Discussion Paper

No. 2018-26 | March 13, 2018
The new global agenda and the future of the multilateral development bank system
(Submitted as Policy Paper)


The authors assess the role of the multilateral development system and the reforms needed to support the new global agenda. There is an urgency to the reforms. The coming decades will see the largest urban expansion in history. More infrastructure needs to be built in the next 15 years than the existing stock of infrastructure in the world. Multilateral development banks (MDBs) are uniquely placed to support policy and institutional reforms and build institutional capacity, enhance the quality of projects and programs, and scale up for transformative change. They are the best mechanism today for leveraging public resources. By our calculations, each dollar of paid-in capital could reasonably translate into $50 of public investments if properly allocated. Despite these inherent strengths, MDBs are constrained by their financial and institutional capacities, effectiveness of instruments, and unclear mandates and governance shortcomings. The authors suggest MDBs do more in three client groups: (i) fragile states; (ii) high-debt countries; and (iii) upper middle-income countries, adjusting strategies and use of instruments in each case. With so many issues on the table, they believe that the greatest risk to the system lies in active inertia, a tendency to make changes on the margin that fall short of a collective response that is scaled to the task at hand. Individual MDBs each perform well, according to evaluation results, but their impact could be enhanced if they cooperated more as a system and developed scalable platform approaches. Major expansion is not feasible under current business and financial models. Shareholders need to reach consensus on capital and governance to unlock the financial potential and effectiveness of the MDB system.

JEL Classification:

F02, F30, F35, F55, F63, J11, O19


  • Downloads: 216


Cite As

Amar Bhattacharya, Homi Kharas, Mark Plant, and Annalisa Prizzon (2018). The new global agenda and the future of the multilateral development bank system. Economics Discussion Papers, No 2018-26, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2018-26

Comments and Questions

Anonymous - Referee report 1
April 23, 2018 - 08:57

Overall assessment:
This policy / advocacy paper makes a pitch for strengthening the role of MDB’s in a context of a significantly changed development context, notably shaped by the 2030 Agenda, urbanization and demographic transition. The authors call for more harmonization, alignment and co-ordination between the different banks to unlock ...[more]

... more and better financing in particular in fragile states, highly debt countries and upper-middle income economies. The paper makes a welcome contribution to the current debate on how to mobilize more and better resources to finance the implementation of the SDGs at country level and they offer some interesting entry points for how the existing system can be improved. The flow works generally well and the proposals are under-pinned with examples and references to the current literature. On the other hand though, the paper has some significant short-comings that should be addressed before publication. My suggestion is – re-submission after revision.

Specific comments:
In the following I will focus on the main points I would consider important to address/clarify/elaborate on:

- Value proposition: in several parts of the document it is stated that MDBs are “the best mechanism today for leveraging public resources” – who is saying this? Is there enough literature, empirical evidence for making since point? – What is the reference system – compared to what other forms? The paper does not address any alternatives to the MDBs in any serious length. I would suggest to add a new section 2 that convincingly point out what the MDBs have been doing, how they changed and what evidence we have that compared to other forms there are “the best mechanism”. As side remark, what the authors are not refereeing too is the creation of the two new MDBs in the last two years – Asian Investment Bank and BRICS Bank – which to some extent goes against their proposal for more harmonisation but seems to go for more proliferation…. – the political economy aspects of MDBs beyond funding could be strengthened.
- Setting the context: section 1 could do a much better job in explaining the current new context and how MDBs could help with addressing the convincingly identified challenges. The current section 1 should be re-written to help the reader get the story, like a classical introduction. What is the problem that this paper addresses, how it is done , and what is the outcome.
- Addressing co-ordination failures: This is the most important point to address in a revision. The reader can be convinced about the MDBs story and role in financing and the need for better alignment, harmonization and co-ordination. But the offered solutions are a bit shallow and short sited – there is a nice saying in development jargon – everybody is for more co-ordination but no-body wants to be co-ordinated. Section 2 and 3 mainly addresses these points but in a fairly unstructured way, going back and forth between making the case for MDBs , current flaws and possible solutions. A clearer structure of a new section 3 what the issues are and a new section 4 how addressing those could be helpful – or if the authors prefer think about different types of issues and directly thereafter a possible solution. The current list of problems and solution needs to be put into priorities – what are the three main stumbling blocks preventing a better co-ordination as an example – would help the reader a great deal to better understand what the authors propose. At the end of the day, what really matters are the “incentives” that would need to be put in place to push the MDS with their own governance structures for more co-operation. Each of the management of the Banks reports to their own Boards – hence only if some sort of either positive or negative incentives are provided then the management will eventually change its policy. It would be great if the authors could be more specific on what they see as the main trigger for changing existing behaviours. Its good to note that the authors are not proposing yet another super-structure for co-ordination – which would be a recipe for failure just adding more transaction costs – but to strengthen it in existing processes; however, in times where all development organization and the multilateral-system is under great pressure with the need to document that each tax-payers dollar is effectively spend through log-frames et al. one needs to think a bit harder how one really can foster more collaboration etc; for a start, being a bit more honest about the current clash back from the PARIS principles that DAC donors seem to have forgotten would be a start; lastly, and based on own experience, I am heavily doubting that “modern communication technologies” will in any way be helpful, if not ex-ante the incentives problems are addressed; we have already enough data/information platform graveyards, collaborative modern tools where we try to lure people in to share their knowledge etc – while in meeting everybody is happy saying so, when back in office nobody has the time to do it….; put it positively – if the authors could come up with concrete examples that have worked I all for it
- Text length: the text is overall long, in parts repetitive and would benefit from making it more “tight”; adding tables or figures would also be useful to beef up the current literature which is a bit short, and mostly refereeing to the publications by the authors – beefing this up would be appreciated

In summary, an interesting policy paper geared towards decision makers in the development community. If properly revised, this paper will be very welcome!

Anonymous - Referee report 2
April 23, 2018 - 10:02

see attached file