Economics of multilateral development financing: A critical assessment of World Bank operation

Abstract

World Bank’s Climate Investment Fund (CIF) is a financing instrument designed to initiate substantial transformative change towards carbon emission and climate resilient development. Even though climate change adaptability is a focus of this fund, World Bank recognized that poverty reduction, economic growth and climate change must be tackled in tandem. The financing for CIF is channelled through the Multilateral Development Banks (MDBs). This paper discusses how this development fund can be allocated in more transparent, efficient, and equitable way. We propose an approach based on three criteria: the global and national benefits obtained from the allocated funds, the World Bank ranking based on Millennium development Goals (MDG) and the donor country’s preference for fund allocation. The World Bank ranking is calculated using both the human development index results and MDG. Factors, which are being used to find World Bank ranking, have been assigned different weights according to their importance of global or national benefits. Demand for funds from the developing countries is mapped with these three criteria and then the loan/grant is assigned to that country. We believe that this fund allocation strategy will be more effective and will bring more transparency in the system