The G20 Leaders on Saturday endorsed the road map for implementing the recommendations of the G20 Independent Review of MDBs Capital Adequacy Frameworks (CAFs) that could generate an additional $200 billion in lending headroom over the next decade for sustainable development goals (SDGs) and climate finance.
“G20 Summit has arrived at an agreement on the need for better, bigger and more effective Multilateral Development Banks,” Finance Minister Nirmala Sitharaman said highlighting that it as one of the key achievements of the Indian G20 Presidency.
The G20 Leaders called for ambitious implementation of CAFs, within MDBs’ own governance frameworks while safeguarding their long-term financial sustainability, robust credit ratings and preferred creditor status.
“While these are encouraging first steps, we will need to give an additional push for continued and further impetus on CAF implementation,” the G20 said.
It also encouraged MDBs to collaborate in areas such as hybrid capital, callable capital and guarantees to boost funding capacity.
“We call on the MDBs to also leverage private capital through innovative financing models and new partnerships to maximise their development impact. Recognizing other multilateral efforts, we take note of the Summit for a New Global Financing Pact,” the G20 said.
In this context, the Leaders took note of the first report of the G20 Independent Expert Group on Strengthening MDBs which was set up by the Indian Presidency. The G20 will examine the report in conjunction with its second report expected in October 2023.
The expert group co-convened by NK Singh and Lawrence Summers estimated an additional spending requirement of $3 trillion per year by 2030 to address urgent global challenges and SDGs. Of the $3 trillion annual requirement, $ 2 trillion could come from domestic resource mobilization while of the remaining $1 trillion, more than half could come from private financing, and the rest from official financing including MDBs.
It said MDBs should provide an incremental $260 billion of the additional annual official financing, of which $200 billion in non-concessional lending.
The G20 leaders acknowledged the need for enhancing the representation and voice of developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions.
“We reiterate our commitment to a strong, quota-based, and adequately resourced IMF at the centre of the global financial safety net,” the G20 said.
“We remain committed to revisiting the adequacy of quotas and will continue the process of IMF governance reform under the 16th General Review of Quotas (GRQ), including a new quota formula as a guide, and ensure the primary role of quotas in IMF resources, to be concluded by December 15, 2023.”
It also welcomed the landmark achievement of the global ambition of $ 100 billion of voluntary contributions (in SDRs or equivalent) and $2.6 billion of grants in pledges for countries most in need and called for the swift delivery of pending pledges.