Where we are and where we need to be on financing for development

We are approaching the fourth anniversary of the Addis Ababa Action Agenda on Financing for Development, and it is clear the global aspirations set out in this landmark agreement are at risk. As global actors gather in New York this week for the fourth Financing for Development Follow Up Forum, we reflect on some of the key challenges actors are facing and what needs to happen to get financing on track to help deliver Agenda 2030.

The recently published Financing for Sustainable Development Report 2019 warns that mobilising sufficient financing remains a major challenge in implementing Agenda 2030; despite signs of progress, investments critical to achieving the Sustainable Development Goals (SDGs) remain under-funded. The report strongly asserts that “the international community should make use of this opportunity to reshape both national and international financial systems in line with sustainable development. If we fail to do so, we will fail to deliver the 2030 Agenda.” The conclusions of this report clearly echo those from Development Initiatives’ report Investments to End Poverty 2018 and our follow-up factsheet Six ways to refocus ODA to end poverty.

Both reports, looking comprehensively at financing for development, point to three key challenges that we must overcome if we are to close the growing inequality between the poorest people and the rest, and so ensure hundreds of millions of women, men and children are not left behind in extreme poverty:

1.    We need to better target resources

Financing for development is a scarce resource, as the Financing for Sustainable Development Report 2019 highlights. And that makes using finance effectively ever more critical. To improve the poverty projections described above, resources must be used effectively to maximise impact. In the context of leaving no one behind, that means reaching the furthest behind first, and that means better targeting resources.

There are a multitude of ways this needs to happen, from investing in the vital human capital sectors of health, education and social protection to providing support for efforts to increase domestic public resources. Crucially, to leave no one behind, governments and donors will need to focus on better targeting resources to reach the poorest and most vulnerable people within countries. As outlined in a newly published report by Development Initiatives and the Overseas Development Institute on Subnational investment in human capital, the (very limited) data available shows that international and domestic public resources do not preferentially target the poorest regions and the poorest people.

2.    Greater investment in human capital and human development is needed

Public resources, both domestic and international, are particularly important in funding the interventions critical to tackling extreme poverty and inequality – they can be directly targeted at reducing poverty and are redistributive in nature. Other resources have an important and complementary role to play – as explored in more detail in Investments to End Poverty – but they cannot substitute for public investment in vital human capital development and basic social service provision. The future jobs, wealth and wellbeing of people depend on these investments in health, education, nutrition and social protection, for example. And yet, support for domestic resource mobilisation remains insufficient and global aid has fallen for the second year running. In particular, social spending has fallen as a percentage of total Official Development Assistance (ODA), from 40% in 2010 to 35% in 2017. The targeting of ODA is not always in line with need. For example, in 2017, donors spent a lower proportion of ODA on education in the poorest countries: 7% of total ODA to Least Developed Countries (LDCs), but 11% in Upper-Middle Income Countries (UMICs).

3.    We need better data to ensure no one is left behind

The first step in leaving no one behind is to ensure that everyone is counted, through comprehensive civil registration and vital statistics systems (CRVS). There also needs to be greater investment in the collection, analysis and use of data that is disaggregated (at a minimum) by income, gender, geographic location, age and disability, in order to identify the groups and individuals most likely to be left behind. Better data on people living in poverty will enable evidence-based decisions on resource allocations and help to target interventions towards the poorest.

What action needs to be taken in New York this week?

This week’s Financing for Development Forum in New York should be a wake-up call to all involved to take stock and take action. Four years into the SDG era, it is clear that collective action is falling well short in mobilising the financing essential to delivering Agenda 2030. To end poverty, reduce inequality and ensure no one is left behind, those gathering in New York this week must focus on how to mobilise more resources and target them more effectively towards the people and places that need them most.

While the current political context is challenging, and governments in the North and the South have many other things on their minds, there is no excuse for inaction. If we fail to change direction now – as the Financing for Sustainable Development Report 2019 points out – we will fail to deliver the 2030 Agenda, and fail to deliver on the promises we made to the world’s poorest people. But there is still time to get back on track; addressing these issues, not just in rhetoric but with ambitious action, would set us on the path towards achieving Agenda 2030.

Photo: Demissew Bizuwerk/UNICEF Ethiopia