Ladies and Gentlemen,
I have the honor to present to you the 2022 Financing for Sustainable Development Report of the Inter-agency Task Force on FfD. This report was prepared against a backdrop unpresidential multi-dimensional crisis.
The world economy has absorbed multiple shocks. From the COVID-19 pandemic to the war in Ukraine, from an escalating refugee crisis to an alarming climate emergency.
But these shocks do not impact all countries and people in the same way. A financing divide has sharply curtailed the ability of many developing countries to recover from the pandemic. And as the war in Ukraine continues to push up energy and food prices, it is the world’s most vulnerable countries that suffer the most.
Unless we take immediate action to bridge this “great finance divide”, the fight against poverty and inequality could be set back for an entire generation, and push the SDGs out of reach.
The 2022 Financing for Sustainable Development Report, the third we have now published amidst the global pandemic, urgently calls on the international community to support developing countries in weathering these storms and recovering better, by providing them with access to stable, affordable, and long-term financing. And it calls on countries to use these resources well and invest them productively and aligned with the SDGs.
Before introducing the report’s main messages, allow me, on behalf of DESA, to briefly thank members of the Inter-agency Task Force on Financing for Development for their excellent collaboration. The Task Force brings together expertise from throughout the UN system and beyond (around 60 entities). The major institutional stakeholders – the IMF, the World Bank, WTO, UNCTAD and UNDP – all play a key role. I am grateful for their support.
While developed countries were able to borrow at ultra-low interest rates to support their economies, the pandemic response of developing countries has been constrained by significantly higher borrowing costs. This has contributed to a “pandemic recovery gap”. Despite international support, many were forced to cut spending in areas critical to the SDGs, including education and infrastructure.
Moreover, debt has now reached critical levels. Globally, 3 in 5 of the poorest countries are at high risk or already in debt distress. High risk is reflected in higher borrowing costs, with some African countries paying 8 per cent or more on commercial borrowing. This translates into billions of dollars spent on servicing loans, that would be better spent on supporting development efforts.
The Task Force, through this Report, puts forth important recommendations to overcome this inequity in access to financing for development, and for dealing with debt overhangs.
First, developing countries need to be provided with international public financing at concessional terms.
ODA commitments must be met; support to Ukraine and refugee-related expenditure must not come at the expense of cross-border flows to vulnerable countries.
Public development banks can play a greater role. Multilateral development banks should see their capital increased. The entire system of development banks should be strengthened, with additional capital and capacity support for national institutions; multilateral and regional development banks can, in turn, benefit from national banks’ detailed knowledge of local markets.
Second, the report lays out measures to improve borrowing terms that developing countries face in international financial markets.
This includes domestic measures to reduce risks and improve enabling environments. But global sources of volatility and risk have become more dominant drivers of surges and sudden stops, and they all must be addressed urgently. For example, major central banks should be aware of the spill over effects of their monetary policy decisions on other countries; the global financial safety net should be further strengthened. Credit rating agencies, whose ratings impact the cost of borrowing, should develop long-term assessments that account for both long-term risks and long-term investments in sustainable development.
Third, the international community needs to step up efforts to resolve unsustainable debt situations urgently and speedily.
Commercial creditors must do their share to provide relief. The Common Framework is a step forward, but the G20 and Paris Club should strengthen their ability to enforce comparable treatment for all claims that need to be restructured.
Fourth, enhanced transparency and a more complete information ecosystem will enable countries to better manage risks and utilize their resources.
Closing data gaps and improving data quality will also support better financing decisions. For example, investors with long time horizons would benefit from longer-term credit assessments. More transparency would also help reducing borrowing costs for developing countries.
Last but not least, countries themselves must ensure that they use additional financing well.
All financing flows must be aligned with the SDGs and climate action. The pandemic has highlighted the deep interlinkages between the social, environmental, and economic dimensions of development. Productive investments will also enhance sustainable growth and fiscal capacity over time, putting public finances on a sounder footing, and reducing debt risks.
I remain convinced that the United Nations can serve as a unique platform to galvanize collective action on these issues, and I trust that your deliberations at this year’s FfD Forum can deliver on this promise.