Next year, the Spanish government will host the Fourth International Financing for Sustainable Development Conference (FfD4) in Seville.
The first Preparatory Committee (PrepComm) kicked off last week in Addis Ababa, Ethiopia, nearly a decade since the city hosted the last conference in 2015, initiating a series of major global meetings that focus on addressing the financial structural challenges required to achieve sustainable development.
Last week’s meetings bought together governments, multilateral organisations, civil society, and private sector stakeholders to take stock of progress and gaps in the implementation of the Addis Ababa Action Agenda, agreed in 2015, and identify ways to accelerate the implementation of the SDGs.
The collective mood was one of disappointment regarding what had been delivered on to date. While there are some successes, including the launching discussion on a UN Tax Convention, there was a general consensus that the implementation financing package laid out in 2015 has fallen significantly short of what is required to make progress on the SDGs.
In 2023 only five OECD- DAC donors met their commitment to deliver 0.7% of gross national income (GNI) as Official Development Assistance (ODA). The lack of political will to make good on this commitment is stacking up. Oxfam estimates that, over the course of 50 years, rich countries have effectively built up a debt of $5.7 trillion in aid to developing countries that hasn’t been paid in order to meet their aid promises.
54 countries in need of this concessional financing are suffering from a debt crisis. The governments of these countries have insufficient resources to invest in the public services and social protection critical to preventing citizens from falling into poverty, and their hands are tied in responding to the climate crisis. Meanwhile, funding continues to flow from countries of the south to those of the north. One group of economists have estimated that this had totalled $62 trillion since 1960 through unequal exchanges alone- that’s enough money to end extreme poverty 15 times over.
While an increasingly complex set of global challenges, including the climate crisis, the COVID-19 pandemic and an increase in conflict and fragility has placed additional demands on states and resources since the Addis agenda was agreed, there is also an underlying frustration that donor countries are not meeting the commitments made in 2015 prior to these developments, and that progress on financial reform had been slow.
Where do we go from here?
The FfD4 offers a critical opportunity to democratise global economic governance. One of the key barriers to truly transforming economic architecture is the inequality that exists within the governing institutions themselves. The Organisation for Economic Cooperation and Development (OECD) discusses and takes decisions on development cooperation, particularly ODA, without any meaningful representation of low- and middle-income countries, whose development agendas donors are supposed to respond to.
The multilateral development bank (MDB) reform agenda has drawn attention to the disparities in voting share facing low- and middle-income countries, which undermines their representation and decision-making powers at these institutions. However, the same issue has kept genuine transformation of the Multilateral Development Banks off the table among the array of reform proposals that have been tabled in the last two years.
The UN is the only truly democratic space where global governance is addressed under a one country one vote model, while having the issues of climate change, inequalities and human rights at its core. Funding to meet current humanitarian, climate and development needs might be short- but so is trust. With that in mind, the FfD4 negotiations over the next year offer a real opportunity to agree a new package for delivering the SDGs that is rooted in genuine partnership, and an opportunity for northern governments to make good on their rhetoric of rebuilding trust.
A number of northern member states and private sector stakeholders participating in the first PrepComm advocated for maintaining the path charted in the Addis Ababa Agenda and focussing on implementation. However, there was clear appetite from member states of lower-and-middle income countries and civil society for the FfD4 to consider more innovative approaches and to reach an agreement that delivers more fundamentally.
The priorities of many CSOs engaged in the funding for development process were captured by the Civil Society Financing for Development Mechanism and tabled as part of last week’s discussions. Some of the key recommendations include:
- An agreement on a UN Framework Convention on International Tax Cooperation to comprehensively address tax havens, tax abuse by multinational corporations and other illicit financial flows.
- A call for a UN Framework Convention on Sovereign Debt that would comprehensively address unsustainable and illegitimate debt, including through extensive debt cancellation.
- To establish an international public credit rating agency at the UN that could provide long-term ratings as well as counterbalance the influence of private credit rating agencies.
- A call for a UN Convention on International Development Cooperation, including establishing a mechanism for the fulfilment of the trillions in unmet ‘aid debt’ owed to lower-and-middle income countries over decades.
- To assess systemic risks posed by unregulated or inadequately regulated financial sector instruments and actors.
- To establish a UN intergovernmental process to review and transform international financial institutions and Multilateral Development Banks, leading to an overhaul of the international public finance architecture.
- Ensure human rights and gender equality as cross-cutting framing for discussions.
As we look ahead to some of the key moments of the next few months, including the UN Summit of the Future (September), the annual World Bank and IMF Annual Meetings (October) and the Second FfD4 Preparatory Committee (December), the ideas tabled at the first funding for development Preparatory Committee warrant serious consideration.
It seems clear that it’s time for a new approach to financing for sustainable development rooted in justice and human rights. Bond looks forward to working with its members and the UK government towards this ambition on the road to Seville 2025.