The United Nations' Fourth International Conference on Financing for Development (FFD4) recently concluded in Seville, Spain. It gathered global leaders from government, development, academia and civil society to discuss key barriers to sustainable development and shape collaborative efforts to address them.
Author
- Alicja Paulina Krubnik
PhD Candidate, Political Science, McMaster University
FFD4 comes at a crucial time, when the Action Agenda from the last FFD3 , set 10 years ago, must be built upon and upheld. With only five years left to meet the UN's Sustainable Development Goals (SDGs), more than 80 per cent are off track . More tangibly, 2030 is a key deadline for global emissions reduction .
The global aid environment is also in crisis , just as low- and middle-income countries face mounting pressures due to the interconnected impacts of climate change, environmental damage, poverty and inequality.
Boosting global co-operation
FFD4 was an opportunity to revitalize and transform international development co-operation to help states meet these challenges and pursue sustainable development.
Achieving this requires more than decarbonizing development financing. FFD4 faced its most testing challenge yet: how to reform the global financial systems that direct development resources.
Key factors include aligning funding with the sustainable development needs of low- and middle-income countries, increasing access to long-term concessional financing - loans or other forms of financing provided on terms more favourable than those in the market - and reducing public debt burdens.
Public development banks offer crucial leadership here. They provide affordable financing, direct resources where urgently needed and align funding with long-term development strategies, giving them significant potential to democratize project ownership.
Urgent human development needs
At the FFD4 gathering, many representatives, especially from Global South and climate-vulnerable countries, highlighted the inadequacy of development financing. Seedy Keita, the minister for finance and economic affairs from The Gambia, told the conference that as developing countries are being urged to invest more in climate and human development initiatives, they lack the tools to do so.
The countries facing the worst climate impacts also struggle with urgent human development needs. Adapting to and mitigating climate breakdown are inseparable from economic and social development , with human welfare - access to food, water and clean air , avoiding displacement and the safety of women and girls - intimately linked to climate.
Yet climate-vulnerable states receive a small share of global development financing, particularly for adaptation projects that yield lower returns. Additionally, resources for building value-added industries in low- and middle-income countries remain insufficient .
Scant commitment to action
Simply increasing financing is not enough. At the launch of the latest SDGs Report , UN Secretary General António Guterres stated:
"There is something fundamentally wrong in the structure of the economic and financial architecture and in the way it operates to the detriment of developing countries."
In short, it's too rigid and unresponsive to the Global South's unique needs, ultimately constraining their ability to act on the SDGs.
The most ambitious and pressing outcome of FFD4, the " Sevilla Commitment ," addresses key issues in efforts to reform international financial systems but lacks commitment to strong, transformative action.
Too much priority is given to enabling low- and middle-income countries to access private finance for development . Using public development finance to mobilize private investments and lending has failed to close the financing gap .
Poverty and inequality worsens
Private support for the structural green transformation needed for long-term economic development in low- and middle-income countries remains inadequate, widening the divide between the Global North and South. The strategy of catalyzing private finance has shifted risk to public balance sheets while reserving most of the profits for private, often multinational corporations - what's known as " de-risking ."
A privatized development strategy has pushed fiscal austerity measures on Global South countries to access international capital markets to fund development initiatives. Many of these countries are struggling with alarming debt , forcing them to divert scarce funds from essential services like health and education to service debts, which worsens poverty and inequality .
FFD4's efforts to create a fairer debt system include scaling up debt swaps and forming an alliance between creditor countries and multilateral banks to implement debt "pause clauses" during crises. While many states called for deeper debt reforms and a UN convention on sovereign debt , several wealthy countries resisted bold changes .
They largely overlooked the Global North's climate debt - estimated at $192 trillion . The Sevilla Commitment proposes launching a UN-led intergovernmental process, opening a potential path for creditor action.
As Spain's economy minister put it, FFD4 is a "launchpad for action" not a "landing zone."
Directing money to where it's needed most
Public development banks have the potential to lead this action for a more prosperous and equitable future. They can mobilize under-utilized public resources more economically, rapidly and effectively to serve development goals in a climate-forward way.
These banks can direct finance to where it's most needed , aligning with development priorities across diverse low- and middle-income countries.
Public development banks are also well-positioned to co-ordinate at multilateral, regional and national levels and to align global decarbonization goals to local demands. The largest coalition of banks, the Finance in Commons group , was recognized in the Sevilla Commitment. The group called for strengthening public development banks' co-operation and leadership at the FFD4. Already a leader in global climate financing, further co-ordination among public debate banks could amplify its impact.
Supporting green, equitable development
Structural change requires the long-term , affordable and counter-cyclical financing that public development banks can provide.
For indebted developing countries facing high borrowing costs, steadfast concessional financing is crucial. Beyond finance, public development banks have a privileged role in knowledge formation and dissemination, which can be leveraged alongside their financial power to support green and equitable development.
As public organizations, public development banks offer greater potential for transparency and accountability to democratic decision-making , aligning financing with public values. Beyond simply de-risking, these banks can leverage their financial power to generate broader public benefits.
Alicja Paulina Krubnik receives funding from the Social Sciences and Humanities Research Council and the International Development Research Centre.
