India has done well to get agreement on the G20 leaders’ communique, which is well drafted, inclusive and packed with actionable points. But this is not a time for self-congratulation. It is a time for action. Strong implementation would be the real victory.

Emerging and developing economies (EMDEs) played a major role in getting a leaders’ agreement despite divisive geopolitics. Indonesia first achieved this difficult task last year and helped India do it this time as well. As did the two EMDEs, Brazil and South Africa whose presidencies are to follow. The Ukraine war was the main stumbling block that prevented any of the other G20 tracks that met over the last year from being able to issue a communique.

But the war on climate change is too urgent to be neglected for any geopolitics. Even as G20 leaders met there was an earthquake in Morocco and the floods in Libya with a devastating toll in human lives. All countries realise this urgency and were perhaps ready to move on, so that EMDEs were able to seize the moment. But it does suggest that if EMDEs work together they can take other countries along. US, whose presidency comes after the EMDE cluster, is also committed to development and climate mitigation goals. China also worked to support development initiatives.

EMDEs are not directly involved in the Ukraine War, but like the rest of the world, have suffered its consequences such as high prices of oil and foodgrains. No people, including those in the warring countries, should be forced to suffer the spillovers of war, especially not indefinitely. EMDEs can work towards dialogue for resolution of issues and for easing trade restrictions on both countries.

Finance for development

Among the many deliverables we focus on finance since it facilitates all the others. The large funds required for development and mitigation have been noted, but past G20s have not delivered on agreements made. Funds and facilities for infrastructure have disappointed again and again.

The Bretton Woods institutions are the implementing agencies for G20. A couple of years have passed since the G20 commissioned the excellent MDB (multilateral development banks) capital adequacy framework review report. This has many suggestions for doing more with less but there has been little change on the ground.

And many of the ideas in the report have been around for years but the institutions have resisted real change. That is why in our ‘Think 20 task force 5’, on reforming the international architecture, we focused on steps to aid implementation. The communique does build in a number of these action points. How can they be taken forward? First and foremost, since G20 countries have agreed to reform MDBs they must vigorously drive change as shareholders and members of MDB boards.

Even with the maximum expansion and use of capital, MDBs will only be able to provide a fraction of estimated requirements. Therefore it is necessary to also mobilise private capital. MDBs can play a major role here through greater use of warranties, innovative financial instruments for de-risking capital flows to EMDEs thus increasing quantity and decreasing cost of capital available. The leaders’ declaration promises to ‘implement well calibrated macroeconomic and structural policies’ and complementary prudential polices. This is essential to reduce excess volatility, risk and capital cost. The IMF must monitor and call out extreme policies especially in countries that create major global spillovers, without using available prudential policies to moderate them.

MDBs have a preferred creditor status. That is, borrowers prefer to repay MDBs in order to keep their loan rates low since other loans are priced off multilateral loans. This as well as their large data-banks put them in a good position to issue warranties. The problem is non-standard activities are as yet a tiny part of MDB actions. How can they be scaled up?

World Bank staff is incentive driven and current incentives encourage sanctioning loans. Skills in innovative finance are lacking. So a manpower churn involving training, recruitment and complete restructuring will have to take place. New funds must not go to support a bloated bureaucracy that does little. The board must impose and monitor stiff targets and timelines, making refinancing conditional on achieving these.

Tech-enabled regional pacts

More competition as well as coordination with regional and national development banks could multiply global scale and reach. A contestable system could encourage innovation, more customer friendliness and spread best practices. At present coordination is marginal. Use of new technologies in finance can enable the above. Real time information local partners provide can reduce risks, delays and the cost of lending. For example, if carbon saving in infrastructure projects is measured and credits given for it, costs reduce. Making available large MDB databases can help the private sector price risk appropriately. Two-way flow of information can be based on similar standards where it matters and still allow differences required for local conditions. Common standards would allow large data sets to talk to each other through APIs.

Countries and local institutions also have to deliver. They have to improve procedures, measurement, governance and prepare a pipeline of projects ready for financing. These could be in line with country priorities and SDG goals. There is a large overlap between the latter and climate change mitigation. It is the poor who are the worst affected by climate disasters. For example, reducing emissions and better air quality can reduce disease that worsens poverty. Projects in this category are likely to find easier funding.

MDBs can help in developing uniform standards and impart technical training where it is required. But where local regulation and governance is good, relying on local approvals can reduce costs and processing time considerably. Insisting that distant local parties follow US or UK legal codes and processes creates large delays and sharply increases project costs. Some regional MDBs are accepting local government approvals. This reduces their staffing requirements and together with the use of technology cuts cost and lending time to one-fourth of World Bank levels.

MDBs and their regional/local partners can help apply schemes that have worked in one country elsewhere thus scaling them up. For example, there are innovative initiatives in climate for debt swaps; in portfolio diversification based de-risking; in using shareholder SDRs to leverage capital.

If the EMDE foursome plus the US continue to work together they can sustain pressure to make it truly different this time so that action follows agreement. Perhaps a committee of overlapping G20 presidency countries can be set up to oversee overall change.

The writer was chair of T20 task force 5