Helen Clark: Speech at the Second High-Level Meeting on Effective Development Cooperation United Nations Development Group Side Event: “Leveraging Finance for Sustainable Development and the 2030 Agenda”
The objective of this event is to explore financing for national development priorities and for implementation of the Sustainable Development Goals (SDGs). Let me begin with some reflections on the current development finance context, and then comment on how the UN Development Group can support countries to access finance – and also to use it well – in support of SDG implementation.
Development finance context
Implementation of the 2030 Agenda for Sustainable Development and the SDGs would be enormously beneficial for both people and planet. It is also clear that implementation of such an ambitious global agenda will require unprecedented investments in areas such as health and education, infrastructure, environmental protection, and peace and security. Every single dollar will also need be deployed effectively.
At last year’s Financing for Development Conference in Addis Ababa, Ethiopia, governments agreed on an “Action Agenda” for financing the SDGs. The outcome document made it very clear that all sources of finance – public and private, domestic and international – will have a role to play, and are complementary. It also called for increased attention to the financing needs of and the challenges experienced by the world’s poorest countries, and by those in special development situations - such as Small Island Developing States and fragile states.
Governments are now moving forward with delivering on their Addis Ababa commitments, and many are formulating national development financing strategies and plans.
The investments needed to achieve the SDGs, however, will have to be made in uncertain times – volatility is the new normal, and this is putting pressure on development financing in a number of different ways.
- It is nearly a decade since the global financial crisis. Yet many countries in both the Global North and South continue to face turbulent economic and fiscal times. In donor countries, this continues to put pressure on Official Development Assistance (ODA) budgets.
- As well, growing needs for emergency relief, triggered by conflicts and by large natural disasters, are putting pressures on donor support for longer term development. More and more ODA is being allocated to crisis response, yet paradoxically the financing gap for humanitarian needs is also at an all-time high.
- Debt levels are increasing across the developing world as countries strive to increase investments in their own development priorities and the SDGs – often with loan financing. Yet we know all too well the heavy human and economic cost which debt crises can incur.
New opportunities for development finance
Nevertheless, there is cause for optimism. The development financing landscape is dynamic and fast evolving, with new finance providers – public and private – emerging all the time. This is providing new opportunities for partnerships and collaboration to deliver public policy objectives more efficiently.
Financing instruments are also becoming more diverse and sophisticated. This can provide fresh opportunities for developing countries to access the finance they need on terms and conditions appropriate to their particular needs and circumstances.
For example, concessional financing from Southern partners has increased considerably in recent years, and social and environmental impact investors, as well as philanthropic actors, are expanding their activities in the international development co-operation arena.
While traditional types of development financing such as ODA will remain crucial, particularly for the poorest and most vulnerable countries, ODA is also being used in more innovative ways. Blended finance, for example, can play a catalytic role in leveraging additional finance from the public and private sectors, especially for infrastructure investments.
A number of developing countries are also exploring and using new financing instruments, such as green bonds, blue bonds, diaspora financing schemes, and development-oriented venture capital.
Technological innovation in financial services also has the potential to drive greater financial and economic inclusion at the individual level.
The McKinsey Global Institute reported in September that US$3.7 trillion of economic activity could be generated by 2025 in emerging economies through innovation in financial inclusion. Improved mobile infrastructure for example can enable the expansion of mobile banking and other financial services leading to the creation of millions of additional jobs.
Digital currencies meanwhile have potential for expanding financing for development, especially from the private sector, through a number of different channels. For example, digital currencies could enable small businesses in developing countries to engage in more global e-commerce, since they can lower the risk of fraud as well as enable many more small value transactions to take place.
They can also act as market disrupters to enable cheaper and faster transfers and provide alternatives to widely-used conventional financial services, such as the transfer of migrant remittances. For example, non-sovereign digital currencies account for one fifth of the volume of remittances between South Korea and the Philippines. Central banks from Argentina to Canada and Singapore have set up research groups to investigate the utility of these currencies and the regulatory issues around them.
The UN Development Group can support countries to leverage the finance they need for sustainable development in a number of ways, including by helping countries to de-risk investments, and to attract, retain, grow, and deploy financing from domestic and international sources.
While the volume of development finance clearly matters, it must also be effective. This is after all the raison d’etre of the Global Partnership for Effective Development Cooperation.
Many developing countries have made considerable efforts to improve the quality, effectiveness and transparency of their public expenditures over recent years, while many donors have also made greater efforts to align their development aid with national priorities and coordinate better amongst themselves. Yet as the recent UNDP-OECD Joint Monitoring Report shows that more can still be done, for example to channel more ODA via country systems.
The UN Development Group is supporting countries to improve the effectiveness of financing in a number of different ways including through support for strengthening public financial management systems.
UNDG members can also support innovation in generating inclusive and sustainable development finance through acting as a platform for sharing data and evidence on good practice. Our broad knowledge base and global presence can help develop ecosystems for technological innovation in financing. We can be partners in researching, learning, adapting to, and adopting innovation. We can support putting in place the necessary legislation, policy, and regulatory frameworks, and the institutional support and seed capital for investment in new approaches.
The challenge of financing the SDGs is significant. Innovation and partnerships are critical. The UNDG stands ready to support countries to apply bold thinking and innovative policymaking to financing for development. We look forward to the contributions of this panel, and to the discussion and actions to follow.