Multilateral development banks have been pushed by their shareholders for some time to lend more, and an International Monetary Fund board decision last week could pave the way for an innovative new way to do just that.
The African Development Bank and the Inter-American Development Bank have been working on a proposal for several years that would allow countries to essentially invest some of their Special Drawing Rights — a reserve currency issued by the IMF — in multilateral development banks. The main holdup was whether the IMF would still consider them a reserve asset and how exactly it would all work.
An IMF board decision on Friday provided some clarity, allowing the instrument to move forward.