By The Financial District
Oct 12, 20233 min
Finance Secretary Benjamin E. Diokno has called for reforms and increased concessionality in the financing models of multilateral development banks (MDBs) to address ongoing global challenges during the Intergovernmental Group of Twenty-Four (G-24) Ministerial Meeting.
To increase support for EMDEs, the Finance Secretary proposed that MDBs offer better financing terms, especially in the face of rising interest rates and increasing international borrowing costs. I Photo: Department of Finance Philippines Facebook
The G-24 Meeting marked the beginning of the Philippine delegation's engagements during the 2023 Annual Meetings of the World Bank and International Monetary Fund (WB-IMF), held under the theme "Global Action, Global Impact," in Marrakech, Morocco from October 9 to 15, 2023.
The Bureau leading the G-24 is chaired by Côte d’Ivoire Finance Minister Adama Coulibaly, with Secretary Diokno serving as First Vice-Chair and Argentina Treasury Minister Sergio Massa as Second Vice-Chair.
Under the theme "Reforming the Multilateral Financial System for the Challenges of the 21st Century," the meeting provided an opportunity for members and observers to discuss key areas where international financial institutions can enhance their support to emerging and developing economies (EMDEs).
Secretary Diokno emphasized, "The response of multilateral development banks to the COVID-19 pandemic and post-pandemic recovery has strained their lending capacity. This threatens their ability to respond to ongoing crises, including climate-related hazards, food insecurity, public health risks, and learning poverty."
In light of these challenges, Secretary Diokno welcomed the proposed additional measures that could further increase the financing capacity of MDBs.
He acknowledged the World Bank's (WB) successful implementation of recommended measures by the G20 Capital Adequacy Framework, which could create up to US$50 billion of additional lending capacity over the next 10 years.
While innovative solutions such as guarantee facilities can enhance MDB lending capacities, the Finance Secretary cautioned about the impact of hybrid capital on the borrowing cost of member countries, considering the high global interest rates.
"In this context, we welcome the proposed additional measures that could further increase the WB’s financing capacity, especially towards providing concessionality for low- and middle-income countries," Secretary Diokno said.
To increase support for EMDEs, the Finance Secretary proposed that MDBs offer better financing terms, especially in the face of rising interest rates and increasing international borrowing costs.
"The rapid increase in the level of the Secured Overnight Financing Rate (SOFR) poses significant risk burdens to IBRD countries such as the Philippines," he noted.
Given the escalating climate crisis and the substantial costs borne by climate-vulnerable countries, Secretary Diokno urged MDBs to provide more concessional financing for climate adaptation and mitigation projects, aligning with the US$4 to 6 trillion investment requirement for the global transition to a low-carbon economy.
"Improved concessionality in climate finance is a necessary step toward climate justice," he emphasized during his intervention.
The body then approved the G-24 Communiqué, a written statement that conveyed the position of G-24 members regarding: reforming the financial models and terms of MDBs to facilitate access to financing; enhancing the voice and representation of member countries, particularly those in Sub-Saharan Africa; promoting durable debt resolution measures to address debt distress; amplifying support for climate finance; encouraging effective domestic resource mobilization for sustainable development financing; and supporting a robust multilateral trade system.
To conclude the meeting, Minister Aldaba introduced Secretary Diokno as the new Chairperson of the G-24 for 2023 to 2024. The Finance Secretary had previously served as the First Vice-Chair of the G-24 Bureau in 2022-2023 and as the Second Vice-Chair in 2021-2022.