Using a multidimensional vulnerability index for the allocation of development finance

The international community has recognized country vulnerability to shocks and stressors as a significant barrier to sustainable development. Recognizing this, the General Assembly in August 2024 adopted Resolution 78/322 on the Multi-Dimensional Vulnerability Index (MVI), a quantitative benchmark to measure structural vulnerability and (lack of) structural resilience across multiple dimensions of sustainable development at the national level. 

The Resolution, in paragraph 7 also invites the international financial institutions, international organizations and multilateral development banks to consider using the MVI, as appropriate, as a complement to their existing practices and policies and in line with their respective mandates. 

The Resolution in paragraph 19 also invites the United Nations system to promote improved understanding of vulnerability and share data and lessons learned from the implementation of the MVI among stakeholders.  

Indeed there are several ways by which development finance try to address the various kinds of vulnerability, in particular after severe shocks occur, hence in a way more curative than preventive. 

Highly needed is now is to see how using a multidimensional and structural vulnerability index, such as the MVI, possibly adapted to the objectives and mandate of each organization, can enable a preventive, consistent and transparent allocation policy. To be used effectively and equitably for the allocation of concessional finance such an index will be an index of structural vulnerability, the components of which are independent of the countries present policy, and it will be complementary to not a substitute of the level of income per capita. This use is also feasible, as evidenced the practice of several institutions.  

The roundtable will serve as a forum for discussions on how a multidimensional vulnerability index in the spirit of the MVI could be of potential relevance to MDBs and selected international financial institutions in supporting developing countries to access appropriate financing of their sustainable development goals. 

A special focus will be brought to the possible introduction of such an index in the “Performance Based Allocation” formula used by several MDBs.

Objective

The objective of the meeting is to enlighten the rationale and feasibility of, as well as possible obstacles to the use an index of multidimensional and structural vulnerability for the access to concessional resources and their allocation between countries through an appropriate formula. The discussion will consider how the index can complement other existing variables used to measure country development financing needs and allocation to them. 

Expected Outcomes 

•  Improved understanding of how a multidimensional structural vulnerability index can serve as a tool to enhance existing methodologies for determining financing needs and allocation
• Identification of possible ways and conditions according to which this index can be integrated into existing practices of MDBs and understanding the barriers to implementation.
• Examination of the possibility to explore more deeply the consequences of this integration on country allocations, in cooperation with the MDBs.

• Why current practices consisting of partly compensating financing developing countries for the shocks they face once they occurred do not address their structural vulnerability and enhance their resilience?
• Current MDBs methods for determining ex ante development finance allocation of member countries focus primarily on country size, lack of income (as measured by GNI per capita) and a measurement of performance. Some MDBs add country features into their formulas, as well as specific windows.  How can a more comprehensive measure of country needs for financing based on structural vulnerability be incorporated into access and allocation formulas? 
• What are the main challenges faced by MDBs and other stakeholders in integrating a vulnerability index into their allocation frameworks?
•  What specific actions or commitments are needed to incorporate measures of country vulnerability into allocation policies?