By Her Excellency, Ms. Vera Daves de Sousa, Minister of Finance of Angola
Throughout the years, African countries and other nations with low-to-middle-income levels have dealt with a range of pressing dilemmas. These challenges include the aftermath of the COVID-19 pandemic and its far-reaching societal and economic implications; the political, economic and social strains stemming from the Russia-Ukraine conflict; the various externally triggered economic shocks that have caused profound global financial crises; the persistent uprisings that have instigated internal or regional conflicts; and notable instances of extreme weather events and frequent climate changes that have swept away the progress made thus far. These disruptions require governments not to act alone, but rather engage with multilateral institutions consistently to secure sustainability.
To face these issues, low- and middle-income countries and developing nations have expected the support of multilateral institutions to guarantee stability, achieve growth and foster development and peace. These institutions are entities created by different nations with the purpose to collaborate towards global development while solving any conflicts that may arise. Multilateral institutions have been essential in promoting regional cooperation, stimulating trade, improving infrastructures, advancing peacekeeping, promoting good governance, developing technology, providing health and education, and cultivating overall economic prosperity.
Particularly in Angola, our relationships with the main multilateral institutions focus on reducing poverty and improving living conditions and values; obtaining support for sustainable economic, social and institutional development; and promoting cooperation and regional integration. We are currently working mainly with the World Bank Group (WBG), the International Monetary Fund (IMF), the African Development Bank (AfDB), the International Fund for Agricultural Development (IFAD), the European Investment Bank (EIB), the Japan International Cooperation Agency (JICA), the French Development Agency (Agence Française de Développement, or AFD) and others. The referenced institutions have given us technical assistance in various matters as well as financial support and investments in key areas, such as health, infrastructures, agriculture and private-sector development.
Unfortunately, multilateralism is facing a crisis, as determined support is waning and chauvinism and protectionism are growing, challenging the virtues of international cooperation and thus preventing the world from solving complex challenges that directly touch the lives of the poorest, particularly in developing countries1. A global analysis of the current effectiveness of multilateralism revealed a severe reduction in support for collectivism and cooperation, with a corresponding increase in nationalism and protectionism.
Lately, the world has continuously registered increases in local and cross-border disputes, political instability and uncertainty, health crises, commodity shocks and other forms of economic shocks that have led to deep economic and financial crises, reduced social well-being and increased hunger. The capacity to address humankind’s common challenges today through institutionalized cooperation seems much weaker and less reliable than 20 years ago. As the global governance became more heterogeneous, its multiple deficits began to explode with the unilateral decisions of states, the arrogant power of the strongest political actors (both traditional and emerging), the overwhelming global influences of multinational companies (notably in the digital sector) and the disintegrations of regimes2.
Moreover, United Nations Secretary-General António Guterres recently addressed the Security Council, highlighting that the Council is currently under its most significant strain since the beginning of the organization almost eight decades ago. This strain arises from sharp tensions among major global powers, necessitating immediate and efficient multilateral reactions to both avert and address conflicts, navigate economic unpredictability, salvage the Sustainable Development Goals (SDGs) and confront threats to global standards by thwarting acquisitions and deployments of nuclear weapons3.
These findings have led many states to urgently consider reforming multilateral institutions to bring them back to their prime objectives and original modus operandi. The suggested reforms of multilateral institutions include readjusting certain nations’ political powers and influences over the many, improving leadership and accountability, enlarging financial powers, setting up more effective multilateral arrangements, increasing representations of different regions and much more.
We believe that the above reforms will further benefit Angola and similar countries, as they present a more welcoming and involving plateau that is concerned with the interests of the whole world.
Regarding the impacts of reforming multilateralism, it is crucial to consider that developing countries, including Angola, must be part of the global discussions and decision-making processes—social, economic and political.
Furthermore, it is paramount to consider the costs and availability of financing for the developing world, which can be solved through increased collaborations between multilateral institutions and the private sector.
Let us recognize that there exists a great infrastructure-funding gap between the developed and developing worlds. In fact, statistics show that the world faces an estimated US$15 trillion infrastructure-financing gap through 2040. To provide basic infrastructure for everyone, we must spend nearly $1 trillion per year. Yet private investment stood at just $172 billion in 2021—a huge variation from the target.
Additionally, the gap between private investments in infrastructure projects in high-income countries and that of low- and middle-income countries is widening. In 2021, only 20 percent of private investments in infrastructure projects occurred in low- and middle‑income countries. Barriers to private investment can also result from a lack of suitable mechanisms to mitigate financial risks. These barriers can be solved through multilateral institutions’ participation in various projects in developing countries, as their participation may signal the projects’ viability, stability and creditworthiness and therefore help reduce risks and attract cheaper and longer-term financing, which is critical for the developing economies most in need of infrastructure investments.
The other important aspect that should be seriously considered in reforming multilateral institutions is the credit-rating process for developing countries. It is important to note that credit-rating agencies impose strict requirements for an AAA credit rating. In addition, rating agencies employ different methodologies to assess country risk. This negatively affects developing countries as multilateral institutions bound to AAA credit-rating requirements and must impact in the lowest and most conservative common denominator, despite growing awareness that the risks of autonomous default may have been historically overstated.
The misrepresentation of risk stemming from the lack of objective, verifiable track records must be seriously considered in the multilateralism reform as it has caused barriers to lower the price and longer-term financing. In fact, developing countries impose high tax rates to offset the high costs of capital, which often result from country-risk overstatement. In this context, countries find it difficult to mobilize domestic revenues to finance projects and other initiatives that are critical to achieving more inclusive and sustainable development levels, reducing poverty and reaching a more diversified economy while curtailing reliance on natural resources.
1 United Nations Development Programme (UNDP): “Why multilateralism matters,” Ulrika Modéer and Ahunna Eziakonwa, September 11, 2019.
2 Foundation for European Progressive Studies (FEPS): “Reforming Multilateralism in Post-COVID Times: For a More Regionalised, Binding and Legitimate United Nations,” edited by Mario Telò, December 2020.
3 United Nations (UN): “Amid Strained Multilateral System, States Must Recommit to United Nations Charter Obligations, Prioritize Human Rights, Secretary-General Tells Security Council,” United Nations Press, April 24, 2023.