Scaling Up for Sustainable Development: Benefits and Costs of Expanding and Optimizing Balance Sheet in the Multilateral Development Banks

Abstract Multilateral development banks (MDBs) seemingly face a dilemma whereby rating agencies require them to maintain low‐risk profiles; otherwise, they may be at risk of downgrade. Meanwhile, MDBs are faced with the pressure to increase quantum of their lending operations. This paper estimates the lending headroom available to ‘AAA'‐rated MDBs under scenarios that attempt to manage both of these parameters. Our estimates suggest that MDBs can collectively increase their lending between US598billion and US1268billion (65–137 per cent) and that for at least four MDBs, the policy option of opting for ‘AA+' may possibly be a viable case. © 2020 John Wiley & Sons, Ltd.