IMF and World Bank focus on reforming Multilateral Development Banks

Context

The International Monetary Fund (IMF) and World Bank focus on reforming Multilateral Development Banks (MDBs) to address 21st-century challenges. 

Key Highlights

• MDBs play a vital role in global economic development, presenting economic and technical help to growing countries for development packages by promoting economic growth, specially in low and middle-income countries.
• India, as one among the largest economies in the world, has a significant relationship with MDBs, which has evolved over time.

India’s Engagement with MDBs

• India has been actively engaging with MDBs to address its development needs and to contribute to global economic stability.
• The country has been a recipient of financial and technical assistance from MDBs for various development projects, including infrastructure development, poverty reduction, and climate change mitigation.

Need for Reform

• The modern legal and institutional framework of MDBs, established in the aftermath of World War II, is increasingly seen as outdated and inadequate to deal with the complexities of the 21st-century global ecosystem.
• The framework does not reflect the current realities and aspirations of developing international locations, especially those of the Global South.
• MDBs are going through numerous challenges that affect their relevance and overall performance.
• These include the want to enhance coordination amongst MDBs, deal with the growing demand for his or her sources, and evolve their operational techniques and business models.

Reform Agenda

• It encompasses efforts being undertaken by numerous MDBs to adapt their vision, incentive structures, operational strategies, and financial capacities.
• The purpose is to equip MDBs to cope with the demanding situations of the 21st century further to the development needs of low and middle income countries.
• A key detail of the reform schedule is to enhance coordination among MDBs.
• Addressing new global challenges will require sources and talents of a significance beyond the capability of any single MDB.

India’s G20 Presidency and MDB Reforms

• The current dynamism at the reform agenda stems mostly from the stress exerted by the shareholders through various boards, such as the UN, the G7, and the G20.
• Among those, the position of the G20 has been particularly important.
• The G20 has installation an Independent Expert Group (IEG) to assemble a roadmap for ‘Multilateralism 2.0.
• It proposed a ‘Triple Agenda’ for MDBs.

Triple Agenda

• The Independent Expert Group (IEG) has proposed a triple agenda for MDBs.
• It includes:
  • Efforts to tackle worldwide demanding situations, along their core venture of poverty reduction and shared prosperity;
  • To triple their sustainable lending stage by means of 2030; and
  • To decorate their financial power through capital adequacy enhancements and trendy capital increases.
• During its G20 presidency in 2023, India emphasized the need for comprehensive reforms of MDBs.
• It highlighted the importance of strengthening MDBs to cope with shared worldwide demanding situations, consisting of climate change and sustainable development.
• Under the aegis of India’s G20 Presidency, an Expert Group on ‘Strengthening Multilateral Development Banks (MDBs)’ was constituted.

MDBs and India’s Development Goals

• India has leveraged MDBs’ assets and knowledge to achieve its development dreams.
• It has sought MDBs’ help for diverse development projects, which includes infrastructure development, poverty discount, and weather trade mitigation.
• India has reached out to MDBs to draw a roadmap for becoming a developed kingdom by 2047.
• It has requested MDBs to proportion their project implementation understanding and assist on this endeavour.

Conclusion

• India’s courting with MDBs is a strategic partnership that has evolved through the years and has leveraged MDBs’ sources and expertise to obtain its development dreams and make a contribution to global economic balance.
• The reform of MDBs is a complex and challenging assignment that calls for a concerted attempt from all stakeholders, together with MDBs themselves, their shareholders, and the global network.
• However, with the proper imaginative and prescient, strategies, and actions, MDBs can be converted into greater effective and responsive institutions, better prepared to address the development challenges of the 21st century.

Source: Indian Express

UPSC Mains Practice Question

Q.India has recently signed to become a founding member of New Development Bank (NDB) and also the Asian Infrastructure Bank (AIIB). How will the role of the two Banks be different? Discuss the strategic significance of these two Banks for India. (2012)

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