Donor countries should use IDA20 to address a blind spot in development finance


By Creon Butler, Research Director, Trade, Investment and New Governance Models, and Director, Global Economy and Finance Programme, Chatham House and Harald Hirschhofer, Senior Advisor, TCX


Developing countries need external finance on a very large scale to meet the Sustainable Development Goals; the COVID-19 pandemic has not only increased the amount they need but also made it harder to access private funding. This makes public Development Banks more important than ever, especially to catalyse investments by pension funds and other institutions in socially productive assets.

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Frontloading finance can save lives, tackle climate change and generate real impact


By Sony Kapoor, CEO of the Nordic Institute for Finance, Technology and Sustainability (NIFTYS) and Chair of Re-Define


The humanitarian, moral and economic case for development aid has been made eloquently and does not bear repeating. But the stark, ongoing highly inequitable impact of climate change and the COVID-19 pandemic, both of which hurt poor and developing economies the most, has turbocharged the case for more aid and now. However, present levels of aid languish at 0.32% of GDP, or $161.2 billion, less than half the promised amount of 0.7% of GDP. This commitment needs to be at least doubled, but despite the OECD call for a “massive expansion of aid” countries such as the UK are cutting, rather than increasing aid. 

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Mapping development assistance to small arms control: why does it matter?

By Giovanna Maletta and Lucile Robin, Stockholm International Peace Research Institute (SIPRI)

Small arms, large impacts

Widely available and easy to conceal, small arms and light weapons (generally referred to as SALW) are easily trafficked and acquired both in times of war and peace. This can negatively impact the development of a country in many ways. Among the most directly identifiable effects are the deaths and injuries they can cause, which can increase financial pressure on households, communities, and health systems. In Zambia, treating a patient for gunshot wounds costs more than $100, which represents approximately ten times the cost of treating a patient with malaria. Small arms proliferation can also indirectly fuel conflicts and armed violence, force displacement, reduce economic opportunities, and limit access to healthcare and education.

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Mobilising investment to sustain economic recovery: what can impact investors do?

By Alberto Bernardini, Sustainable Finance Director, GreenWave


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

Private investment in sustainable development has been on the rise in recent years. Impact investments differ from traditional investments as they aim to generate positive, measurable impacts on society and on the environment, in addition to being financially profitable. According to the Global Impact Investing Network’s (GIIN) annual impact investor survey, close to 300 impact investors worldwide collectively managed USD 404 billion of impact investment assets in 2019. This is almost double the USD 228 billion worth of assets under management by 200 impact investors in 2017. Moreover, the rapidly growing impact investment market could provide the capital needed to address the world’s most pressing challenges in areas like sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services such as housing, healthcare, and education. 

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Public development banks: gateways to transformative SDG financing

By Maria Alejandra Riaño, Research Fellow, Governance Programme, Institut du Développement Durable et des Relations Internationales IDDRI

Public development banks around the world can play a vital role in minimising economic decline, supporting recovery and financing structural transformation. To fulfil this role, they need to fully capture the interconnected and transversal nature of the 2030 Agenda and align their practices, operations and investments accordingly. It is not just a matter of marginally adjusting strategies and processes – public development banks need to deeply reshape behaviours and investment practices.

Scaling up public development banks’ alignment with the 2030 Agenda

Public development banks have certain advantages that position them at the forefront of the vast network of actors responding to the socio-economic impacts of the COVID-19 crisis and seeking to chart a course towards a transformative recovery. Public development banks have become an essential and complementary voice for traditional co-operation and commercial investors due to their detailed knowledge of the specific context in each region or country, and unmatched flexibility in the design of concessional loan programmes.

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Transforming finance in the Middle East and North Africa

By Rabah Arezki, Chief Economist for Middle East and North Africa Region at the World Bank and Lemma W. Senbet, The William E. Mayer Chair Professor of Finance, Robert H. Smith School of Business, University of Maryland, and Immediate Past Executive Director/CEO, African Economic Research Consortium

Bedouin solar panels

To overcome current challenges and seize the opportunity to leapfrog, the Middle East and North Africa (MENA) region needs to simultaneously embrace the technological tide transforming the global economy and clean energy development. This transformation calls for a dual transition: (a) decarbonisation of the economy—moving away from the use of fossil fuel as the main source of energy toward renewable energies; and (b) digitalisation— the digital transformation of traditional activities and the advent of new digital activities. To achieve the transition, MENA needs hundreds of billions of dollars of investment in quality projects, including in renewable energy and telecom sectors. MENA should aggressively join the global momentum for the use of clean, renewable energy (e.g., wind, solar, geothermal) to combat climate change. Likewise, it should aggressively develop the digital infrastructure that is also essential for the development of a digitised financial economy.

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The Future of Financing for Development

By Mahmoud Mohieldin, United Nations Special Envoy for the 2030 Agenda, and Benjamin Singer, Economic Affairs Officer, United Nations


This blog is also a part of a thread looking more specifically at the impacts of the COVID-19 crisis in terms of capital flows and debt in developing countries

finance-development-covid-19

Before the pandemic started, developing countries had been increasing their debt levels since the 2000s. By the end of 2019, 44% of IDA-eligible countries were already considered at high risk of or in debt distress. Debt servicing costs of least developed countries (LDCs) and low-income countries increased twofold from 2000 to 2019 to reach 13% of government revenue. A growing proportion of this debt was privately owned, or commercial.

Then the pandemic hit, sending countless public health systems, many already under pressure, into disarray. Up to 1.6 billion livelihoods – half the world’s workforce – have been lost. Health and unemployment benefit expenditures skyrocketed at the same time as the release of some US$9 trillion worth of stimulus packages.

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COVID-19 and the global contraction in foreign direct investment

By Adnan Seric, Research and Industrial Policy Officer at the Department of Policy Research and Statistics (PRS) at the United Nations Industrial Development Organisation (UNIDO), and Jostein Hauge, Research Fellow at the Centre for Science, Technology, and Innovation Policy (Institute for Manufacturing) at the University of Cambridge


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


shutterstock_163440290COVID-19 is uprooting economic globalisation. As both supply and demand are experiencing simultaneous shocks due to lockdown measures, global production networks and international trade flows are being disrupted on a scale never seen before. Disruptions to flows of portfolio and foreign direct investments (FDI) — which are part and parcel of economic globalisation — are no exception. According to the International Monetary Fund, investors removed over US$100 billion of portfolio investment from developing countries since the beginning of the COVID-19 crisis, the largest capital outflows ever recorded. According to the UN Conference on Trade and Development (UNCTAD), global FDI flows are expected to contract by 40% during 2020/21.

The contraction in FDI is going to hit developing countries particularly hard, mainly for two reasons. First, FDI inflows to developing countries are expected to drop even more than the global average seeing that sectors that have been severely impacted by the pandemic account for a larger share of FDI inflows in developing countries. Second, developing countries have become more reliant on FDI over the last few decades — FDI inflows to developing countries increased from US$14 billion to US$706 billion (current prices) between 1985 and 2018, as seen from Figure 1. As a share of world FDI inflows, this represents an increase from 25% to 54%. Continue reading “COVID-19 and the global contraction in foreign direct investment”

How COVID-19 can change incentives for development co-operation

By Nilima Gulrajani, Senior Research Fellow, ODI


This blog* is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


cooperation-hands-puzzle-world-2There is nothing new in accusing bilateral donors of repurposing foreign aid to serve their domestic national interests. Even before the current pandemic, donors had been slashing aid in exchange for middle-class tax breaks, twisting the definition of official development assistance (ODA) to allow for the inclusion of expenditures in wealthier countries, and tying aid to the uptake of domestic consultants. So, what happens now, as economic and social needs expand globally with every case of COVID-19 detected and every grave marked?

The initial vital signs of international collective action are not promising. Some politicians have come under flak for donating personal protective equipment to other countries just before domestic demand skyrocketed, even if this equipment was set to expire and the favour returned in kind. Others stand accused of using medical aid to further diplomatic ambitions. Yet others have gone even further, seemingly keen to upend global co-operation and dismantle the very institutional architecture able to marshal both the transnational networks and political leadership required to detect, monitor and eventually stop this unpredictable pathogen. In short, there are worrying signs about the possibility of upholding a functioning multilateral co-operation system, even among supposedly like-minded actors. Continue reading “How COVID-19 can change incentives for development co-operation”

Remittances during COVID-19: Reduce costs to save livelihoods

By Paul Horrocks, Manager, Private Finance for Sustainable Development; Friederike Rühmann, Policy Analyst; and Sai Aashirvad Konda, Consultant at the OECD Development Co-operation Directorate


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


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Mumbai, India – Migrant workers return home during a nationwide lockdown due to COVID-19, on May 2020. Photo: Manoej Paateel / Shutterstock

The COVID-19 crisis is severely affecting migrants’ ability to send money home to their families.

The World Bank predicts a decline in global remittances by about 20 percent in 2020 due to the economic downturn caused by the COVID-19 pandemic. This decline threatens the livelihoods of millions of households in developing countries, and the international community must urgently invest in innovative, resilient, and cost-reducing solutions to support developing countries amid the crisis and in their recovery.

Impact of COVID-19 on remittances

Remittances serve as an important source of income for millions of households in developing countries and act as a safety net in times of emergencies, natural disasters and crises. In 2019, the flow of remittances reached a record flow of $554 billion to low-and middle-income countries. Continue reading “Remittances during COVID-19: Reduce costs to save livelihoods”