After the survival crisis of the late 20th century, the revival and expansion of the system of multilateral development banks (MDBs), led by the World Bank, has become one of the most important transformations of the global financing system development since the 2008 global crisis. financial crisis.

Following the adoption of the United Nations 2030 Agenda for Sustainable Development, multilateral development banks (MDBs) have set a goal of increasing their capital raising capacity from “trillions to trillions”, reflecting the he emergence of a development financing paradigm that lies between government and market forces. . More fundamentally, this shift is driven by growing challenges related to financing gaps on the demand side of international development.

In the context of global security, economy, health and environment, the implementation of the United Nations 2030 Agenda faces significant challenges. Only 17 percent of its targets were met on time, leading to calls for comprehensive reforms of the MDBs to make them “better, bigger and more effective” to meet these challenges.

This year marks the 80th anniversary of the creation of the Bretton Woods institutions. This year, MDB reform has also become a global governance priority. From the just concluded G20 Summit in Rio de Janeiro, Brazil, to the United Nations Future Summit and the 29th Conference of the Parties to the United Nations Framework Convention on Sustainable Development. Climate Change (COP29), all global forums have identified MDB reform as essential to solving various global problems.

MDBs have become “omnibanks” with a broader mission, which now includes not only poverty reduction, but also crisis relief, peacebuilding, climate action, provision of better healthcare, health and other global public goods.

Significant progress has indeed been made in the reform of the MDBs. First, their scale has become “bigger”. According to the G20 Independent Expert Group, various MDBs have improved their capital adequacy through reforms such as reducing the equity-to-loan ratio, introducing hybrid capital and leveraging member guarantees. shareholders. These reforms are expected to significantly increase the lending capacity of MDBs, with a total increase of $357 billion by 2030, an increase of 30% from 2019. This includes an additional lending capacity of $150 billion for the International Bank for Reconstruction and Development.

MDBs also provide increasing technical support to improve the investment climate in developing countries, so as to mobilize private resources. For example, the World Bank has published data on sovereign defaults and recovery rates over the past 40 years, as well as data on private sector defaults in an effort to boost investor confidence.

Second, MDBs have made significant progress in building a more coherent system. The World Bank, with its mission to promote international development, no longer works in isolation. It is now part of a larger system of more than 30 regional and subregional development banks, including larger banks such as the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the Bank Islamic Development, the European Bank. for Reconstruction and Development, and more recent institutions such as the Asian Infrastructure Investment Bank and the New Development Bank.

The World Bank, which has the largest concessional multilateral financing window and the greatest knowledge capacity, remains the central node of this system and maintains its leadership position. Under new World Bank President Ajay Banga, MDB leaders said efforts would be made to strengthen mutual recognition of procurement standards. They also launched a shared platform for project data sharing and co-financing, marking a new step in MDB system integration.

Third, MDBs are becoming more flexible to respond to an increasingly turbulent and uncertain development landscape. At the World Bank’s annual meeting, Banga highlighted several steps the bank is taking to make its operations faster and simpler. For example, the average project approval time was reduced from 19 months to 16 months; the aim is to shorten it further to 12 months by June 2025.

However, these reforms are far from meeting external expectations and their objectives. Against the backdrop of growing geopolitical conflicts and competition, reform of the MDB system faces various fundamental challenges.

In the new discourse of strategic competition, the substantial expansion of MDBs – mobilizing billions of dollars for the sake of mobilizing billions of dollars – faces structural obstacles. In the broader context of global economic debt, the growth of MDBs must rely on greater fiscal support from shareholder countries, and they are unlikely to succeed in mobilizing private or private resources on a large scale. to achieve climate goals only through financial innovations or policy coordination. . Several studies suggest that MDBs’ efforts to mobilize private resources to date have been “a drop in the ocean.”

However, general capital increase is not yet on the agenda of most MDBs, notably the World Bank, due to its implications on power sharing with emerging economies. Brazil’s presidency of the G20 this year, under the theme “Building a just world and a sustainable planet”, strongly advocated for more equitable global governance, in particular the reform of the Bretton Woods institutions. But the implementation of the reforms remains uncertain.

Furthermore, obstacles to economic globalization fundamentally undermine the global development mission of MDBs, and developed economies prioritize trade protectionism and “risk reduction” in their policy agendas. Moreover, their global development policies are increasingly aimed at serving their own strategic economic interests, thus creating a “siphon effect” rather than development opportunities for developing countries.

Furthermore, developed economies are increasingly resorting to earmarked financing mechanisms under MDBs, while being reluctant to contribute to MDB core resources, making the system more fragmented. Worse still, the re-election of Donald Trump as president of the United States casts a pall over the future contributions of MDBs.

While MDB reforms call for better coordination and helping developing countries improve their investment climate to mobilize resources, such actions are often used as a convenient way to “avoid the real problems.”

Furthermore, the growing link between security and development since the attacks of September 11, 2001 has led the MDBs to find themselves deeply involved in the geopolitical games of the integrated peacebuilding framework. As a result, more resources are diverted to solving humanitarian crises, crowding out funding for long-term development priorities like infrastructure.

While MDBs have become “bigger,” the real question remains: how can they become “better” and “more efficient”? As geopolitical complexities increase, finding an answer to this challenge becomes increasingly difficult.

The author is deputy director of the Institute of Global Economic Studies at the Shanghai Institutes of International Studies. The views do not necessarily represent those of China Daily.

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