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All hands on deck: how to scale up multilateral financing to face the Covid-19 crisis

ODI

April 9, 2020

This article posits that it is essential to begin preparing the groundwork for stepped-up financial support to developing countries so they can best manage their response to the global crisis triggered by the Covid-19 pandemic.

Key messages

  • Multilateral development banks (MDBs) have the financial firepower to help developing countries face the impacts of the Covid-19 crisis.
  • The major MDBs can expand lending by at least $750 billion (160% above current levels) while maintaining a AAA rating, or as much as $1.3 trillion (nearly triple current levels) if they are willing to risk a rating downgrade to AA+.
  • Doing so requires rethinking MDB financial policy in light of the current emergency by including callable capital of shareholders rated AAA and AA+ in capital adequacy calculations, and by reforming or abolishing outdated statutory lending limits.
  • Scaling up lending quickly does not require any additional resource contributions from shareholders, and it will not endanger the financial stability of MDBs.
  • Shifting MDB policy and expanding lending to face the crisis should be done in a coordinated manner among MDBs, with the explicit support of the G20 and shareholders.
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