05 March 2009

G-20 Working Group - The World Bank and other Multilateral Development Banks

G-20 members express concern over the sharp fall in capital flows to emerging markets. The reduction in credit availability has generated a significant economic impact on emerging markets and low-income countries (LICs) as businesses and households find it difficult to access finance. This may hamper progress towards achieving Millennium Development Goals.

G-20 members urge the multilateral development banks (MDBs) and other international financial institutions (IFIs) to step up their counter-cyclical efforts and to off-set capital flight and maintain demand by providing on a consolidated basis fiscal expansion, support to social safety nets, trade financing, bank recapitalization, and infrastructure investment in emerging markets and LICs.

G-20 members commit to use more thoroughly the resources of these institutions to bring forward global expenditure support financing to developing countries by $US100 billion over the next three years based on currently agreed capital.

They emphasize the counter-cyclical role MDBs have in support of their longer-term development mandate. They call for the MDBs, in close coordination with the IMF where appropriate, to move forward on flexible, fast-disbursing and front-loaded instruments designed to substantially and quickly assist developing countries facing financing gaps in the contect of the current crisis, in a manner that would not endanger their financial sustainability and investment ratings.

G-20 members will partner with MDBs in providing short-term financing and risk sharing and in protecting the poorest people through the crisis. They will provide additional resources for these purposes, for instance through contributions to concessional funds or new facilities.

The World Bank and the IMF should also review the application of the Debt Sustainability Framework with a view to make full use of its existing flexibility to reflect the diversity of situations across LICs.

Furthermore, G-20 members, through their involvement in the Boards of Governors, commit to urgently review the adequacy of the capital resources of all MDBs to provide appropriate increases in funding to mitigate the consequences of the crisis. Any increases should maintain appropriate safeguards and development effectiveness, and entail commitments to ongoing governance reform.

The Asian Development Bank should immediately proceed with a substantial general capital increase of 200% or $US100 billion. G-20 members, through their representatives at the Executive Boards of the African Development Bank and the Inter-American Development Bank, stand ready to initiate a review process of the capital adequacy of both institutions, at their respective 2009 Annual Meetings. The EBRD should promptly review its statutory capital constraints to give leeway to interventions by the Bank while preserving its financial strength. The Islamic Development Bank currently has a reasonable level of resources to appropriate lending growth and should continue to keep its resource needs under review in light of the evolving situation in its member countries.

G-20 members stress that MDBs’ reforms should be guided by the principle of shared and common responsibility, increasing legitimacy and partnership of member countries in addressing global challenges of the 21^st century.

G-20 members urge the MDBs to strengthen accountability of their management, and improving the processes to assess their performance. There is broad support from G-20 members for open, transparent, competitive, and merit-based selection process, irrespective of nationality and geographical preferences for the appointment of the senior management of the MDBs

G-20 members urge the World Bank Group to pursue comprehensive reforms of its ownership structure and internal governance. They restate their support for a full-fledged governance reform in the World Bank Group in order to increase voice and representation of emerging markets and developing economies.

They call for the Development Committee at its 2009 Spring Meeting to launch a wider discussion on improving governance and effectiveness of the World Bank, and to set an accelerated timeline for the second step of the Voice and Representation reform package, with an aim to reach an agreement at the 2010 Spring Meeting. Within that process, some G-20 members call for an increase of the shares of developing countries as a whole without dilution of any individual developing member, leading over time towards an equitable voting power between developed and developing countries, while some others consider that only under-represented countries should benefit from such a measure.

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