Image by IMF/ Raphael Alves
  • Blog
  • 11 February 2022

To build back better from Covid-19, we need rapid structural change

DI's CEO Harpinder Collacott reflects on the need for a major paradigm shift in how we raise international public finance

Written by Harpinder Collacott

Chief Executive Officer

The Covid-19 pandemic reversed decades of progress towards achieving the Sustainable Development Goals (SDGs) and led to financing challenges in all countries. Between 2019 and 2020 an estimated 50 million more people were forced into extreme poverty, and by 2021 an estimated 698 million people, or 9% of the global population, were still living in extreme poverty. The full impacts will be felt for years to come, but the pandemic has also exposed deeper problems that we were already facing.

On 2 February, while moderating a panel for the 2022 UN ECOSOC Partnership Forum on the theme of ‘financing for the SDGs in the era of Covid-19’, (co-hosted by the United Nations Foundation and Southern Voice), I was struck by the level of consensus on this. Speakers were unanimous that the global recovery is happening at an unequal pace, and that to build back better we must mobilise traditional resources while embracing deep structural change – and fast.

Context for the discussion was provided by Navid Hanif, Director of the Financing for Sustainable Development Office of the UN Department of Economic and Social Affairs. He painted a bleak picture, noting that by some estimates, the SDG financing gap has increased from US$2.5 trillion annually to US$3.7 trillion or more, and that while official development assistance (ODA) has increased, it has largely been in the form of loans, as our own analysis of ODA in 2020 has shown.

Mr Hanif argued for broader reform of the global sovereign debt and tax systems, with 60% of low-income countries already in or at high risk of debt distress, highlighting the need to address structural barriers to achieving the SDGs. I very much agree with him that multi-stakeholder partnerships will be critical to these efforts, an issue at the heart of Development Initiatives' strategy as we prepare to launch a new partnership framework in 2022.

Other speakers largely endorsed this view, adding regional perspectives. H.E. Walton A Webson, Permanent Representative of Antigua and Barbuda to the UN, argued compellingly that without global reform, small island developing states face a major challenge in creating fiscal space and funding SDG investments while also tackling increasingly burdensome debt. Adedeji Adeniran, Director of Research at the Centre for the Study of the Economies of Africa, argued that the pandemic had amplified the region's existing challenges, including constraints on domestic resource mobilisation and private sector finance.

While Covid-19 does not discriminate, the pandemic has clearly hit some communities harder than others. I was moved to hear from UN Foundation Next Generation Fellow Aishwarya Machani, who pointed out that one in six young people, who represent about half the world’s population, were forced to stop working during the pandemic. This has created an economic opportunity crisis undermining efforts to achieve SDG 8. According to the World Bank, the pandemic has created the worst education crisis in a century, and by some estimates, 20 million more secondary school-aged girls could be out of school after the crisis has passed.

Understanding that global crises affect us all, but not in equal measure, will be key to enacting much-needed structural reforms to tackle other pressing global threats, such as climate change.

For example, people living in countries which have produced the least emissions are facing the highest costs of the climate crisis. Director of the OECD Centre on Well-Being, Inclusion, Sustainability and Equal Opportunity, Romina Boarini, noted that in the OECD, a steep recovery has been spurred by unprecedented support from governments and central banks, vaccinations and social protection schemes, but that no SDG targets on climate action or reducing inequalities are close to being reached.

How can we address these issues? In the short term, Ambassador and Head of Section for Sustainable Development at the Permanent Mission of Sweden to the UN, Charlotta Schlyter, emphasised that donors must uphold commitments under the Addis Ababa Action Agenda and Funding Compact, including commitments to allocate 0.7% of gross national income as ODA, noting that Sweden has continued to commit 1%.

Beyond meeting existing commitments, 2022 presents numerous opportunities for governments, the donor community and civil society to develop bold new solutions, including the High-level Political Forum on Sustainable Development in July. With support from the Government of Kenya, Sweden is organising Stockholm+50 in June, which will encourage the adoption of green recovery plans. The UN’s 2022 ECOSOC Forum on Financing for Development and SDG Investment Fair in April will provide opportunities to mobilise private investment and develop new financing approaches. Ms Machani argued for job creation for young people through investment in green, sustainable industries, support for young entrepreneurs and closing the global digital divide, issues which she called on leaders to address at the G20 summit in October.

As a top priority, we need a major paradigm shift in how we raise international public finance, an agenda I am proud to support in my role as Chair of the Transitional Council and member of the Steering Committee and Expert Working Group on Global Public Investment. Looking beyond the aid debate and a narrow focus on poverty reduction, global public investment seeks a new approach to concessional international public finance to meet the broader challenges of inequality and sustainability. It is clear that the financial and governance systems of the past are no longer fit for purpose. If we are to end the suffering of the poorest people and places, we must seize the opportunity to change them before it is too late.