Diokno calls for financing model reforms

“Now, as rising interest rates and increasing costs of international borrowing are likely to further restrict government budgets and curtail priority investments, MDBs must make available better financing terms,” Diokno said on Tuesday during the Group of Twenty-Four (G24) Ministerial Meeting.

FINANCE Secretary Benjamin Diokno. Photo from Department of Finance

Diokno recognized that current concessional resources are not enough, stressing that they support the idea of the MDBs offering low-interest rates to middle-income countries. 

“We look forward to further discussions with the MDBs on the measures being taken under the Evolution road map to improve Concessional Finance, including the Draft Principles for the Allocation of Concessionality,” he said.

“We strongly urge MDBs to increase support for climate change adaptation and mitigation programs and projects, in support of the $4 to $6 trillion investment requirement for the ambitious global transformation to a low-carbon economy,” he added. 

Diokno noted that the Covid-19 response and recovery efforts have strained MDBs’ lending capacity, potentially affecting their ability to address ongoing crises like climate-related issues, food security, public health and education challenges.

Given these challenges, he supported measures to boost MDB financing capacity, like the successful adoption of G20 Capital Adequacy Framework recommendations by the World Bank, which could create $50 billion in extra lending capacity over a decade. 

However, he cautioned against using hybrid capital due to high global interest rates, while considering innovative solutions like guarantee facilities to enhance lending capacities without increasing borrowing costs for member countries.

“Better concessionality in climate finance is a necessary step toward climate justice,” Diokno said. 

The body also approved the G24 Communiqué, which conveyed its members’ positions on various issues that need to be addressed.

This includes reforming MDB financial models, boosting member country representation, addressing debt distress, increasing climate finance support, promoting domestic resource mobilization and bolstering the multilateral trade system.