In the New Delhi G20 Leaders' Declaration, leaders worldwide have voiced their commitment to reform and strengthen Multilateral Development Banks (MDBs). Their goal to create a more effective international development finance system capable of assisting developing countries, especially those facing extreme poverty and vulnerability, in addressing economic challenges and combatting the impact of climate change.
Call for Reforms
In the recently released New Delhi G20 Leaders' Declaration, a collective vision for a more robust and impactful international development finance system emerged. This vision focuses on enhancing the role of Multilateral Development Banks (MDBs) in providing financial and technical support to developing nations. Here are the key takeaways:
Multilateral Development Banks, or MDBs, encompass institutions like the World Bank, the Asian Development Bank, and the European Bank for Reconstruction and Development. Their primary mission is to provide financial resources and technical expertise to help developing countries bolster economic management and reduce poverty. MDBs are pivotal in the pursuit of climate action and the achievement of sustainable development goals (SDGs).
Biden's Pledge to Boost MDBs
The significance of MDBs in critical areas such as climate change and global development was underscored at the summit. United States President Joe Biden actively championed the expansion of the World Bank's capabilities to support low- and middle-income nations. His efforts included a request to Congress to unlock over $25 billion in new concessional financing from the United States alone.
Addressing Climate Change
The issue of climate change took center stage in the G20 Delhi Declaration. With the Earth's surface temperature rising by approximately 1.15 degrees Celsius, leaders recognized the urgent need to curb greenhouse gas emissions. The Paris Climate Agreement 2015 set a clear target: preventing global temperatures from exceeding this critical threshold. Yet, nearly a decade later, that goal remains unmet. Here's why this matters:
Race Against Rising Temperatures
Unchecked emissions, primarily from developed countries since the late 18th century's Industrial Revolution, have led to a substantial increase in global surface temperatures. If left unchecked, the world is on track for a temperature rise of roughly three degrees by the century's end. The critical distinction lies in the difference between a 1.5-degree and a 3-degree increase—an uninhabitable Earth versus a manageable challenge. To limit the global average temperature rise to 1.5 degrees Celsius, emissions must be halved by 2030 compared to 2009 levels.
Developing nations, including India, have long advocated for wealthier countries to assume greater responsibility. They argue that developed nations bear substantial historical emissions and should provide financial resources and technology to facilitate the transition to clean energy sources.
MDBs as Catalysts
Multilateral Development Banks, especially the World Bank, are pivotal in enabling poorer nations to secure funding for essential infrastructure and clean energy initiatives. Amitabh Kant, India's G20 sherpa, emphasized the importance of global leadership in green development, especially in the climate crisis and the requirements of both the SDGs and climate action.
The $100 Billion Promise
Six years before the Paris Agreement, developed nations committed to providing $100 billion annually by 2020 to support developing countries in their fight against climate change. As of today, this commitment remains unfulfilled. Meeting this pledge in the near future will depend significantly on increased financing through MDBs.
Bridging the Financing Gap
Bilateral public finance, a crucial indicator of direct contributions by developed nations, has seen minimal growth since 2016. This highlights the urgent need to address shortfalls in financing, a concern that the G20 New Delhi Declaration aims to resolve.