All hands on deck: How to scale up multilateral financing to face the Covid-19 crisis

Abstract

Key messages• Multilateral development banks (MDBs) have the financial firepower to help developing countries deal with the impacts of the Covid-19 crisis.• The major MDBs can expand lending by at least $750 billion (160% above current levels) while maintaining a AAA rating, or as much as $1.3 trillion (nearly triple current levels) if they are willing to risk a rating downgrade to AA+.• Doing so requires rethinking MDB financial policy in light of the current emergency by taking existing callable capital of shareholders rated AAA and AA+ into account in capital adequacy calculations, and by reforming or abolishing outdated statutory lending limits.• Scaling up lending quickly does not require any additional resource contributions from shareholders, and it will not endanger the financial stability of MDBs.• Shifting MDB policy and expanding lending to face the crisis should be done in a coordinated manner among MDBs, with the explicit support of the G20 and shareholders. Emerging analysis and ideas2

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