to sustain and accelerate support to clients in this changed operating context. The broad priority areas for MDB reform have been clear since at least 2023 and each institution is embarked on a specific plan of implementation in accordance with their diverse business models. The recommendations summarized below and detailed in the body of this report build on the experiences of the last three years to identify the most practical and impactful specific measures which could help to accelerate progress over the next three years. By design, they are set out as directional propositions which will need fleshing out and adapting to the specific circumstances of each MDB.

Summary recommendations:

MDBs should:

• Double down on country-led transformative investment programs. The projects-to-programs shift is still a work in progress, and many borrowing countries have yet to develop institutional structures for long-term change. MDBs can do more to build, support and use new-style country platforms and other client-led delivery mechanisms that are emerging. Helping to develop stronger pipelines of financeable projects and the country capacity to implement at scale is key to this effort.
• Expand the use of multi-country sector programs. Clarity on time-bound quantitative outcomes in scorecards can help sub-sets of MDBs align around specific programs (such as AfDB’s Desert to Power and now the joint World Bank/AfDB M300) and provide a verifiable tracking mechanism through which they can be held accountable for results.
• Deploy existing headroom more rapidly, while continuing to build additional headroom. Own account lending from MDBs has stalled in real terms after a COVID-related surge and public and private investments in client countries continue to lag. The gap between development needs and development projects is growing across a number of sectors. Meanwhile, MDBs have substantial liquidity balances, unutilized headroom and the potential to increase headroom further. Working with borrowers to accelerate disbursement of loans that have been committed should be a high priority.
• Place a big bet on private capital mobilization and catalyzation. MDBs have shown impressiveprogress in ramping up the volume of private capital mobilized through their efforts. Recentfocus on and innovations with originate-to-distribute/share and other new modalities for PCMare promising. They need to be complemented by action to make whole sectors investment-ready and taken to scale.
• Orient concessional resources to the poorest and most vulnerable countries. Key eligibility and allocation formulae for concessional resources reward performance over need. The decline of bilateral ODA is creating a gap in basic needs provision that can only be replaced in small part by a reorientation of concessional MDB resources. Enhanced access of lower middle-income countries to IBRD loans can offset the impact on these countries of such a reorientation.
• Work better together and build a core ecosystem of development financiers with national development banks. MDBs can standardize and harmonize their own activities, especially on project identification and preparation, and advisory services and technical support. But the agenda is broader than this and also encompasses development finance institutions, vertical climate funds, and national development banks.

Read the full report here.

The report has been prepared by a group of researchers from four independent think tanks: The Brookings Institution, The Center for Global Development (CGD), The Indian Council for Research on International Economic Relations (ICRIER), and ODI Global.

The work of the group and the drafting of the report was coordinated by Homi Kharas (Brookings) and Masood Ahmed (CGD). The report draws on contributions from: Amar Bhattacharya (Brookings) on transformative investments; Hans Peter Lankes (ODI Global), Nancy Lee (CGD) and Sam Attridge (CGD) on private capital mobilization and MDB capital adequacy; Karen Mathiasen and Clemence Landers (CGD) on concessional finance; Annalisa Prizzon (ODI Global) on client views of MDBs; Shekhar Aiyar and Tanu Goyal (ICRIER) on knowledge and technical assistance. Their contributions draw upon ongoing work that they and their colleagues are undertaking and benefits from the financial support of the Children’s Investment Fund Foundation (CIFF), the Gates Foundation, Open Society Foundations (OSF), and the Rockefeller Foundation. Charley Ward provided research support for the project. Tanu Goyal oversaw the report production. The analysis and recommendations reflect the views of the individuals and not of the institutions with which they are affiliated.

The research team is grateful to Mr. N. K Singh and Dr. Rachel Glennerster for invaluable advice and comments during the preparation of the report.

1. The two volumes of the Triple Agenda report were reviewed during the 2023 G20 Finance Track meetings where Ministers welcomed the recommendations to make the MDBs better, bolder and bigger.

2. G20 Roadmap towards better, bigger and more effective MDBs, October 2024.

3. World Bank Group (2026), Global Economic Prospects, June 2026. Washington, DC: World Bank.