Multilateral Development Banks: Overview and Issues for Congress

Publication Date: February 2010

Publisher: Library of Congress. Congressional Research Service

Author(s): Rebecca M. Nelson

Research Area: Banking and finance

Type: Report

Abstract:

Multilateral development banks (MDBs) provide financial assistance to developing countries in order to promote economic and social development. The United States is a member, and donor, to five major MDBs: the World Bank and four regional development banks, including the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank.

The MDBs primarily fund large infrastructure and other development projects and provide loans tied to policy reforms by the government. The MDBs provide non-concessional financial assistance to middle-income countries and some creditworthy low-income countries on marketbased terms. They also provide concessional assistance, including grants and loans at belowmarket rate interest rates, to low-income countries.

The Role of Congress in U.S. Policy at the MDBs

Congress plays a critical role in U.S. participation in the MDBs through funding and oversight. Congressional legislation is required for the United States to make financial contributions to the banks. Appropriations for the concessional windows occur regularly, while appropriations for the non-concessional windows are less frequent. Congress exercises oversight over U.S. participation in the MDBs, managed by the Department of the Treasury, through confirmations of U.S. representatives at the MDBs, hearings, and legislative mandates. For example, legislative mandates direct the U.S. Executive Directors to the MDBs to advocate certain policies and how to vote on various issues at the MDBs. Congress also has issued reporting requirements for the Department of the Treasury on issues related to MDB activities, and tied MDB funding to specific institutional reforms.