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New tool reveals slow progress in reforming development banks

A new tool launched on Monday by the Center for Global Development (CGD) shows that the World Bank and the five biggest multilateral development banks (MDBs) have made limited progress in implementing reforms to address global challenges such as climate change and pandemic preparedness.

What is the new tool and why is it needed?

The new tool, called the MDB Reform Tracker, is a web-based platform that monitors and evaluates the reforms undertaken by the six major MDBs: the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, and the Inter-American Development Bank.

The tool aims to provide an independent and transparent assessment of how well the MDBs are adapting to the changing needs and expectations of their shareholders and stakeholders, as well as to the evolving global context.

New tool reveals slow progress in reforming development banks

The tool covers four key areas of reform: governance and representation, operational effectiveness, financial capacity, and global public goods. It uses a traffic light system to indicate the status of each reform: green for completed or on track, yellow for partial or slow progress, and red for no or negative progress.

The tool is based on publicly available information from the MDBs themselves, as well as from other sources such as academic studies, media reports, and civil society organizations. The tool is updated biannually or when major changes are announced.

What are the main findings of the tool?

According to the tool, the MDBs have made some notable progress in areas such as raising lending limits, launching innovative finance programs, and increasing their focus on climate action. However, many reforms are still in the aspiration phase rather than the implementation phase.

For example, the tool shows that:

  • The World Bank has adopted a new mission statement that includes the phrase “livable planet”, but it has not yet defined what this means in practice or how it will align its operations with this goal.
  • The African Development Bank has committed to double its climate finance by 2025, but it has not yet developed a clear strategy or roadmap to achieve this target.
  • The Asian Development Bank has pledged to increase its support for health security and pandemic response, but it has not yet established a dedicated fund or mechanism for this purpose.
  • The European Bank for Reconstruction and Development has expanded its geographic scope to include sub-Saharan Africa and Iraq, but it has not yet clarified how it will coordinate with other MDBs and avoid duplication or overlap.
  • The European Investment Bank has announced its intention to become a “climate bank” by 2025, but it has not yet defined its criteria or indicators for measuring its climate impact or alignment with the Paris Agreement.
  • The Inter-American Development Bank has initiated a process to review its governance structure and voting power distribution, but it has not yet reached a consensus or agreement among its members on how to reform them.

What are the implications and recommendations of the tool?

The tool suggests that the MDBs are facing several challenges and constraints in implementing reforms, such as:

  • The lack of clear and consistent guidance from their shareholders on their priorities and expectations.
  • The difficulty of balancing their multiple and sometimes conflicting mandates and objectives.
  • The complexity of coordinating and collaborating with other MDBs and development partners.
  • The resistance or inertia of their internal cultures and systems.

The tool also offers some recommendations for accelerating and enhancing reforms, such as:

  • Strengthening the voice and participation of borrowing countries and other stakeholders in decision-making processes.
  • Improving transparency and accountability mechanisms for monitoring and reporting on results and impacts.
  • Enhancing operational efficiency and flexibility by simplifying procedures and reducing bureaucracy.
  • Increasing financial capacity and leverage by mobilizing more resources from public and private sources.
  • Integrating global public goods into core business models and strategies.

The tool concludes that reforms are necessary and urgent for the MDBs to remain relevant and effective in addressing the current and future development challenges. It calls for more political will and leadership from both shareholders and management of the MDBs to advance reforms in a timely and ambitious manner.

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