- News Release 2009-035 -

Working Group 4
Summary of Report

G-20 Leaders tasked Working Group IV (WG4) to explore ways to support the World Bank and other Multilateral Development Banks¹ (MDBs) so they can better support vulnerable countries at this time of economic and financial crisis. This work focused on ensuring the MDBs have sufficient capital (i.e., funding) and financial products (e.g., loans and guarantees), to properly respond to the financial crisis and ensure they remain relevant in the world economy.

Capital

MDBs provide loans, grants and technical assistance to developing and low-income countries. These services are made possible by contributions of shareholder nations, including Canada. The financial crisis has led to a decrease in available financing from commercial banks, which is resulting in a greater need for services from MDBs. The Asian Development Bank demonstrated that long-term requirements for increased capital are necessary, and WG4 has recommended that shareholders triple the amount of contributions made to it.

The African Development Bank (AfDB) and Inter-American Development Bank (IADB) are also signalling increased needs for capital based on the financial crisis and long-term requirements. WG4 recommended that they both analyze their requirements in detail, following the example set by the Asian Development Bank, and present the findings to shareholders.

Financial Products

WG4 encouraged MDBs to ensure they have the appropriate financial products in their crisis-response tool kits. These products should allow for quick delivery of funds without ignoring appropriate oversight or development objectives. This could include expanding existing operations or creating new products tailored to address the crisis. Also, MDBs were encouraged to maximize their existing assets by accelerating (front-loading) operations and realigning activities with emerging crisis-related priorities.

To lessen the burden on the MDBs, WG4 encouraged shareholder countries to explore partnership opportunities with the institutions. These partnerships could see shareholder countries provide additional, short-term funding to the MDBs as well as finding arrangements to share risks. These partnerships will help MDBs respond to the crisis without ignoring their essential core mandates and objectives—poverty reduction and private sector development.

Governance Reform

The global economic landscape has shifted since the MDBs were created. Some countries now represent a larger or smaller share of the global economy than their current ownership share and voting rights at the MDBs would indicate. To ensure these institutions remain relevant, WG4 has recommended accelerating reforms including realigning ownership structure and strengthening management accountability. Also, MDBs have been encouraged to adopt open and transparent processes in selecting institutional heads and other senior management.

Aid commitments

WG4 called for donors and MDBs to address the needs of the world's poorest and most vulnerable countries. WG4 specifically urged donors to live up to their prior commitments and encourage developed and emerging economies to take on new ones consistent with their growing role in the global economy.

¹For the purposes of WG4, other MDBs included the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (AsDB), the African Development Bank (AfDB), the Inter-American Development Bank (IADB), and the Islamic Development Bank (IsDB).