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The Center for Global Development convened a high level panel on the future of multilateral development banking in 2015. The geographically diverse group includes leading voices from the private sector and academia, as well as those with distinguished careers in the public sector. By bringing together a group that broadly reflects the diversity of the MDBs’ shareholder countries, we expect to provide useful guidance to the policy community at a time of considerable change for the MDBs. The panel's work has culminated in a report to the shareholders of the MDB system with five key recommendations.
Find CGD’s previous work on the future of the World Bank here.
The multilateral development banking model, first introduced 70 years ago at Bretton Woods, has proven to be remarkably durable. The innovation at the time, embodied in the International Bank for Reconstruction and Development (IBRD), was to capitalize a multilateral institution with public funds from shareholder governments, so that the “bank” could leverage those funds through private borrowing and lend the proceeds to member countries for “development” purposes.
The basic model is still with us today in the IBRD and has been replicated elsewhere, reflected in the rise of regionally based multilateral development banks (MDBs). Not only has multilateral development banking lasted more than seven decades, it seems to be enjoying a renaissance. The traditional multilateral development banks have all seen shareholder-led expansions of their capital within the past five years, other regional development banks have grown significantly (from the CAF in Latin America to the Saudi-based Islamic Development Bank to the EU’s massive European Investment Bank), and perhaps most significant, a new generation of institutions has emerged, largely spearheaded by the Chinese government, along with other large emerging-market governments.
How can the international community best capitalize on the resurgent MDBs? What are the core missions that should guide their activities? How big should they be, and how should they deploy their resources? What “rules of the road” should they follow when it comes to environmental standards and procurement rules? How are they best governed to ensure their legitimacy and effectiveness?
The high level panel report addresses these fundamental questions as part of an effort to provide a new policy blueprint for multilateral development banks, both new and old. Starting with the basic elements of financing and governance first defined seventy years ago, the panel's report identifies what is essential, what is adaptable, and what no longer serves a useful purpose in MDBs.
Montek Singh Ahluwalia, Distinguished Visiting Professor Stern School of Business, New York University
Lawrence H. Summers, Charles W. Eliot University Professor and President Emeritus, Harvard University
Andrés Velasco, Professor of Professional Practice in International Development, School of International and Public Affairs, Columbia University
Caroline Anstey, Global Head UBS and Society, UBS
Afsaneh M. Beschloss, Founder, President and CEO, The Rock Creek Group
Chris Elias, President, Global Development Program, The Bill & Melinda Gates Foundation
Last year, the Asian Development Bank (ADB) management proposed a major financial restructuring that would increase the amount of bank capital available for investment. This proposal offers many benefits in and of itself. But it also creates an opening for additional and complementary changes in governance that would greatly strengthen the bank and would ensure all of the benefits of the restructuring are fully captured. The merger proposal represents a highly credible down payment by the ADB on a set of innovations that can greatly expand the institution’s ability to respond to the region’s needs and opportunities—and in the process, stimulate similar dynamics at other MDBs.
Do we still need the World Bank, given how much the global financial sector has expanded since the institution was founded? The paper argues that there is a continuing role for the Bank and that it is complementary to private finance.
This weekend’s spring meetings of the World Bank and IMF take place in the context of a fragile global recovery and the need to balance the risks of asset bubbles caused by expansive monetary policy with those of slowing growth through hiking interest rates.
What does it mean when a majority of the World Bank’s shareholders (measured by voting shares) decides to put capital in a new multilateral development bank (MDB) and not the World Bank itself? The flood of countries joining the Asian Infrastructure Investment Bank (AIIB) is unavoidably a soul-searching moment for the Washington-based institution long known simply as “the bank” in the development community.