The Unassuming Economist

From a post by Tim Hirschel-Burns:

“2025 admittedly presents a dubious landscape for achieving substantive global economic governance reforms. The scale of needs is large—achieving development and climate goals demands trillions more in annual financing and a reorientation of our economic system—while our political context is trending in the wrong direction, with countries cutting international investments and geopolitical tensions deterring international cooperation.

Still, making progress matters. On climate change, every fraction of a degree makes a difference, and the scale of development challenges are so large that even small increases in inclusive growth or public service provision can improve the lives of millions of people. Actions taken now can also set the stage for more ambitious reforms when circumstances become more favorable in the future.

So, what are five realistic goals for global economic governance in 2025?

1. Establish principles for MDB resource needs reviews and initiate them at each MDB

Right now, decisions on multilateral development banks’ (MDBs) financing capacity are largely driven by inertia and political whims, rather than a regular, evidence-based assessment of how their ability to provide finance matches up with the financing needed to meet goals and the international community. Resource needs reviews would change that, and they are one of the key recommendations of the Group of 20 (G20) Roadmap on Better, Bigger, and More Effective MDBs, which G20 leaders endorsed in November.

That Roadmap sets a near-term goal of establishing principles for resource needs reviews, and South Africa can push for these principles to be decided under its G20 presidency next year. The G20 can simultaneously push MDBs to each initiate their own resource needs review—in the World Bank’s case, the 2025 shareholding review provides a moment to launch an assessment of its capital needs. Carrying out these reviews will generate an analysis of what mix of capital adequacy reforms, hybrid capital and capital increases would add up to financing needs, putting MDBs on a strong footing to increase the supply of finance..”

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