The Multilateral Financial Institutions of Development

Abstract

The aim of this paper is to analyse the role of Multilateral Development Institutions (MDIs) in promoting economic and social progress in Less Developed Countries (LDC). After examining the activities of the main MDIs (International Monetary Fund, WorldBank Group, Interamerican Development Bank, African Development Bank, Asian Development Bank and European Bank for Reconstruction and Development) we have come to some conclusions. First, MDIs loans play a catalytic effect in channeling flows of additional public or private resources to LDC. Second, MDIs emphasize both the role of the private sector and an efficient public sector to achieve its objectives (to promote economic growth, reduce poverty, etc.). Third, MDIs provide direct financing for private sector activities, restructuring and privatisation to encourage the development of market economies as well as funding for the infrastructure that supports these activities. Fourth, over the last few years the MDIs have increased their conditionalities on the borrowers, especially in environment and governance areas. Fifth, the resources provided by the MDIs are not enough to cope with the financial needs of LDC; furthermore, a low percentage of total loans are on concessional terms. Sixth, most of the MDIs resources go to the benefit of medium-income countries (South Korea, Mexico, Brazil, etc.) and only a small amount of credits go to the poorest countries; what´s more, in the last few last years MDIs are increasing their financial support of countries in the East. Seventh, MDIs have integrated social sector and environment as a first-order priority in their reports, but the lending reality is far from incorporating such an aim: one thing istheory, the other is practice. Eighth, MDIs’ institutional structures and decision-making processes are similar, as in most of them the principle of one dollar one vote holds. As a result, the MDIs are dominated by the developed countries, which use such institutions as tools to implement their foreign interests. Ninth, regional development banks work closely with many other international organisations such as the World Bank and the International Monetary Fund, which have assumed the role of world development organizations without need of formal constitutional amendments: rather merely through introducing new institutional practices are changes effected. And tenth, since the economic growth and development model encouraged by MDIs in developing member countries is very unfair, the model has a negative social and environmental impact: transnational corporations end up the big winners.