The Monterrey Consensus and the Doha Declaration emphasized the key role that multilateral development banks (MDBs) play in the provision of finance for development. The Addis Agenda reaffirms the contribution of MDBs and other international development banks to sustainable development including in countercyclical lending and providing both concessional and non-concessional stable, long-term development finance.
In 2016, annual disbursements of non-grant subsidized finance from the seven MDBs reached $65.8 billion, an increase of 15 per cent over 2015. Their lending was largest in the aftermath of the global economic and financial crisis, with disbursements reaching a high of USD 74.4 billion in 2010, underlining the important counter-cyclical role they have been playing.
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- To increase capital efficiency, MDBs have implemented policies aimed at a more efficient use of capital – for example, by introducing economic capital models that assess capital adequacy by assessing risks of specific operations, rather than general equity-to-loan ratios.Five MDBs have collaborated to establish a framework to exchange loans to diversify their portfolios and reduce sovereign risk. Three bilateral exposure exchange agreements for a total of USD 6.5 billion were approved in December 2015.
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- This could include further aligning internal staff incentives with metrics relevant to achieving the 2030 Agenda for Sustainable Development and the SDGs, rather than focusing them primarily on lending volumes. In the context of optimizing balance sheets, the Addis Agenda also included a call on development banks to use all tools to manage their risks, including through diversification, which warrants further study.Shareholders of the MDBs should continue to work towards a shared vision of the MDB system. In this context, the G20 Eminent Persons Group on Global Financial Governance will make recommendations to achieve greater coherence of shareholder objectives, policies and compliance standards across international financial institutions, including the MDBs, later this year.Cooperation among MDBs has increased significantly since the adoption of the Addis Agenda, including through the Global Infrastructure Forum, which was called for in the Addis Agenda, and the Infrastructure Data Initiative, which brings together all the MDBs to jointly set standards for reporting on infrastructure investment. MDBs could further strengthen collaboration in their diagnostic work, support for project preparation and technical assistance. Greater cooperation should serve to support the ultimate objective of strengthening country systems and country capacities. Cooperation could also be enhanced on financing structures—for example, by the establishment of scalable platforms that can be used to leverage resources across MDBs. Such platforms can support actors that have limited capacities, while allowing the MDBs to pool their resources and expertise. One example of such efforts is SOURCE, a new platform to develop sustainable infrastructure across the MDBs. Another example is the Global Emerging Markets Risk Database, a comprehensive database of credit risk information that provides MDBs and development finance institutions with pooled data on credit default rates.
The Addis Agenda pays particular attention to development banks’ social and environmental safeguards, particularly in new development banks. In the design of safeguard systems, it calls for consultation with all stakeholders on the basis of established international standards, including on human rights, gender equality and women’s empowerment. Development bank’s safeguards should also aim at being “transparent, effective, efficient and time-sensitive.”