The G20 International Financial Architecture Working Group places great emphasis on improving the efficacy of MDBs’ operations to support economic development and to help achieve the UN’s Sustainable Development Goals (SDGs). A number of valuable recommendations have been put forward by the G20 Independent Review of MDBs’ Capital Adequacy Frameworks. It is estimated that MDBs should provide US$260 billion in additional annual official financing to achieve the SDGs by 2030. This requires both more capital and a more efficient use of MDBs’ available resources and instruments. This paper has a particular focus on regional and sub-regional MDBs, because the specifics of how they raise shareholders’ capital differ significantly from those of global MDBs. Regional/sub-regional MDBs are more flexible than global MDBs, have a better understanding of the conditions of member countries and home regions, and therefore can be more efficient. At the same time, they urgently need additional capital to expand their operations. The G20 should encourage and incentivize regional/sub-regional MDBs to embrace a lending capacity expansion strategy consistent with their specific strengths and weaknesses. The authors discuss available options for capital increase for regional/sub- regional MDBs. These include increasing existing shareholders’ capital; membership expansion by attracting regional and non-regional countries, institutional investors, and other MDBs; as well as non-conventional methods (e.g., rechanneling the IMF’s special drawing rights to MDBs).
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