Fabio Panetta: Statement - meeting of the Development Committee
Statement by Mr Fabio Panetta, Governor of the Bank of Italy and Governor of the
Constituency of Albania, Greece, Italy, Malta, Portugal, San Marino and Timor-Leste, at
the 110th Meeting of the Development Committee (Joint Ministerial Committee of the
Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to
Developing Countries), Washington DC, 25 October 2024.
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This year marks the 80th anniversary of the Bretton Woods institutions. In this turbulent
time, their mission is more important than ever. Together they must foster growth,
create jobs, increase stability, build resilience, fight poverty, and reduce inequalities, all
while facing massive global challenges - climate change, fragility, mass migration,
pandemics, and the risks stemming from new technologies and demographic trends.
We believe that the World Bank Group (WBG), the International Monetary Fund (IMF),
and the wider system of multilateral development banks (MDBs) should pursue this
complex mission cooperatively, leveraging their respective comparative advantages. In
this regard, we greatly appreciate the Development Committee Paper, "A Future-Ready
World Bank Group," for its comprehensive report on what has been accomplished
under the WBG Evolution, launched in October 2022.
We commend the WBG for progress made in improving its operational and financial
model to better serve all its clients, with particular attention to the poorest and the most
vulnerable. It demonstrates an impressive amount of work that is reshaping and
revamping the organization with an eye to strengthening partnership and collaboration
within the WBG and with other MDBs.
Our constituency continues to advocate for improved monitoring and reporting of the
impact of WBG operations, by incorporating better data, impact evaluation, and lessons
learned from past experiences. We will continue to ensure that impact and
accountability anchor any reforms to operational efficiency and effectiveness. Improved
measurement standards in the 22 indicators of the new WBG Scorecard are particularly
welcome, and we look forward to further improvements.
One of the most important tools the WBG can provide is knowledge. It benefits all
countries and is necessary to raise the impact of financial flows on development. To this
end, we strongly support the newly envisioned Knowledge Compact and the new
Knowledge Hubs, designed to favor the flow of expertise and lessons learned around
the globe.
We commend management for further achievement in implementing the G20 Capital
Adequacy Framework (CAF) Review, launched under the Italian G20 Presidency, which
has increased the IBRD's financing capacity by up to $150 billion over the next decade.
We congratulate the Bank for the newly adopted IBRD Framework of Restoration
Measures, while calling for rapid approval of remaining reforms to ensure its full
functionality and alignment with major regional MDBs.
We also applaud the work that the MDBs are jointly making to better recognize the
value of existing callable capital. While continuing the dialogue with credit rating
agencies, we urge management to integrate a part of callable capital into the WB's
capital adequacy metrics. We also appreciate the newly established enhanced callable
capital, and we call for the most inclusive approach in recognizing the financial leverage
of shareholders' voluntary contributions in a way that is consistent with the credit rating
agencies' practice.
We should be very cautious in designing any reform of IBRD pricing which may have
negative impacts on IBRD and IDA financial capacity, which we have been striving to
expand. Moreover, we should be aware of any conflicting effects on the newly
established Framework for Financial Incentives. We also call for greater analysis of
spillovers of price changes for the broader MDBs system, as well as on their
implications for the Bank budget anchor and the incentives for country graduation and
private sector financing.
We urge MDBs to develop effective partnerships with climate and environmental
vertical funds so as to maximize scarce concessional resources. MDBs can greatly help
improve access to these funds at scale and speed. Thanks to their financial leverage,
MDBs can also augment the resources available in vertical funds, by associating
programmatic approaches with their parallel subscription of WBG hybrid capital and
portfolio guarantees, to strengthen predictability of resources for beneficiary countries.
We look forward to continuing work with the WBG to implement the conclusions of the
forthcoming G20 Independent High-Level Expert Group Review on the Vertical Climate
and Environmental Funds.
We appreciate the WBG's new approach to private capital mobilization. Enhanced
country diagnostics, stronger country dialogue, and closer collaboration among the
WBG institutions are needed to increase the supply of effective projects. The WBG
guarantees platform, the publication of GEMs data, the introduction of new products to
mitigate foreign exchange risks, and the promotion of policy reforms specifically
designed to improve the business environment will all help lower the actual and
perceived risks of private investment in developing countries. Project standardization
and securitization will contribute to attracting investors and accelerating the WBG's
portfolio turnover, thus making capital more efficient.
The poorest countries are facing the greatest hardships, and 700 million people
worldwide are still trapped in extreme poverty. It is our duty to help them overcome
challenges and build a more equitable future. As the largest international development
fund in the world, IDA has a major responsibility to help low-income countries return to
the path of recovery and sustainable growth, as well as transition out of conflicts,
poverty, and deprivation.
This year, IDA21 negotiations are creating a new architecture in order to better
integrate IDA into a One WBG and strengthen its alignment with the Evolution agenda.
IDA must continue to be centered on concessional financing, meaningful policy
commitments, and result-oriented targets.
At this crucial juncture, we are committed to ensuring that IDA remains the largest and
most impactful partnership between borrowers - at different income levels - and
donors. Highly concessional resources are a vital source of financing for low-income
IDA countries, especially those lacking significant access to capital markets. At a time
of heightened debt vulnerabilities, higher interest rates, and lower FDIs, this is even
more important. We should collectively deploy all efforts to mobilize adequate
concessional finance for IDA21.
In this collective effort, the rule-based formula to increase IBRD transfers under better
financial conditions and higher incomes - agreed upon in 2018 - is playing a crucial
countercyclical role, and it should make shareholders proud of the IBRD's increased
role among the key contributors to IDA. The 2018 agreement remains a sign of
solidarity and mutual responsibility for a poverty-free world.
We also commend the further efforts of IDA itself to stretch its own balance sheet with
new CAF measures. These measures allow for more efficient deployment of resources
belonging to IDA beneficiaries. We support their full engagements in this decision to
best calibrate the appropriate balance between the degree concessionality and
volumes, should a trade-off emerge.
Our ultimate goal is to spur long-term development through an effective IDA21. The IDA
model is well tested in delivering complex and transformative projects in key sectors,
based on country ownership. Mission 300, in partnership with the African Development
Bank, is an excellent model for using IDA resources through regional multiphase
approaches, building partnerships and - together with IFC and MIGA - mobilizing
private capital. IDA is also uniquely positioned to deliver infrastructures for regional
integration, along with projects and policy reforms to strengthen industrial development
and the local private sector. This is especially important in fighting food insecurity,
increasing access to healthcare and job opportunities, building sustainable local value
chains for critical minerals, and preparing for pandemics.
Rising active conflicts and regional instability call on the WBG to renew its approach in
addressing the root causes of fragility and maintaining effective engagement in conflict
situations. This requires reducing geographical inequalities, promoting broad-based
growth, supporting public service delivery in situations of active conflict, and
strengthening institutions - including effective and decentralized justice systems and
community dispute-resolution mechanisms to mitigate and prevent social conflicts.
As part of this effort, the Italian G7 Presidency is working with its partners to ensure a
successful replenishment of IDA21, building a solid package that addresses all of these
critical issues. IDA must remain relevant to the needs of its clients, particularly Africa
and fragile countries. A collective endeavour will be paramount in striking the right
balance among donor contributions, internal efficiency, and borrower effort, while
broadening the donor base.
Africa is a top priority for this constituency, an agenda further advanced during the G7
Italian Presidency. The Mattei Plan, launched by the Italian Government at the Italy-
Africa Summit last January, aims to build a renewed relationship with African countries
based on equal cooperation, shared interests, and mutual benefits to foster economic
growth and social development at the local level.