Multilateral development banks overtake bilateral partners

The MDBs now provide close to half of all development support to Southeast Asian countries. However, the stabilising role of these banks is threatened by shareholder dynamics and decreased donor contributions

The MDBs overtook bilateral donors in 2024 as the largest providers of ODF to Southeast Asia. Collectively, they provided $12.7 billion, equal to just under half of all ODF to the region and exceeding the $12.5 billion provided by bilateral donors.

The ADB and the World Bank are the largest and second-largest development partners operating in the region, providing $5 billion and $4.7 billion respectively in 2024. This is down from their 2023 spending of $5.8 billion (ADB) and $6.1 billion (World Bank). However, total MDB financing was propped up by a sharp rise in AIIB spending, which climbed to $2.75 billion in 2024 from $719.9 million in 2023. This was the largest increase in ODF by any single development partner during 2024 and was driven by greater co-financing with the ADB and the World Bank. Co-financing is a common risk-sharing approach among the MDBs as it uses individual country allocations at each bank more efficiently, stretching their balance sheets further.

Responding to shareholder pressure and the G20 review of MDB capital adequacy frameworks, the MDBs began extensive capital and institutional reforms in 2023, expanding their balance sheets and lending capacity.¹ Southeast Asia’s emerging economies stand to benefit most, given their greater ability to borrow. As these countries move up the income scale, the mix will naturally shift towards lending, reinforcing the MDBs’ significant role in virtually every sector.

This report projects that MDB spending in 2025 will partially offset the expected decline in bilateral ODA. Once the ADB and the World Bank are factored into our projection, the overall ODF decline for the region is 4.2% from traditional development partners. The two banks are expected to lift their spending in 2025 by 10.2%, to $10.6 billion. Our methodology matches that used for traditional bilateral donors, drawing on ADB and World Bank annual reports.²

While bilateral partners are stepping back from direct support, they have so far largely preserved funding for the MDBs as core pillars of the development cooperation architecture.³ In 2024, traditional development partners made $11.5 billion in core contributions to the MDBs and channelleda further $5 billion through the MDBs via mechanisms such as trust funds and co-financing.⁴ OECD preliminary data suggest this priority will hold in 2025, with core contributions to the World Bank expected to rise by 6.4% and to regional development banks by 11.9%.⁵ These figures are particularly telling given the OECD reports overall multilateral support from traditional donors declined by 21.3% between 2023 and 2025, with the UN system alone seeing a 27% decline over this period.⁶

Donor support for the MDBs has held up largely because they leverage contributions by a factor of four to eight, depending on the instrument.⁷ But if the announced ODA cuts continue, that support may eventually erode — the 11 traditional bilateral donors that have announced cuts for 2025–27 account for 62% of core contributions to the ADB and the World Bank, and 59.8% of funds channelled through them.⁸

The MDBs will matter even more as Southeast Asia absorbs the economic, fiscal, and development fallout of the 2026 Iran war and any further shocks. Along with the IMF, the MDBs are the frontline for countercyclical financing at scale. The ADB has already allocated $4 billion in response — $3 billion against government requests and $1 billion in trade finance.⁹

Stable MDB financing also helps countries in the region build resilience to future shocks. The ADB has revised several of its financing mechanisms to cover fuel and food price spikes so that support can be triggered by economic signals such as surging import costs.

The MDBs have responded at scale to the fuel crisis, but they are now expected to simultaneously deliver countercyclical crisis response, climate and infrastructure finance, social sector programs, and general budget support. As shareholders (i.e. bilateral donors) continue to cut their aid budgets, they are increasingly asking the MDBs to do more with essentially the same capacity and balance sheets.