Towards a more efficient use of multilateral development banks� capital

Riccardo Settimo

No 393, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The increasing financing needs of the Sustainable Development Goals (SDGs), coupled with factors likely to restrain in the near future the growth of multilateral development banks� (MDBs) own resources, call for maximizing capital efficiency. Focusing on 7 major MDBs � the IBRD, IFC, AfDB, EBRD, EIB, ADB and IADB � this paper contributes to this debate by: (a) quantifying their aggregate available lending capacity(capital resources and ratings being unchanged); (b) providing a preliminary estimate of the impact on these banks� lending capacity if rating agencies (in particular, Standard and Poor�s) were to refine their methodologies to take into account �preferred creditor status� and �single name concentration�, as suggested by other researchers. The analysis is replicated assuming that MDBs target an AA+ rating. The paper shows that appropriately refining rating procedures may indeed increase MDBs� current overall lending capacity significantly, under both �triple-A� and �AA+� scenarios. At the same time, it makes clear that MDBs alone cannot satisfy what are anticipated to be the very substantial financing needs of SDG-related investments.

Keywords: multilateral development banks; preferred creditor status; single name concentration; credit ratings; rating agencies; 2030 development agenda (search for similar items in EconPapers)
JEL-codes: F53 G24 O19 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (1)

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