Im - plementing MDB Reforms: A Stocktake - G20 In

Currently, gross investment in most emerging market and developing countries (EMDCs) barely covers the depreciation of the existing capital stock; investment rates are in the range of 20-25% of GDP in all regions except Asia, where the average investment rate is 38% of GDP. [...] An important aspect of this new MDB approach to the private sector is the Cascade principle, which will require a considerable rewiring of incentives and a shift in operational culture to become effective.9 • IDA’s private sector window (PSW) has piloted the use of grants to cover losses from MDB private finance activities in low-income countries, thereby shifting risk from IFC and MIGA to IDA bal. [...] But the PSW performs poorly on the key test of success: the scale and share of IFC investments in PSW-eligible countries has fallen, not risen, relative to the years prior to the creation of the PSW. [...] Expectations and groundwork for future reform 9 The Cascade is a subsidiarity principle according to which the public sector part of the MDBs should refrain from financing what could and should be done by the private sector and private finance, thus avoiding the creation of additional public debt. [...] The most negative responses related to being off-track on the tripling of concessional flows and non- concessional lending, the quadrupling of private capital mobilization, and the underlying expansion in shareholder capital to achieve these targets.