G20 to review multilateral development banks reform roadmap in October, says Brazil

By Thomson Reuters Apr 18, 2024 | 10:31 AM

WASHINGTON (Reuters) – Brazil’s presidency of the G20 will submit a roadmap for reforming multilateral development banks for approval by member countries at the finance track meetings scheduled for October, focused on expanding their efficiency and lending capacity.

Speaking on the sidelines of the International Monetary Fund and World Bank spring meetings, Haddad invited countries representing the world’s 20 largest economies to continue studying and considering IMF’s Special Drawing Rights (SDRs) “as a potential instrument for significantly leveraging the financing capacity of the banks.”

The Inter-American Development Bank and the African Development Bank have proposed channeling SDRs through multilateral development banks (MDBs), aiming to leverage the allocated amount by at least four times its original value for new financing to countries in need.

IDB President Ilan Goldfajn told Reuters on Wednesday he expects the IMF to approve this possibility in a meeting scheduled for May.

In his remarks at a G20 meeting on MDBs, Haddad emphasized countries should encourage discussions on the role of credit rating agencies, including how new proposals such as callable capital, hybrid capital, and portfolio guarantees could be better reflected in their methodologies.

Reports from the IDB and the World Bank last week highlighted the significance of callable capital, which is the amount each member country would have to contribute if called upon, constituting the majority of the total capital of MDBs, as opposed to paid-in capital.

While shareholders view callable capital commitments as binding, the likelihood of them being called to actually pay it is considered unlikely. If rating agencies recognize the value of callable capital, it could potentially enable the MDBs to boost lending.

(Reporting by Marcela Ayres; editing by Steven Grattan)