Panel moots triple agenda to harness the potential of MDBs 

  • July 18, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Panel moots triple agenda to harness the potential of MDBs 

Subject :Economy

Section: External sector

In News: Independent Expert Group (IEG), appointed under the auspices of the India G20 Presidency, has recommended a triple agenda to harness the potential of multilateral development banks (MDBs). MDBs include World Bank and International Monetary Fund (IMF).

Key Points:

  • About three elements of triple agenda, the report suggested adopting a triple mandate of:
    • Eliminating extreme poverty,
    • Boosting shared prosperity, and contributing to global public goods (GPG), tripling sustainable lending levels by 2030 and
    • Creating a third funding mechanism which would permit flexible and innovative arrangements for purposefully engaging with investors willing to support elements of the MDB agenda.
  • Other recommendations:
    • Timelines for project preparation should be shrunk and procedures rationalised.
    • They must also increase the scale and nature of their activities.
    • Engagement with the private sector should be leveraged for transformation in MDB.
    • Coordination between private and public sector arms of the MDBs on the use of the Cascade principles, guarantees, blended finance, political risk insurance, and foreign exchange hedging should be systematic rather than episodic.
    • MDBs only mobilise 0.6 dollars in private capital for each dollar they lend on their own account. They should aim to at least double this target.
  • Monetary targets:
    • Additional spending of some $3 trillion per year needed by 2030, of which $1.8 trillion represents additional investments in climate action and $1.2 trillion in additional spending to attain other SDGs.
    • To support this, the international development finance system should be designed by providing $500 billion in additional annual official external financing by 2030.
    • Mobilise and catalyse an equivalent amount of private capital, implying a total additional external financing package of $1 trillion.
Concepts:

  • Cascade Financing:
    • The Cascade is how the World Bank Group operationalizes its Maximizing Finance for Development approach.
    • To maximize the impact of scarce public resources, the Cascade first seeks to mobilize commercial finance, enabled by upstream reforms where necessary.
    • Where risks remain high, the priority is to apply guarantees and risk-sharing instruments.
    • Official and public resources are applied only where market solutions are not possible through sector reform and risk mitigation.
  • Blended finance
    • It is the strategic use of development finance for the mobilisation of additional commercial finance towards the SDGs in developing countries.
    • Blended finance is one of several tools to mitigate risk and facilitate financing for private sector-led projects that have the potential to generate social benefits.
    • Blended finance combines concessional financing—loans that are extended on more generous terms than market loans— and commercial funding.
economy Panel moots triple agenda to harness the potential of MDBs