Working Papers

This paper examines the involvement of supreme audit institutions (SAIs) in auditing the preparedness of governments for implementing the Sustainable Development Goals (SDGs) since 2015. These audits have covered institutional arrangements put in place to implement the SDGs, the mobilization of resources, and monitoring and evaluation frameworks. SDG preparedness audits have produced valuable information that is not necessarily available from other national processes linked with SDG follow-up and review. As such, audit recommendations can be a powerful tool to help governments improve SDG implementation. The paper reflects on the impact that SDG audits have made, and on the challenges…

This paper conceptualizes recently negotiated international agreements, particularly the 2030 Agenda for Sustainable Development, as a collective roadmap to overcome challenges associated with globalization. By analyzing the effects and implications of globalization on societies and economies, the paper highlights concrete aspects of the international commitments that address globalization challenges in the three dimensions of sustainable development. Particular focus is placed on global production patterns, labor markets, poverty and inequality, global imbalances, migration and climate change. The paper concludes that, in the context of a changing political economy of globalization and…

The prolonged sluggishness in the world economy since the global financial crisis has led to growing calls for a reorientation of macroeconomic policies toward more supportive fiscal measures. Such calls inevitably invite the question of how much fiscal space governments actually have. This paper provides a systematic review of the most popular definitions and measures of fiscal space. It examines the evolution of fiscal space measures and discusses the pros and cons of each measure. It then outlines several key factors that could help to further strengthen existing approaches and allow a more comprehensive assessment of fiscal space. By illustrating how different measures paint…

In light of a cautious emphasis given to public-private partnerships (PPPs) as a mechanism to finance infrastructure projects and highlighting the need for capacity building and knowledge sharing at the Third International Conference on Financing for Development in Addis Ababa, this paper reviews the extant literature on the subject and identifies areas requiring better understanding and institutional innovation for ensuring value for money, minimizing contingent fiscal risk and improving accountability. An institutional capacity to create, manage and evaluate PPPs is essential to ensure that they become an effective instrument of delivery of important services, such as infrastructure.…

This paper explores the scope for Innovative Development Finance (IDF) to compensate for declining Official Development Assistance (ODA) and/or to enhance the efficiency of ODA. It shows that IDF has not helped much to increase the volume of aid. With regard to efficiency, the role of IDF-related mechanisms remains controversial. In view of the above, it may be more productive to focus on other resources available to Asia. The paper points to two such resources, namely the surpluses accumulated in the form of reserves, Sovereign Wealth Funds (SWFs), etc. and the migrant remittances. Efficient utilization of these two sources can vastly change the development finance landscape in Asia.…

This article evaluates and compares the forecasting performance of three international organizations: the United Nations, the International Monetary Fund and the World Bank. The annual forecasts made by the United Nations in the period of 1981-2011 are found to be fairly robust, in terms of bias and efficiency. In comparison, the forecasting performance of the United Nations is found to be marginally better than the other two organizations during the period of 2000-2012. However, the forecasts of all these organizations missed the Great Recession of 2009 by a large margin.

There are two major failings in policy interventions in the crisis in the US and Europe: the reluctance to remove the debt overhang through timely, orderly and comprehensive restructuring and the shift to fiscal austerity after an initial reflation. These have resulted in excessive reliance on monetary means with central banks entering uncharted policy waters, including zero-bound interest rates and the acquisition of long-term public and private bonds. This ultra-easy monetary policy has not been very effective in reducing the debt overhang and stimulating spending. It has, however, generated financial fragility, at home and abroad, particularly in the case of the US as the issuer of…

From around 2000 onward, donors and recipient governments embarked upon a new aid paradigm. The most important elements include increased selectivity in the aid allocation, more ownership of recipient countries based on nationally elaborated PRSPs, and more donor alignment and harmonization via program-based approaches such as budget support. The paper assesses the theoretical merits of this new paradigm, identifying some contradictions and limitations, and then examines its implementation over the past decade and its results. The empirical results largely confirm the earlier identified weaknesses and limitations. The paper concludes with some suggestions for improving aid practices.

This paper recalls the history of proposed “innovative” mechanisms by which governments could strengthen financial cooperation for development. Such proposals sought more predictable and assured financial flows to facilitate recipient country programming, while also substantially adding to the volume of highly concessional international support for development. International discussions of these proposals mostly began in the 1960s and in many cases continue today, although implementation thus far has been modest. These discussions are contrasted with generally more recent proposals that proponents call “innovative” but that do not share the characteristics of the more radical thinking…

The international community has advanced in reforming the international aid system. Such reform comes at a time when there is a renewed skepticism about aid effectiveness and when the crisis sheds new doubts about the sustainability of donors´ commitments. At the same time, the international reality has changed as a consequence of the growing heterogeneity of the developing world, the new geography of global poverty, the emergence of new powers from the developing world, the presence of new aid players and, finally, the enlargement of the sphere of international public goods. Such changes demand a deeper reform in the development cooperation system.

The International Finance Facility for Immunization (IFFIm), which securitized future aid commitments by donor countries, has been successful in providing funds to immunize children in poor countries. Since capital is likely to remain scarce, the paper evaluates the prospects of setting up IFFIm-like mechanisms to fund a variety of objectives. Two broad conclusions emerge. First, replicating IFFIm could prove challenging because donor pledges will lack the desired credibility. Second, credit enhancements like third party guarantees, excess coverage, and channeling of pledges through a preferred creditor, could overcome this deficiency. Finally, Advance Market Commitments and Cash on…

This paper argues that the technical and political difficulties of using SDRs for development can be overcome. This requires an SDR-based reserve system and a fully SDR-funded IMF. The IMF would allocate SDRs counter-cyclically and treat them as deposits of countries, which could be used in lending to them. A substitution account is needed for a smooth transition from major reserve currencies to SDRs. To avoid the deficiency payments, a counterpart account – which would be credited when the substitution account is in surplus and debited when in deficit – is required. Alternatively, politically-feasible cost-sharing mechanisms could be designed.