Finance Secretary Benjamin E. Diokno is calling for changes in the financing models of multilateral development banks (MDBs) to tackle global challenges.

During the Intergovernmental Group of 24 (G-24) Ministerial Meeting in Marrakech, Morocco, Diokno said the lending capacity of MDBs has been strained due to their response to the Covid-19 health crisis and subsequent recovery efforts.

"This threatens their ability to respond to ongoing crises, including climate-related hazards, food insecurity, public health risks, and learning poverty,” Diokno said during his intervention.

In light of these difficulties, Diokno threw his support behind efforts to increase the financing capacity of MDBs in response to the challenges they face.

He then praised the World Bank's implementation of measures recommended by the G20 Capital Adequacy Framework, which could create an additional $50 billion in lending capacity over the next 10 years.

Diokno also acknowledged the potential of guarantee facilities to enhance MDB lending capacities but cautioned against using hybrid capital due to the high global interest rates and its potential impact on borrowing costs for member countries.

“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,” Diokno said.

To scale up support for emerging and developing economies, Diokno proposed that MDBs make available better financing terms especially amid rising interest rates and increasing costs of international borrowing.

“The rapid increase in the level of the Secured Overnight Financing Rate (SOFR) poses significant risk burdens to International Bank for Reconstruction and Development (IBRD) [World Bank] countries such as the Philippines,” he said.

Diokno urged multilateral development banks (MDBs) to provide more concessional financing for climate-related projects, considering the high costs and urgency of addressing the climate crisis.

This support is crucial for the global shift to a low-carbon economy, which requires trillions of dollars in investment, he said.

“Better concessionality in climate finance is a necessary step towards climate justice,” he emphasized in his intervention.

The G-24 members unanimously approved its Communiqué, which outlined their collective stance on various issues.

These included advocating for reforms in the financial models and terms of MDBs to facilitate easier access to financing.

They also emphasized the importance of enhancing the voice and representation of member countries, particularly those in Sub-Saharan Africa.

Additionally, durable debt resolution measures to address debt distress, increased support for climate finance, effective domestic resource mobilization for sustainable development financing, and backing a strong multilateral trade system were all highlighted in the Communiqué.