The world is now more than a year into the second global crisis of the century. Both the current pandemic and the Global Financial Crisis (GFC) more than 10 years ago tested the capacity of international financial institutions to respond with speed and scale. This time, the IMF has stepped up, first with emergency finance facilities, and later this year with a massive injection of global liquidity through a Special Drawing Rights (SDR) allocation of $650-billion.

But what about the multilateral development banks (MDBs)? One of their central roles is to expand the fiscal space of middle- and low-income countries (MICs and LICs) for development spending, exactly what is needed now, and to catalyze finance from the private sector, especially when private finance pulls back. Have they done so? As the 2020 data on MDB finance become available, what can we conclude about how MDBs are performing when the developing world needs them most?

While high-income countries spent on average 24 percent of GDP in 2020 to combat the crisis and its effects, MICs managed only 6 percent, and LICs just 2 percent. Yet the evidence is mounting that poor countries and the poor generally are much harder hit by the pandemic than they were by the GFC, with up to 150-million people projected to be pushed into extreme poverty by the end of this year. Moreover, as vaccines usher in a return to normalcy in the rich world, the slow pace of vaccine rollouts elsewhere means that in much of the developing world, the pandemic could get worse before it gets better.

Report by the Centre for Global Development