Urgent Need to Tackle Inequalities in Financing for Development Worsened by the COVID-19 Pandemic

By Jamshed Baruah

NEW YORK (IDN) — In the face of dramatic reversals in global progress towards achieving the Sustainable Development Goals (SDGs), urgent action is required by the international community to improve developing countries’ access to affordable finance.

Inaugurating the four-day Forum on Financing for Development (FfD Forum) on April 25, ECOSOC President Mr. Collen V. Kelapile, Botswana’s Permanent Representative to the UN said: “…The ambition of sustainable development for all is facing perhaps its greatest threat since the adoption of the 2030 Agenda seven years ago.”

This is because “the COVID-19 pandemic has exacerbated trends that are contributing to cataclysmic effects on development progress, and the poorest and most vulnerable are experiencing the impacts most severely”.

Convened under the auspices of the UN Economic and Social Council (ECOSOC), the FfD Forum has been joined by eight Heads of State and Government, over 50 Ministers, senior government officials, and senior representatives of international organizations and representatives of the private sector, civil society and local authorities.

Together they will develop solutions to scale up financing for the SDGs.

Against the backdrop of a cascade of crises for developing countries, the Forum is proposing policies and strategies to expand investments in health and social protection, boost private investment, enhance concessional finance, resolve increasing debt distress, strengthen domestic resource mobilization, combat illicit financial flows and address climate change and the digital divide.

The high-level Forum comes as a recent UN report, the 2022 Financing for Sustainable Development Report: Bridging the Finance Divide (FSDR 2022), warns that 60 per cent of the world’s poorest countries are in or at high risk of debt distress, double 2015 levels. The high cost of servicing debt in developing countries—with interest rates up to 8 times higher than their rich counterparts—is straining already fragile public finances.

Economic shocks from the COVID-19 pandemic, and now the war in Ukraine, have worsened the situation, with the poorest countries spending billions on debt servicing, diverting resources from the pandemic response and investments towards supporting a sustainable recovery.

“There are early signs of a tsunami of potential debt crises, deprivation, discontent and civil unrest. No country, developed or developing, will be isolated from the impacts,” UN Deputy Secretary-General Amina Mohammed said in her opening remarks.

“The SDGs are in need of urgent rescue. Financing for development is an essential part of the solution. But so far, the global response has fallen far short.”

As a result of the decline in the tax-to-GDP ratio in 72 per cent of countries in 2020 due to the pandemic, an estimated 889 million people were living in extreme poverty in 2021. Meanwhile, 53 per cent of the global population had no social protection benefits. With fuel and food prices already 60 per cent and 35 per cent higher before the Ukraine crisis, without intervention, millions more could become subject to hunger and destitution in 2022.

The Forum leaders agree that without greater fiscal space for critical expenditure and SDG investment, developing countries cannot have an inclusive and sustainable recovery. They are looking at solutions and new policies to meet these urgent needs. Among them:

  • Scaling up concessional financing
  • Dealing with debt distress in an orderly, coordinated and timely manner
  • Mobilizing domestic resources
  • Stemming illicit financial flows

According to UN News, as the FfD Forum reviews the Addis Ababa Action Agenda, there is agreement that it will be key to align all financing flows, public and private, with the SDGs. “Countries will also need to address the opportunities and risks of the digital transition to ensure that all share the benefits of new technologies. At the same time, they must deal with the looming challenges of a changing climate.”

The leaders of the countries represented at the Forum agree that if the 2030 Agenda is to remain within reach, it is urgent and vital to resolve all of these issues.

2022 SDG Investment Fair

Parallel to the FfD Forum April 26-28, ministers and senior government officials are meeting with the private sector at the 2022 SDG Investment Fair. Representatives from Colombia, Nigeria, El Salvador, Guatemala, and Equatorial Guinea will present high-impact, investment-ready projects that support sustainable development to private investors.

In 2021, more than $10 billion in investment opportunities were presented at the Fair. Currently, opportunities for investments in sustainable development across emerging markets are estimated to be $10.2 trillion.

Scaling up private investment is crucial to achieve the SDGs. According to FSDR 2022, foreign direct investment rebounded by 77 per cent in 2021, but most of the rebound was concentrated in developed economies. Private investment in infrastructure in developing countries remains low relative to historical averages.

In addition to the project presentations, the SDG Investment Fair features panel discussions on public development banks and the SDG investment ecosystem, direct interaction among project sponsors, investors, and experts, and spaces for networking and knowledge sharing at the Fair and beyond.

The FfD Forum is an annual intergovernmental event mandated to review the Addis Ababa Action Agenda and other financing for development outcomes to advance the implementation of the SDGs.

The SDG Investment Fair grew out of a need for a dedicated space to connect investors with impactful business opportunities.. Countries are chosen from a pool of interested candidates to present their most promising projects to investors of all sizes scouting for investment opportunities across Asia, Africa and Latin America. [IDN-InDepthNews – 26 April 2022]

Photo Credit: Predrag Vasic/SPCS/OUSG/DESA

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