Multilateral development system

Three challenges threatening the multilateral development system and possible solutions

By Abdoulaye Fabregas, Economist, Jieun Kim, Policy Analyst, OECD Development Co-operation Directorate, and Olivier Cattaneo, Head, Policy Analysis and Strategy Unit, OECD Development Co-operation Directorate, and Adjunct Professor, Paris School of International Affairs in SciencesPo

Halfway into the implementation timeframe of Agenda 2030, the multilateral development system is under growing pressure, faced with the continued fallout from the COVID-19 pandemic and the ongoing war launched by Russia against Ukraine. The war has aggravated global inflationary pressures; food and energy prices are soaring, threatening the livelihoods of the most vulnerable. This week, the UN launched a record USD 51.5 billion humanitarian appeal for 2023. In this challenging context, our new report shows that the multilateral development system is confronting three paradoxes.

First, the multilateral system has never been as in demand as it is today; neither has it faced so much criticism. It came under attack for its incapacity to help avert the COVID-19 pandemic. Concerns surrounding a lack of representativeness and efficiency of multilateral organisations also fuel mistrust. At the recent UN General Assembly, the IMF-World Bank Group Annual Meetings and the COP27, several leaders of developed and developing countries called for a revamped multilateral system to better serve the interests of the most vulnerable in the face of new challenges such as climate change. The most prominent of those calls has been the Bridgetown Initiative, launched by the Prime Minister of Barbados, Mia Mottley. Failure to acknowledge and confront shortcomings could trigger a crisis of legitimacy, putting at risk the system’s resilience and its capacity to contribute to the global development agenda.

Another paradox is that despite the growing share of official development assistance channelled through multilateral organisations, their resources fall short, by a long stretch, of meeting the ever-growing expectations placed on the system. In responding to the COVID-19 pandemic, multilateral development organisations provided a record USD 185.1 billion in financing to developing countries in 2020, 31% more than the previous year. Although that proved their ability to assist developing countries in times of crises, it was far from sufficient to prevent a sharp rise in inequalities, let alone invest meaningfully in preventing future crises. In 2022, for example, the UN registered a record funding shortfall for humanitarian assistance of USD 31.4 billion in 2022, corresponding to a 55% financing gap.

While the need to reform the system has never been as pressing, the multilateral architecture is becoming more crowded, complex and fragmented with each new crisis. This is the third paradox. New multilateral funds keep appearing in response to emerging development challenges, such as the threat of pandemics, climate change or biodiversity loss. In the long run, further expansion and fragmentation of the multilateral development system could undermine its effectiveness, either through overlapping mandates or intensifying competition for resources among a growing number of multilateral entities while funding gaps widen.

Finding a way to balance short-term emergency response with long-term investment in a resilient and more effective system is imperative. The world needs a strong and well-resourced multilateral development system that is capable of preventing further build-up of global risks, and of strengthening developing countries’ resilience to these risks.

For all the recent attempts to diversify and optimise multilateral funding sources, adapting the multilateral development system requires increased support from its major donors and shareholders. In turn, system-wide accountability must improve. Unless multilateral development organisations can demonstrate their added value, it is unlikely that donors’ contributions will rise to the levels required, especially given current constraints on development budgets.

All multilateral stakeholders – including donors, multilateral institutions and partner countries – must ensure that multilateral development finance is channelled to the areas where it can have the greatest impact in favour of both people and the planet. To support this reform effort, the OECD aims to build consensus and provide evidence to inform debates in the UN, the G7 and G20. The OECD Development Assistance Committee strives to mobilise additional resources in support of the multilateral development system and deploy innovative tools to maximise its leverage. Good donorship and collective accountability mechanisms that could increase the effectiveness of the system remain key.