The US Treasury Secretary has called for reforms that prioritize making multilateral development banks “better… not just bigger” and has requested specific reforms before considering a capital increase for these institutions.
Speaking in Gandhinagar, Gujarat, on July 16 ahead of the third meeting of G20 Finance Ministers and Central Bank Governors, Janet Yellen outlined several priorities for reforming multilateral development banks. These priorities include establishing a framework for targeted use of concessional financing for global challenges, allowing the World Bank to lend to sub-sovereign and supra-sovereign entities like COVAX, and streamlining the climate finance architecture to enhance collaboration between development banks and specialized funds.
Yellen emphasized the need to focus on implementing these reforms before considering capital increases, stressing the importance of building better banks rather than just larger ones. She highlighted the importance of multilateral development banks increasing their mobilization of private capital.
Yellen’s remarks coincide with discussions within the G20 about the first volume of a report led by Larry Summers and NK Singh on reforming multilateral development banks. The report, which was proposed by India at a previous meeting of finance ministers and central bank governors, will be publicly released on July 18.
Yellen expressed satisfaction with the Summers-Singh report’s emphasis on incorporating global public goods into the mandates of multilateral development banks and its focus on making these institutions more responsive through cultural, incentive, and risk appetite changes. She also supported the call for greater private sector engagement and efforts to enhance the overall system’s effectiveness. Yellen additionally backed the swift implementation of the Capital Adequacy Framework recommendations.
Regarding the World Bank, Yellen noted that efficiency improvements and balance sheet reforms would unlock an additional $50 billion in lending capacity over the next decade. She also highlighted the potential for multilateral development banks to unlock $200 billion over the next decade through measures already being implemented or under consideration.
Yellen also discussed the importance of cooperation between China and the United States in tackling global challenges, particularly in addressing debt vulnerabilities among emerging market economies. China’s role as the world’s largest bilateral creditor makes its involvement crucial in efforts to achieve debt sustainability. Yellen stressed the need for multilateral development banks to be included in debt restructuring discussions to ensure comprehensive solutions.
Furthermore, Yellen reiterated the US’ support for Ukraine and emphasized that Russia’s access to military equipment and technologies necessary for the war would continue to be blocked. She expressed the goal of combating Russia’s attempts to evade sanctions, highlighting the actions taken by the coalition in recent months to address these efforts.
Yellen’s statements reflect the ongoing discussions and efforts within the G20 to address crucial global economic challenges and promote cooperative solutions among nations.
