IDEAS home Printed from https://ideas.repec.org/p/bdi/opques/qef_598_21.html
   My bibliography  Save this paper

Will multilateral development banks weather the Covid-19 crisis?

Author

Listed:
  • Riccardo Settimo

    (Bank of Italy)

  • Raffaele De Marchi

    (Bank of Italy)

Abstract

We assess the impact of the COVID-19 crisis on the financing capacity of the four major multilateral development banks (MDBs) specialized in sovereign lending (IBRD, ADB, IADB, AfDB), based on available capital buffers and while maintaining triple-A ratings. The capacity of MDBs to expand development exposures, on aggregate estimated in the range of $860-896 billion, would grow to $985-1,020 billion, benefiting from the capital increases approved recently. Simultaneously, a number of potential factors – such as the foreseeable increase in exposures due to the MDBs’ countercyclical role, the deterioration in the ratings of borrowing and non-borrowing member countries, and the possible weakening of ‘preferred creditor treatment’ (PCT) – could substantially erode this lending capacity, reducing it to $116-227 billion. Therefore, in the post-pandemic period, it will be crucial to preserve the PCT of MDBs, also in the hypothetical case of debt restructuring episodes. Other policy suggestions go in the direction of reviving balance sheet optimization initiatives, improving harmonization among MDBs’ risk-management procedures and securing credit risk guarantees from highly rated entities.

Suggested Citation

  • Riccardo Settimo & Raffaele De Marchi, 2021. "Will multilateral development banks weather the Covid-19 crisis?," Questioni di Economia e Finanza (Occasional Papers) 598, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_598_21
    as

    Download full text from publisher

    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2021-0598/QEF_598_21.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. World Bank, 2020. "Global Economic Prospects, January 2020," World Bank Publications - Books, The World Bank Group, number 33044, April.
    2. Julian Duggan & Scott Morris & Justin Sandefur & George Yang, 2020. "Is the World Bank’s COVID Crisis Lending Big Enough, Fast Enough? New Evidence on Loan Disbursements," Working Papers 554, Center for Global Development, revised 16 Oct 2020.
    3. Riccardo Settimo, 2019. "Higher multilateral development bank lending, unchanged capital resources and triple-A rating. A possible trinity after all?," Questioni di Economia e Finanza (Occasional Papers) 488, Bank of Italy, Economic Research and International Relations Area.
    4. World Bank, 2020. "Global Economic Prospects, June 2020," World Bank Publications - Books, The World Bank Group, number 33748, April.
    5. David Xiao Chen & Philippe Muller & Hawa Wagué, 2017. "Multilateral Development Bank Credit Rating Methodology: Overcoming the Challenges in Assessing Relative Credit Risk in Highly Rated Institutions Based on Public Data," Discussion Papers 17-6, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raffaele De Marchi, 2022. "Public debt in low-income countries: current state, restructuring challenges and lessons from the past," Questioni di Economia e Finanza (Occasional Papers) 739, Bank of Italy, Economic Research and International Relations Area.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Orietta Nicolis & Jean Paul Maidana & Fabian Contreras & Danilo Leal, 2024. "Analyzing the Impact of COVID-19 on Economic Sustainability: A Clustering Approach," Sustainability, MDPI, vol. 16(4), pages 1-30, February.
    2. Quibria, M.G., 2020. "Poverty and Policy in the Developing World: Before and After the Pandemic," MPRA Paper 104240, University Library of Munich, Germany, revised 15 Oct 2020.
    3. Ștefan Cristian Gherghina & Daniel Ștefan Armeanu & Camelia Cătălina Joldeș, 2020. "Stock Market Reactions to COVID-19 Pandemic Outbreak: Quantitative Evidence from ARDL Bounds Tests and Granger Causality Analysis," IJERPH, MDPI, vol. 17(18), pages 1-35, September.
    4. Abdoul’ Ganiou Mijiyawa & Djoulassi K. Oloufade, 2023. "Effect of Remittance Inflows on External Debt in Developing Countries," Open Economies Review, Springer, vol. 34(2), pages 437-470, April.
    5. Isaac K. Ofori & Mark K. Armah & Emmanuel E. Asmah, 2021. "Towards the Reversal of Poverty and Income Inequality Setbacks Due to COVID-19: The Role of Globalisation and Resource Allocation," Working Papers 21/043, European Xtramile Centre of African Studies (EXCAS).
    6. Hadzi-Vaskov Metodij & Pienknagura Samuel & Ricci Luca Antonio, 2023. "The Macroeconomic Impact of Social Unrest," The B.E. Journal of Macroeconomics, De Gruyter, vol. 23(2), pages 917-958, June.
    7. Ian M. McDonald, 2020. "Macroeconomic Policy to Aid Recovery after Social Distancing for COVID‐19," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(3), pages 415-428, September.
    8. Amrita Ahuja & Susan Athey & Arthur Baker & Eric Budish & Juan Camilo Castillo & Rachel Glennerster & Scott Duke Kominers & Michael Kremer & Jean Lee & Canice Prendergast & Christopher M. Snyder & Ale, 2021. "Preparing for a Pandemic: Accelerating Vaccine Availability," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 331-335, May.
    9. Decerf, Benoit & Ferreira, Francisco H.G. & Mahler, Daniel G. & Sterck, Olivier, 2021. "Lives and livelihoods: Estimates of the global mortality and poverty effects of the Covid-19 pandemic," World Development, Elsevier, vol. 146(C).
    10. Assaf Razin, 2021. "Globalization and Global Crises: Rest of the World vs. Israel," NBER Working Papers 28339, National Bureau of Economic Research, Inc.
    11. Yannick Markhof, 2020. "Pakistan's social protection response to the COVID-19 pandemic: the adequacy of Ehsaas emergency cash and the road ahead," One Pager 461, International Policy Centre for Inclusive Growth.
    12. Seonho Shin, 2025. "The impact of COVID-19 on cultural and arts activities: evidence from a large-scale micro-level survey in South Korea," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 49(1), pages 193-229, March.
    13. World Bank, 2021. "Indonesia Economic Prospects, December 2021," World Bank Publications - Reports 36732, The World Bank Group.
    14. Marcos Deuñas & Mercedes Campi & Luis Olmos, 2020. "Changes in mobility and socioeconomic conditions in Bogotá city during the COVID-19 outbreak," Working Papers 30, Red Nacional de Investigadores en Economía (RedNIE).
    15. Nasir Ababulgu & Nugusa Abajobir & Hika Wana, 2022. "The embarking of COVID-19 and the perishable products’ value chain in Ethiopia," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-25, December.
    16. Dueñas, Marco & Ortiz, Víctor & Riccaboni, Massimo & Serti, Francesco, 2021. "Assessing the Impact of COVID-19 on Trade: a Machine Learning Counterfactual Analysis," Working papers 79, Red Investigadores de Economía.
    17. MARINOV, Eduard, 2022. "The Transforming Role Of Developing Countries In Global Trade," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 10(1), pages 264-275, October.
    18. World Bank, 2020. "India Development Update, July 2020," World Bank Publications - Reports 34367, The World Bank Group.
    19. Metodij Hadzi-Vaskov & Mr. Luca A Ricci, 2019. "The Nonlinear Relationship Between Public Debt and Sovereign Credit Ratings," IMF Working Papers 2019/162, International Monetary Fund.
    20. Ha, Jongrim & Kose, M. Ayhan & Ohnsorge, Franziska, 2023. "One-stop source: A global database of inflation," Journal of International Money and Finance, Elsevier, vol. 137(C).

    More about this item

    Keywords

    international lending; development banks; rating agencies; preferred creditor treatment; international organizations; Covid-19;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdi:opques:qef_598_21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bdigvit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.