This paper outlines an expanded and more challenging role for multilateral development banks (MDBs) in the provision of longer term development finance. The traditional role has to be further refocused and expanded to cover mobilization of private sector resources, both external and internal.

The paper undertakes an empirical investigation of key macroeconomic factors affecting private investment in the South Pacific developing member countries. The study finds that instability in the real exchange rate had a sizeable adverse effect on private investment.