Our best, and perhaps last, chance to secure financing for a sustainable future

By José Antonio Ocampo, Professor at the School of International and Public Affairs at Columbia University, and Chair of the Independent Group of Experts for the fourth UN Conference on Financing for Development 

The preparations for the 4th International Conference on Financing for Development are in full swing with the two major background documents already launched: the Zero Draft, which serves as the basis for the negotiations, and the proposals of the International Commission of Experts on Financing for Development which I had the opportunity to coordinate. Both reflect a high level of ambition and build on the landmark Addis Ababa Action Agenda agreed 10 years ago. 

The goal is to support the transformative role of the State in the developing countries – a key driver of their structural transformation. It also requires prioritizing not only the quantity but also the quality and impact of resources. This means removing barriers that currently limit countries’ policy choices. It means replacing a short-term project-focused agenda with an approach that aligns resources with collectively-defined long-term priorities. It is essential to strengthen the currently weakened multilateral system and create regional platforms.

Perhaps the most urgent issue is to handle the over-indebtedness of the public sector that affect about a third of developing countries, and the high level of debt and debt service that affect many others. This is the result of the large fiscal imbalances during the COVID-19 pandemic and the high levels of interest rates that the world has experienced in recent years. 

To manage this problem there is a need for an ambitious short-term renegotiation instrument, which can build upon the Common Framework for Debt Treatment launched by the G20 in 2020. It must be based on faster renegotiations processes and include middle-income countries. There is a need for a permanent institutional mechanism for sovereign debt restructuring, which could be housed in the UN or in the IMF, providing in the latter case that its decisions are independent of the IMF Board.

It is also essential to reinvigorate development financing, given the 4 trillion-dollar-gap in the resources need to finance the Sustainable Development Goals (SDGs). This requires, first of all, reinforcing commitments of Official Development Assistance made half a century ago (0.7% of the gross national income of high-income countries) and the special target for the Least Developed Countries (0.2%). 

A second element in this area is to significantly increase financing by the Multilateral Development Banks (MDBs) and support the activities of National Development Banks (NDBs) in developing countries – or their creation in countries that lack them. This must be accompanied by increasing MDBs’ financing in countries’ local currencies, to reduce the risks that their debts will increase if they need to depreciate their currencies, and to support the development of their domestic bond markets. 

Going beyond the traditional forms of lending, MDBs should sponsor developing countries’ programmes to finance the provision of international public goods — both global and regional. This includes preventing and combating pandemics, mitigation and adaptation to climate change, and protection of biodiversity. 

Environmentally sustainable financing is indeed a crucial issue. The recent Conferences of the Parties on Climate Change and Biodiversity agreed to increase financing in both areas, but the funds that were accepted are insufficient. They will not be enough to address temperatures of 1.5oC above preindustrial levels that the world is already experiencing, to reverse massive biodiversity losses, or to slow the rate of severe natural disasters worldwide. In these areas, and in development financing in general, greater private-sector involvement should be mobilized with the help of credits for environmental investments or complementary mechanisms such as loan guarantees from development banks. 

Guaranteeing adequate and progressive tax bases are essential to finance the development agenda. This requires avoiding profit shifting by multinational firms to low-tax jurisdictions and tax havens and to guarantee adequate tax payments by the richest of the world. The first of these objectives require the adoption of the principle of “significant economic presence”, according to which multinationals pay a fair share of taxes in all countries where they operate, including by providing services from abroad. 

For rich individuals, it would be essential to create a global asset registry based on beneficial ownership of all assets. For stronger international cooperation, the essential instrument is the UN Tax Convention currently being negotiated. It also requires the creation of an institution in charge of such cooperation: the best alternative in this regard is the transformation of the UN Committee of Experts on International Cooperation in Tax Matters into an intergovernmental organ.

In the international monetary system, the credit facilities should continue to be improved, and their conditionality revised. Two new IMF instruments must be created: an international swap facility and an Emerging Markets Fund that could allow the Fund to intervene in the international bond markets of emerging and developing countries during downswings. This must be complemented by more frequent issuance and, more importantly, the active use of the IMF’s Special Drawing Rights (SDRs), since they represent the most underutilized global financial instrument, which now exceeds 900 billion dollars. These funds could be channeled into various mechanisms, including those established in the MDBs to finance development or environmental goals. 

In trade and investment, the crucial issues are the need to uphold existing tariff commitments made at the WTO, and an agreement on the limits of industrial policies with room for maneuver for developing countries (special and differential treatment). Exceptions to intellectual property rights for health and environmental technologies should be adopted. To have fairer commodity markets for developing countries, international and national buffer stocks must be more amply used, as well as an increasing participation of those countries in the relevant value chains.

International financial regulation has not been the subject of the past financing for development conferences. Still, several important issues should be on the agenda, notably the appropriate regulation for digital financial assets (sometimes called “currencies”), the regulation of credit rating agencies, and more robust regulation of international commodity futures markets. In the area of private investment, a new global investment agreement is desirable, particularly to avoid demands on countries’ provision to protect social or environmental goals.

Finally, several institutional reforms should be on the agenda. The first should be the longstanding call for greater “voice and participation” of developing countries in the Bretton Woods institutions – the IMF and the World Bank. This requires establishing a fair allocation of capital shares, increasing these countries’ basic votes, and creating open processes for selecting each body’s leadership in which citizens of all Member States can participate. The second involves establishing adequate institutions, ideally within the United Nations, to effectively manage international tax cooperation and sovereign debt renegotiations. The third priority is strengthening the network of global and regional institutions in all areas of international financial cooperation, particularly in the monetary and tax areas, replicating in these areas the experience of the system of MDBs.

* The views expressed in this blog are the author’s and do not necessarily reflect the opinion of UN DESA. 
** This blog draws from an op-ed published by Project Syndicate: 
https://www.project-syndicate.org/commentary/global-financing-for-development-agenda-2025-by-jose-antonio-ocampo-2025-02