Finance Secretary Benjamin E. Diokno holds a press briefing in Malacañang on May 30, 2023. — PHILIPPINE STAR/KRIZ JOHN ROSALES

MULTILATERAL development banks (MDBs) must expand their financing capacity for emerging and developing economies, which are facing challenges from the inflationary environment, Finance Secretary Benjamin E. Diokno said.

“Now, as rising interest rates and increasing costs of international borrowing are likely to further restrict government budgets and curtail priority investments, MDBs must make available better financing terms,” he said in a speech during the Annual Meetings of the World Bank (WB) and International Monetary Fund (IMF).

“The rapid increase in the level of the Secured Overnight Financing Rate (SOFR) poses significant risk burdens to the International Bank for Reconstruction and Development (IBRD) countries such as the Philippines,” he added.

Mr. Diokno also called development banks to ramp up support for climate change adaptation and mitigation. “Better concessionality in climate finance is a necessary step towards climate justice.”

“The response of multilateral development banks to the COVID-19 pandemic and post-pandemic recovery has stretched their lending capacity. This threatens their ability to respond to ongoing crises, including climate-related hazards, food insecurity, public health risks, and learning poverty,” he said.

Mr. Diokno called on the World Bank to “provide below-market rates” to middle income countries due to the lack of resources.

“In this regard, we look forward to further discussions with the Bank on the measures being taken under the Evolution Roadmap to improve Concessional Finance, including the Draft Principles for the Allocation of Concessionality,” he said.

“We appreciate innovative solutions such as the guarantee facilities being considered by MDBs including the World Bank, which will enhance their lending capacities. However, we remain cautious of the potential repercussions of the use of hybrid capital on the borrowing cost of member countries,” he added. — Luisa Maria Jacinta C. Jocson