Satisfying diverse financing needs
G20 Issue

Satisfying diverse financing needs

As well as expanding its membership, the New Development Bank – whose mission is to mobilise resources for sustainable development in emerging economies – is strengthening its collaborative and partner work through active participation in global forums – including the G20

What is the mission of the New Development Bank, and what progress has it achieved so far?

The New Development Bank’s mission is to mobilise resources for infrastructure and sustainable development projects for BRICS and other emerging countries, ultimately to promote global growth and development. It strives to establish itself as a new kind of development institution by innovating across three broad areas: relationships, projects and instruments, and approaches.

Since its inception, the NDB has made remarkable progress. By the end of the third quarter of 2020, its cumulative project approvals reached $20.7 billion. The NDB has focused on clean energy; transportation; irrigation, water resource management and sanitation; sustainable urban development; and social infrastructure.

The NDB’s subscribed capital is $50 billion. By the end of the third quarter of 2020, the total paid-in capital received amounted to $7.2 billion. A solid capital base, robust business profile and prudent risk management framework have enabled the NDB to maintain strong international credit ratings, higher than the sovereign credit ratings of its members, and therefore to access funding at favourable terms in international and domestic capital markets.

To ensure that sufficient resources are available to meet its liquidity needs, the NDB has five funding programmes to raise funds in various currencies. To date, it has raised over $5 billion through bond issuances in international and domestic capital markets.

How has COVID-19 affected the demand for the NDB’s services?

The immediate impacts of the pandemic and ensuing downward pressures on the global economy present significant challenges for the sustainable development and economic growth of NDB members. The economic shock caused by COVID-19 underscores the countercyclical role that multilateral development banks and other development finance institutions, such as the NDB, can play in support of growth and development during a crisis.

The NDB has responded with increased agility, speed and flexibility to its members’ urgent needs. It accelerated the expansion of its operations by moving beyond financing mainly economic infrastructure to supporting sustainable development projects related to health, employment and social inclusion.

The NDB established the Emergency Assistance Response Facility of up to $10 billion to address members’ urgent financing needs. The facility supports those countries’ health and social relief efforts by financing direct expenses related to the pandemic or providing support to governmental measures for economic recovery. To date, it has approved $4 billion for emergency assistance loans to the governments of Brazil, India, China and South Africa. The NDB is also working on projects to support the post-COVID recovery of its members.

What are the NDB’s priorities for 2020 and beyond?

The NDB is getting closer to a steady state of operations, and is targeting incremental project approvals exceeding $10 billion in 2020. As it develops its ability to implement complex projects, it will continue to offer increasingly sophisticated and innovative financial instruments that can satisfy its clients’ diverse financing needs.

Aligned with its mandate, the NDB is fully committed to leveraging its demand-driven approach and providing tailor-made solutions to its members to address the immediate challenges posed by COVID-19 as well as the associated adverse impacts on their long-term social and economic development. The NDB is ready and well equipped to participate actively in what could be the biggest round of infrastructure investment since the 2008 global financial crisis.

Despite its growing operations, the NDB will remain a lean organisation, committed to operating at speed, without compromising quality. Whenever possible, it will continue to use its members’ own systems to manage the environmental and social impacts and risks of projects as well as to ensure the best use of resources. The NDB will also enhance the provision of financing in its members’ local currencies and is ready to expand these operations according to demand.

In the near future, the NDB will take steps towards expanding its membership. Membership expansion will allow it to extend its development efforts, knowledge and technological capacity to the benefit of more countries and their citizens. It will help strengthen the NDB’s financial capacity, allow it to diversify its portfolio and increase its presence globally.

The NDB will also strengthen collaboration and partnerships with other multilateral development banks and development institutions by actively participating in forums such as the G20 and BRICS, so as to rethink and revamp development policy and help countries make the most effective use of the international financial architecture. The NDB will strive to be a platform for cooperation, by playing an increasingly important role in bringing economic players together, facilitating knowledge sharing and promoting innovation among the BRICS countries and other emerging markets and developing countries.