Central Idea

The World Bank has established a task force dedicated to examining recommendations for enhancing multilateral development banks (MDBs).
This move follows the suggestions made by an independent experts’ group during India’s G20 presidency, as announced by World Bank Group President Ajay Banga.

About World Bank

	Details
Establishment	July 1944, during the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, USA.
Initial Purpose	To help rebuild European nations devastated by World War II; Later expanded to include global development and poverty reduction.
Components	– International Bank for Reconstruction and Development (IBRD) – International Development Association (IDA) – International Finance Corporation (IFC) – Multilateral Investment Guarantee Agency (MIGA) – International Centre for Settlement of Investment Disputes (ICSID)
Membership	189 member countries as of 2021.
Headquarters	Washington, D.C., United States.
Main Functions	Provides loans, credits, and grants; offers technical expertise and policy advice; researches development issues.
Funding	Through issuance of bonds in the international financial markets and earnings from its investments.
Governance	Led by a President, with a Board of Governors and a Board of Executive Directors.
India’s Involvement	– Founding member since 1944. – First loan approved in 1949 for Indian Railways.

Definition and Membership: MDBs are financial institutions with multiple country members, both developed and developing, that provide financing and technical assistance for development projects.
Operational Focus: Their operations span various sectors, including transport, energy, and urban infrastructure, with developed countries contributing to the lending pool and developing countries primarily borrowing for development projects.

Addressing Global Challenges: The climate crisis and other global issues require mechanisms for global-scale action, particularly in emerging markets and developing economies (EMDEs).
Aligning with National Priorities: The expert group recommends that MDBs align more closely with the developmental priorities of individual nations.
Enhancing Private Sector Engagement: A shift is suggested towards greater private sector involvement in MDB operations, moving away from the culture of limited interaction between private and sovereign financing arms.

Coordination and Stakeholder Involvement: The panel emphasizes the need for greater coordination among stakeholders, including national governments, to develop unified goals and policies.
Addressing Coordination Failures: The reforms aim to resolve multiple coordination failures among domestic and international stakeholders, both public and private.
Changing Perception and Practices: The current perception of MDBs as bureaucratic and risk-averse is seen as a barrier to private sector involvement, which is crucial for ramping up financing.

Role in India’s Development: MDBs have been instrumental in financing key infrastructure projects in India, often with longer gestation periods.
World Bank’s Commitments: Since its establishment in 1944, the World Bank has committed $97.6 billion to India, with significant portions in public administration, agriculture, and transport.
Asian Development Bank’s Involvement: Formed in 1969, the ADB has committed $59.7 billion to India, focusing on transport, energy, and urban infrastructure.
Asian Infrastructure Investment Bank’s Financing: The AIIB, established in 2016, has approved $9.9 billion in financing for India, with a focus on transport, energy, and economic resilience.
European Investment Bank’s Contributions: Since 1958, the EIB has committed Euro 4.5 billion to India, primarily in the transport and energy sectors.

Implications of the Recommendations: The proposed shift in MDB operations could lead to more effective and targeted development financing, aligning closely with the specific needs and priorities of individual countries.
Potential for Enhanced Global Impact: By addressing coordination challenges and increasing private sector engagement, MDBs could play a pivotal role in meeting global development goals and addressing critical challenges like the climate crisis.