by John Irish

PARIS (Reuters) – Dozens of leaders who will meet in Paris this week for a finance summit are expected to push for multilateral development banks, such as the World Bank, to take more risk with their capital to boost lending, according to a draft statement seen by Reuters.

It is expected that the multilateral development banks will find themselves at the heart of the discussions on Thursday and Friday in the French capital, where President Emmanuel Macron will welcome nearly forty heads of state and government with the aim of establishing a roadmap to ease the debt burden for low-income countries and provide additional climate funds.

According to an expert report for G20 countries unveiled last year, leaders of multilateral creditors, shareholder states and credit rating agencies are too timid when it comes to financial risk. Greater risk tolerance could free up hundreds of billions of dollars in the medium term, they estimated.

A draft communiqué from the Paris summit on the multilateral development banks (MDBs) calls on them to make a new effort to “optimize” the use of their capital and “encourages them to take innovative measures”.

“This should include exploring the incorporation of a prudent share of guarantee capital into the capital adequacy frameworks of MDBs (and) diversifying their sources of funding (including by considering issuing hybrid capital) “, is it written in the document, the final version of which could evolve.

Leaders meeting in Paris are also expected to back a plan to allow rich countries to redirect some of the unused special drawing rights from the International Monetary Fund (IMF) to development banks, including the African Development Bank and the Inter- American development.

(Report John Irish, with contribution by Leigh Thomas; Jean Terzian)

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