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Clouds and winds sans rain

Debapriya Bhattacharya | November 12, 2018 00:00:00

One of the derived wisdoms from the experience of implementing the Millennium Development Goals (MDGs) suggests that the absence of an apriori understanding on the financing possibilities of the global agenda did affect its delivery. Thus, widespread satisfaction was expressed when the third Financing for Development (FfD) conference was held in Addis Ababa in July 2015. As the SDGs are rolled out at the country level over the last three years, it may be observed that the state of financing of the SDGs, particularly in the developing countries remains problematic – like clouds and wind without rain.

Global financial flows and implications for the South: Before delving into specific countries' experience, let us have a brief look at the aggregate picture concerning flow of development finance. A glance at the latest available annual data (2016) from the Organisation for Economic Co-operation and Development (OECD) indicates that gross official development assistance (ODA) flow (in current prices) to developing countries marginally increased from United States Dollar (USD) 105.54 billion in 2015 to 115.52 billion in 2016, while gross other official flows (OOF) decreased during the same period from USD 53.12 billion to USD 51.82 billion (OECD, 2018). However, the total of ODA and OOF in net terms (in current prices) depicts a fall to USD 106.90 billion from a comparable figure of USD 115.97 billion in 2015 and USD 123.63 billion in 2010. Net flow of non-concessional loans (in current price) indicates a similar picture as it stagnated at UDS 5.11 billion (2016) as against USD 4.38 billion (2015). During 2016, net foreign direct investment (FDI) and remittance flows (in current prices) to developing countries experienced a decline as well. Net FDI fell from USD 643.43 billion (2015) to USD 571.54 billion, while remittance flow (net) fell from USD 334.64 billion to USD 323.15 billion. We observe that the total stock of external debts in the developing countries reached USD 6876.98 billion in 2016 compared to USD 6604.49 billion in the previous year. As a result, the share of total external debt stock rose to 25.19 per cent of total GDP of the developing countries in 2016 compared to 24.28 per cent in 2015 (World Bank, 2018). At the same time, country level experience shows (based on panel data on 44 developing countries derived from World Bank) that the revenue collection (without grants) as a share of gross domestic product (GDP) has stagnated during the first year of the post-2015 period -- 24.8 per cent (2015) and 24.10 per cent (2016). While it is not advisable to judge a trend based on one year observation, it may be said that signs of a strong take-off in the financing of SDGs in the developing countries is yet to be seen.

Indeed, from Development Assistance Committee (DAC) countries, core support to international non-governmental organisations (NGOs) including developing country-based NGOs also experienced a decline from USD 1.0 billion (2015) to 0.82 billion (2016). These figures correspond to 0.76 per cent and 0.57 per cent of total ODA flow from DAC.

Resource flow from non-DAC countries to other developing countries, as per OECD data set, also projects encouraging pictures (in current price). Gross ODA from these sources fell from USD 17.7 billion (2015) USD 14.07 billion and the comparable figures for OOF were USD 3.97 billion and USD 1.09 billion respectively. As a result, the total official flow from non-DAC developing countries to other developing counties between 2015 and 2016 registered a fall from USD 21.67 billion to USD 15.16 billion. The concerned net figures are more on the downside.

Figures relating to disbursements of loans and grants by regional development banks also provide a number of interesting changes. Between 2015 and 2016, flow from Asian Development Bank (2016) and Inter-American Development Bank (2017) stagnated at USD 12.2 billion and USD 10.0 billion respectively; the comparable figures for African Development Bank (2017) almost doubled from USD 1.62 billion to USD 3.22 billion. Interestingly, while the total disbursement from Inter-American Development Bank stagnated between 2015 and 2016, one may very well notice a redirection of the flows in favour of the upper middle-income countries (e.g. Argentina, Brazil, Columbia and Mexico). In contrast, lower middle-income countries, such as Ecuador, El Salvador and Nigeria experienced reduced flow. A similar review of the African Development Bank data reveals that, notwithstanding the overall surge in disbursement, a number of the low-income countries including Burkina Faso, Democratic Republic of Congo, Mali, Mozambique and Togo received lower disbursement in 2016 in comparison to 2015. It may be noted that almost all of these African nations are 'conflict' countries.

Financing SDGs at country level: Assessing progress, estimating the cost: Most of the developing countries hit the ground running when it comes to their efforts to implement the SDGs. As a first step towards this, a large number of developing countries took specific measures to align their national plans, policies and programmes with the 2030 Agenda. Even a country like China went on to produce a national plan on implementation of the 2030 Agenda (Ministry of Foreign Affairs of the People's Republic of China, 2017). A number of countries undertook data assessment exercise to ascertain how equipped they are to undertake a review and follow-up exercise of SDG implementation. Many developing countries have also put in place institutional structures to provide inter-ministerial oversight to the SDG delivery process. Indeed, certain countries (e.g. Bangladesh) are going ahead in trying to relate the performance of the concerned ministries and officials to their contribution towards implementing the SDGs.

A follow-up step observed in the developing countries had been the attempts to measure the financial costs involved in implementing the SDGs in the country context. Given the nature of the 2030 Agenda, this was a challenging business as this involved a lot of assumptions in terms of what exactly being costed (e.g. full or additional), period covered, possible changes in domestic prices, movement in exchange rates, modes of financing of the SDGs, synergies and trade-offs between and among goals etc. Nonetheless, these assessments included not only cost estimates by a specific SDG or development area, but also indicated the expected financial flow by source. The lack of fiscal space of the developing countries (particularly due to rising recurrent costs) for sustaining SDG implementation is evidenced by these financial need assessments. These cost estimates also went on to assess the financial deficit that the countries may experience in this regard.

Cost estimates for implementing SDGs, prepared by the developing countries, indicate the difficulty in establishing their comparability. Yet, a review of the concerned figures, give us an idea regarding the magnitude of the financing demands. For example, the estimated cost for key priority areas and other development areas in Malawi for the period 2018-2022 amounted to USD 7.37 billion (The Ministry of Economic Planning and Development, 2017). In case of Tanzania, total costing for the period 2016-2021 amounted to USD 47.07 billion (Ministry of Finance and Planning, 2016). Bangladesh came up with a figure "additional unsynchronised cost" of USD 1162.69 billion for the period 2017-2030; for India, the concerned figure is USD 14411 billion for the period 2016-2030. [Author's calculation based on The Ministry of Economic and Planning and Development (2017), Ministry of Finance and Planning (2016), General Economics Division (2017), Bhamra, Shanker and Niazi (2015) and World Bank (2018).] Colombia, interestingly, provided a goal-wise estimate amounting USD 13.66 billion, which was provided by the national budget for 2015 [Author's calculation based on AidData (2017), World Bank (2018).] As may be noted, these numbers vary largely due to varying population sizes of the countries as well as due to diverging estimation methodology deployed. If we standardise the abovementioned figures on per capita basis, we find the financing requirements range from USD 74 (Malawi), USD 131 (Tanzania), USD 283 (Colombia), USD 461 (Bangladesh) and 675 (India). Review of another set of country-level estimates provide a measure of the financing gaps per year, e.g. 24.5 per cent (Nepal), 59 per cent (India), 62.5 per cent (Nigeria) and 78 per cent (Bangladesh) [Author's calculation based on "SDGs: Financing gap is $94b" (2016), National Planning Commission (2017), Uneze, Adeniran and Ezechukwu (2016), General Economics Division (2017) and Bhamra, Shanker and Niazi (2015).]

Analysis of the structure of the SDG costings in the developing countries also gives interesting insights. It seems, SDG 9 (Industry, Innovation, and Infrastructures?) stands out as the single most important financing item in the following countries, e.g. India (13.18 per cent), Colombia (19.86 per cent), Bangladesh (21.52 per cent), Malawi (24.92 per cent) and Tanzania (35.80 per cent). But in most cases, SDG 3 (Good Health and Well-being) and SDG 4 (Quality Education) are invariable figures among the top five big ticket items. Nonetheless, one may observe that the financing priorities are often dictated by contextual circumstances. For Colombia, SDG 16 (Peace, Justice and Strong Institutions) and SDG 10 (Reduced Inequalities) were among the top five financing items, given that it is a post-conflict country with a high incidence of income inequality. In the same vein, SDG 13 (Climate Action) was one of the major financing concerns for Bangladesh as the country remains greatly vulnerable to the adverse effects of climate change. For relatively low-income countries, SDG 2 (Zero Hunger) and SDG 8 (Decent Work and Economic Growth) figured quality prominently within the top five.

In the context of apparent no significant changes in the developing countries regarding higher flow of financial resources towards SDG implementation, one wonders to what extent the international development community had been active on the ground. While numerous meetings and conferences are continuously taking place strategising on implementation of different SDGs, there are very few cases where the international development partners got together at the country level to express their commitments towards financing SDGs. Even if such a meeting happened, it was largely a case of business as usual and did not involve pledging. For example, a regular session of the Bangladesh Development Forum (BDF)-a joint platform of the government and the development partners-was held in January 2018 which was essentially a high-level dialogue on wide ranging policy issues. Only United Nations specifically mentioned at the BDF that it will provide USD 1.2 billion towards the implementation of SDGs in Bangladesh ("UN to fund $1.2b for SDG in Bangladesh," 2016). It may be noted such platforms of development partners are usually co-chaired by the World Bank, not United Nations, along with the national government (Bangladesh Development Forum, 2018).

Conclusion: Curiously, very few developing countries raised global systemic concerns in connection with facilitating greater resource flow towards achieving the SDGs.

The numbers and observations presented above validates the proportion that no discernible upturn is yet to emerge in the scenario relating to development finance as well to overall financial flows to developing countries in the context of SDG delivery. Indeed, one may observe a serious mismatch between the global discourse on financing for development and the realities on the ground. It often appears that the local offices of the bilateral and multilateral agencies are not adequately interfaced with their respective counterparts regarding the commitments made by the latter. On the other hand, the developing countries having done the policy alignment and cost estimation for implementing SDGs, have reached a plateau. These countries are yet to strategically position themselves for accessing a greater volume of finance resources for underwriting their financial needs for achieving the SDGs. The emerging global economic environment is not helping in this regard and there seems to be a serious lack of political energy. Thus, it seems, the financing of SDGs in the developing countries currently looks like clouds and wind without rain.

Dr Debapriya Bhattacharya is a Member, CPD Board of Trustees and Distinguished Fellow, CPD.


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