Development finance

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

Development Matters Development finance, Reviving multilateralism

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.

But to achieve this they urgently need to address a long-standing blind spot by giving much greater weight to helping developing countries access the risk management tools necessary to protect their finances against global shocks. Climate change and the increased incidence of pandemics make shocks affecting critical economic sectors, such as commodities and tourism, or the availability of international finance, more likely.

Continue reading →

Enjeux et défis du financement du développement dans la zone de l’Union économique et monétaire ouest-africaine post-COVID-19

Development Matters Africa, Building resilience, Français, Reviving multilateralism , , ,

Par Alain Tchibozo, Chef Economiste, Banque Ouest Africaine de Développement – BOAD

Endettement accru par les dépenses liées à la Covid-19

Le recours à l’endettement pour financer les plans de riposte et de relance économique explique principalement le fait que le déficit budgétaire des pays de l’Union Économique et Monétaire Ouest Africaine (UEMOA) se soit accru. Au plan des finances publiques, même en tenant compte d’un redémarrage de l’activité autour de 5.5% cette année (contre 1,5% en 2020), le déficit budgétaire global représenterait en 2021 près de 5,0% du PIB, après 5,4% en 2020. L’accumulation de déficits publics liés au financement de dépenses de fonctionnement des États apparaît de fait comme le principal facteur d’endettement public. Or la détérioration des finances publiques restreint l’accès futur des États à de nouveaux financements. En 2021, le service de la dette intérieure (paiement des intérêts et amortissement du principal) représentera plus de 50% du service total de la dette dans sept des huit États membres de l’UEMOA. En outre, la part des recettes publiques consacrée au service de la dette représente depuis 2020 plus d’1/3 des recettes totales dans sept États. Aussi, la question de la soutenabilité de la dette sera un enjeu crucial pour les États de la zone ces prochaines années.

Continue reading →

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

Development Matters Africa, Development finance ,

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.

Continue reading →

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

Development Matters Covid-19, Development finance , ,

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. 

Continue reading →

Public development banks: gateways to transformative SDG financing

Development Matters Development finance, SDGs , ,

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.

Continue reading →

The Future of Financing for Development

Development Matters Covid-19, Development finance , , ,

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.

Continue reading →

Remittances during COVID-19: Reduce costs to save livelihoods

Development Matters Covid-19, Development finance , , , ,

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.

shutterstock_1729484149
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 →

New Approaches to Scaling Private Sector Funding for Sustainable Development

Development Matters Development finance, SDGs ,

By Sonja Gibbs, Managing Director & Head of Sustainable Finance, IIF

This blog is part of the
OECD Private Finance for Sustainable Development Conference

Development-Finance-shutterstock_524218915Welcome to 2020–the “Decade of Delivery” for the 2030 Sustainable Development Goals (SDGs). While the international development community remains hard at work on solutions, success over the next decade will require addressing an “SDG financing gap” of $5-7 trillion per year, with emerging markets making up $2.5-3 trillion of that.  This will create tremendous opportunities for the private sector across the spectrum of investment vehicles—including foreign direct investment, listed and unlisted equity and private equity, in addition to the wide variety of debt instruments.  Indeed, given the massive buildup of debt over the past two decades—to over 320% of global GDP, from around 230% in 1999—a shift towards more non-debt financing could be a more sustainable approach to closing the gap.

With fewer than 10 years left to achieve the SDGs, many low-income countries remain very far off-target. At slightly above 50, the low-income countries median on the composite SDG index—which measures country-level performance in achieving the SDGs—remains well below that of either mature or emerging markets (though there is substantial variance among low-income countries). Continue reading →

Shifting public and private finance towards the Sustainable Development Goals 

Development Matters Development finance, SDGs , , ,

By Paul Horrocks, Priscilla Boiardi and Valentina Bellesi, OECD Development Co-operation Directorate 

This blog is part of the OECD Private Finance for Sustainable Development Conference

dev-cooperation-puzzle-handBack in 2015, the international community committed to a shared global vision towards sustainable development – the 2030 Agenda – including 17 Sustainable Development Goals (SDGs).

The Goals identify the areas in which resources are most needed. But with the realisation that meeting the Goals by 2030 would require filling an annual financing gap of 2.5 trillion dollars, the Addis Ababa Action Agenda (AAAA) called upon a broader mobilisation of resources, including private ones.

Five years on, progress remains slow and uneven.

Three critical questions emerge from this context: How can we drive more resources towards the Goals? How can we make sure they are going where they are needed most?

And are they being used in the most effective way?

In order to guide the answers to those questions, we propose a three-step approach: Mobilisation, Alignment and Impact. Continue reading →

A perspective from the financial sector on sustainable business

Development Matters Building resilience, Development finance , ,

LJD

By Professor Angela Sansonetti, Golden for Impact Foundation

This blog is part of a special series exploring subjects at the core of the Human-Centred Business Model (HCBM). The HCMB seeks to develop an innovative – human-centred – business model
based on a common, holistic and integrated set of economic, social, environmental and ethical rights-based principles. Read more about the HCBM here, and check out an event about it here
The HCBM project originated in 2015 within the World Bank’s Global Forum on Law, Justice and Development and is now based at the OECD’s Development Centre.

For too long, the financial system worked on its own set of principles focused on attracting clients and maximising short-term profits. These principles, growth within a capitalist and closed economy, are no longer suitable in a circular and sharing economy focused on customer needs as well as on environmental, social and governance rules. Today, several forces are pushing towards a new framework oriented to sustainable development, social innovation and human-centred approaches based on these rules.

In this transition environment, the financial system, plays a key role in driving economic growth towards values of sustainability based on promoting, amongst other factors, greater environmental responsibility, climate resilience, low-carbon, human rights, gender equality, social inclusion and sustainable economic growth. The financial system results from a long-term evolution related to global economic growth and founded on macro-economic choices as well as defined legal, technological and government rules. However, nothing is irreversible. So, in this changing context, sustainable finance plays a key role to support the shift from traditional economies based on high-impact and high-carbon industries to clean-energy and low-carbon sustainable industries.

Continue reading →