- Calls for Increased Firepower: World Bank and Risk Assumption
- $100 Billion Climate Finance Commitment Within Reach
- Overhaul Needed: Criticisms of World Bank and IMF Capabilities
World leaders stated on Friday that multilateral development institutions like the World Bank are expected to find $200 billion in additional firepower for low-income economies by assuming more risk, a move that may require wealthy nations to inject more cash.
The leaders, convened in Paris for a summit to discuss financing for the climate transition and the post-Covid debt burdens of poor countries, stated that their plans would secure billions of dollars in private sector investment.
They added that a long-overdue commitment of $100 billion in climate finance for developing nations was also in sight.
During the two-day summit, however, many attendees stated that the World Bank and the International Monetary Fund were increasingly ill-equipped to address the most pressing challenges and required a comprehensive overhaul.
“We expect a $200 billion increase in the lending capacity of MDBs over the next decade by optimizing their balance sheets and taking more risks,” according to the summit’s final statement obtained by Reuters.
“If these reforms are implemented, MDBs may require additional capital,” it added, recognizing for the first time in a final summit document that wealthy nations may need to contribute more funds.
The final summit document called for each dollar of lending by development banks to be matched by at least one dollar of private finance, which, according to analysts, should enable international institutions to leverage an additional $100 billion in private funds for developing and emergent economies.
The announcements represent a stepped-up effort by the development banks in the fight against climate change and provide a roadmap for future action in advance of their annual meetings later this year.
However, some environmental activists criticized the results.
“While the roadmap recognizes the need for substantial financial resources to bolster climate action, it overemphasizes private investments and underestimates the role of multilateral development banks,” said Climate Action Network International’s director of global political strategy, Harjeet Singh.
Debt relief
The United States and China sought to adopt a more conciliatory tone at the summit after a historic agreement was reached on Thursday to restructure $6.3 billion in debt owed by Zambia, the vast majority of which was owed to China.
“As the world’s two largest economies, we have a responsibility to work together on global issues,” Yellen stated on a summit panel alongside Chinese Premier Li Qiang and other world leaders.
Nevertheless, distinctions remain. Also China, the world’s largest bilateral creditor, wants the World Bank and IMF to share the losses, which Western nations oppose.
Climate commitment
The summit statement indicated a “good likelihood” of finalizing a $100 billion climate finance commitment to developing countries this year.
Many of the topics debated in Paris were based on suggestions from a group of developing nations, led by the Prime Minister of Barbados, Mia Mottley, and known as the “Bridgetown Initiative.”
