G20 Capital Adequacy Frameworks roadmap can yield additonal lending potential of USD 200 billion: Sitharaman

New Delhi [India], September 10 (ANI): The Capital Adequacy Frameworks (CAF) measures, including those under implementation and consideration by G20 countries, could yield additional lending headroom of about USD 200 billion over the next decade, Finance Minister Nirmala Sitharaman said on Saturday and noted that India has effectively articulated priorities of the Global South in the larger global conversation on the Multilateral Development Bank reforms.

Addressing a joint press conference after G20 Declaration was adopted, Sitharaman talked about the key achievements of the Indian Presidency in the finance track on Multilateral Development Banks.

“First one is the outcomes which are focused on strengthening the MDBs to address shared global challenges if the 21st century… There are four key highlights… First, agreement on the need for better, bigger and more effective MDBs. It is necessary to have better bigger and more effective MDBs because the developmental demands from all across the globe are high, so these institutions will have to be better and bigger. This is also going to contribute to enhancing the representation and voice of developing countries in decision-making,” she said.

“The second, is the G 20 independent expert group on strengthening MDBs and this was established and it has submitted its volume one. Their report consists of two volumes, the first volume has already been submitted. The report recommends a triple agenda that dovetails with a call for better, bigger and more effective MDBs. The third point in strengthening MDBs is the agreement to collectively work towards boosting the World Bank’s financing capacity. Here the options would be explored that will deliver a powerful boost to the IBRD head to support low and middle-income countries.  

“Fourth, endorsement for the G20 roadmap for implementation of the recommendations of an independent panel on capital adequacy framework of the MDBs,” she said.

The minister said that the Capital Adequacy Frameworks (CAF) recommendations are focused on enabling MDBs to use the existing resources effectively.

“The roadmap estimates that implementation of the CAF and the measures thereby will potentially yield additional lending headroom of approximately 200 billion USD over the next decade… So through these achievements, India has harnessed the opportunity provided by the G 20 presidency to effectively articulate and embed the priorities of the global south in the larger global conversation on the MDB reforms,” Sitharaman said.

In the G20 declaration adopted on the first day of G20 summit, the member countries endorsed the G20 Roadmap for Implementing the Recommendations of the G20 Independent Review of MDBs Capital Adequacy Frameworks and call for its ambitious implementation, within MDBs’ own governance frameworks while safeguarding their long-term financial sustainability, robust credit ratings and preferred creditor status.

“We also call for a regular review of the progress of implementation on a rolling basis including through engaging with MDBs, subject experts and shareholders.  We commend the MDBs for their progress in implementing the CAF recommendations, especially with respect to adapting definitions of risk appetite and financial innovation,” the declaration said.  

“We appreciate the ongoing collaboration among MDBs on the timely release of Global Emerging Markets (GEMs) data and the launch of GEMs 2.0 as a stand-alone entity by early 2024. Going forward, we also encourage MDBs to collaborate in areas such as hybrid capital, callable capital, and guarantees.  We appreciate the enhanced dialogue between the MDBs, Credit Rating Agencies and shareholders and encourage continued transparency in the exchange of information and rating methodologies.  

“We take note that initial CAF measures, including those under implementation and consideration, could potentially yield additional lending headroom of approximately USD 200 billion over the next decade, as estimated in the G20 CAF Roadmap,” it added. 

The G20 countries said they will need to give an additional push for continued and further impetus on CAF implementation.