Almaty/Santa Cruz de la Sierra, 16 September 2024 – The Eurasian Development Bank (EDB) and the FONPLATA Development Bank (FONPLATA) have jointly published a T20 policy paper titled “One Size Does Not Fit All – Analyzing the Applicability of Options for Expanding Lending Capacity Across MDBs”. T20 is a major G20 engagement group that brings together think tanks and research centers from G20 members and organizations.
The multi-analytical team of the two Multilateral Development Banks (MDBs), led by Evgeny Vinokurov, Vice Chairman of the Management Board and Chief Economist at EDB, and Oscar Llamosas, Vice President for Strategic Development at FONPLATA, conducted their research with a particular focus on regional and sub-regional MDBs. The reason was that the approaches in raising shareholders’ capital can differ significantly depending on the particular MDB size and regional coverage. The G20 Independent Review of MDBs’ Capital Adequacy Frameworks estimated that MDBs should provide US$260 billion in additional annual official financing to achieve the SDGs by 2030. This requires both more capital and a more efficient use of MDBs’ available resources and instruments. The EDB and FONPLATA share understanding that regional and sub-regional MDBs are generally more flexible, have a better understanding of the conditions of member countries and regions, and therefore can be very helpful to their member states. Adequate capital is a major prerequisite along this way.
The authors discuss available options for capital increase for regional/subregional MDBs. These include: (1) increasing existing shareholders’ capital; (2) membership expansion by attracting regional and (3) non-regional countries, (4) institutional investors, and (5) other MDBs; as well as (6) non-conventional methods which have yet to be tested in practice (e.g., channeling the IMF’s special drawing rights to MDBs).
This policy brief advises G20 countries to encourage regional and sub-regional MDBs to embrace a lending-capacity-expansion strategy consistent with their specific strengths and weaknesses in order to raise shareholder’s capital.
Evgeny Vinokurov, Chief Economist at the EDB, highlights the benefits of this research cooperation: “When MDBs from around the world collaborate on joint research projects, they combine forces and perspectives to produce more balanced and convincing conclusions. MDB cooperation, including in research, is a power tool. We should nurture it. EDB and FONPLATA come from entirely different regions – Eurasia and Latin America – but, as we found, they shared similar challenges that have to be dealt with. Our joint publication under the aegis of T20 focuses on traditional and innovative solutions that can enable regional and sub-regional MDBs to grow capital and expand their portfolios for the benefit of their member states.”
On the other side, Oscar Llamosas, Vice President for Strategic Development at FONPLATA reflected: “Acknowledging that while facing similar challenges, multilateral development banks have diverse characteristics, is crucial to advancing the goal of making not only each of them but the entire international financial architecture bigger, better and more effective. The joint work of FONPLATA and the Eurasian Development Bank aims exactly at that, raising the question of how the specificities of MDBs affect the availability and suitability of options to expand their lending capacity, as well as providing a roadmap to enhance complementarity among MDBs.
The full paper is available at the T20 website: https://t20brasil.org/media/documentos/arquivos/TF03_ST_02_One_Size_Does_Not_F66e19a5be3588.pdf
Additional Information:
The Eurasian Development Bank (EDB) is a multilateral development bank investing in Eurasia. For more than 18 years, the Bank has worked to strengthen and expand economic ties and foster comprehensive development in its member countries. The EDB’s charter capital totals US $7 billion. Its portfolio consists principally of projects with an integration effect in transport infrastructure, digital systems, green energy, agriculture, manufacturing and mechanical engineering. The Bank adheres to the UN Sustainable Development Goals and ESG principles in its operations.
FONPLATA Development Bank (FONPLATA) is a multilateral development bank whose mandate is to support the integration and harmonious, inclusive and sustainable development of its member countries, in order to promote their better insertion in the region and in the global market, through the financing of studies, projects, programs, and the provision of assistance and technical advice. It was formed in 1974 by its five founding members, Argentina, Bolivia, Brazil, Paraguay, and Uruguay, who are the current members of MERCOSUR.
The T20 is a G20 engagement group that brings together think tanks and research centers from G20 members and guest countries and organizations. Think tanks can contribute to the T20 in a variety of formats such as participating in the T20 conferences and meetings, proposing and organizing side events, submitting policy briefs, and joining the task forces activities.
The G20 International Financial Architecture Working Group (IFA-WG) is dedicated to building a more stable and resilient international financial architecture that ensures long-term and sustainable growth in line with the 2030 Agenda for Sustainable Development. One of the IFAWG’s key priorities for 2024 is to make the MDBs better, bigger and more efficient.
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