If the Covid-19 pandemic demonstrated our interdependence and hyper-connectedness, Russia’s war in Ukraine and its economic consequences have further underscored that no country or region can stand alone. We are all integrated – politically and by trade and investment linkages – into the global economy.
Given growing awareness of this, policymakers around the world are rethinking their approach to sustainable development and re-examining the role of multilateral development banks (MDBs). These institutions are of course still relevant. But whether they are fit for purpose in their current form is open to debate.
To determine how MDBs can best support developing countries, let us consider the difficulties facing Nigeria, where I served as minister of finance, budget, and national planning from 2019 until this year. During the pandemic, more of our citizens were pushed into poverty, and our economy faltered. The breakdown in global supply chains caused the price of crude oil, our largest export product, to crash, tipping Africa’s largest economy into recession. The economy rebounded after a series of reforms, but Russia’s war in Ukraine now confronts us with higher food, oil, and fertilizer prices.
Nigeria is also dealing with fiscal stress, exacerbated by historically low non-oil revenues and adverse global economic conditions. A significant portion of the country’s revenues goes toward servicing its debt, and rising interest rates are pushing up debt-service costs further. Against this backdrop, our biggest challenge is getting the economy back on track and ensuring that our citizens live dignified lives.
MDBs, including the World Bank and the International Monetary Fund, were created in the aftermath of World War II to help alleviate poverty and promote economic growth in developing countries. Seven decades later, these institutions have duly provided financial assistance and met some development metrics. But the world is still battling poverty, disease, and hunger.
The leaders of the World Bank and other MDBs must pursue systemic reforms to fulfill their mandate. To be sure, MDBs have played an important role in low- and middle-income countries and will continue to do so. But we must now face the reality that today’s problems cannot be fixed with outdated solutions. The current geopolitical climate, and the resulting economic and financial conditions, calls for a fundamental shift in these institutions, so that they are better positioned to respond to multiple, overlapping crises.
To be clear, African countries are seeking development partnerships, not handouts or aid. In Nigeria, we have requested longer-term financing from MDBs to weather the current storm. These banks could also facilitate partnerships between private investors and local African businesses to boost economic growth and job creation. Nigeria has already shown remarkable resilience; now the country needs support to translate its economic potential into meaningful development that benefits its citizens.
African countries must work together with the global community to lift the continent out of poverty. But they should also focus on leveraging their abundant resources and young and dynamic populations. One avenue that we are already pursuing is the promotion of intra-African trade through the African Continental Free Trade Area (AfCFTA). With more than one billion people, Africa can be its own market – but only if trade barriers are removed. Nigeria, for example, could unlock its manufacturing and export capacity, earning foreign exchange, attracting investment, and becoming more globally competitive. AfCFTA is already providing a forum for Nigerian entrepreneurs to strengthen partnerships with business owners in other countries.
With the right investments and economic policies, Africa can and will overcome its challenges. Doing so is crucial not just for its own survival, but for the healthy functioning of an interdependent global economy. A string of crises – from the pandemic to the Ukraine war to the intensifying effects of climate change – has highlighted the MDBs’ shortcomings while simultaneously prompting calls for reform. Unless we build on the momentum generated by these disasters, they will engulf us all. — Project Syndicate
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