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Paving Priorities for FfD4

The 2024 ECOSOC Financing for Development (FfD) Forum was held from April 22–25 at the UN Headquarters in New York. The Forum is focused on advancing policies for financing long-term sustainable development priorities, in line with its mandate laid out in the Addis Ababa Action Agenda. This year, the FdD Forum was of particular importance as its purpose was to inform the priorities of the 4th International Conference for Financing for Development to be held in Spain next year. The Conference is expected to commit to concrete deliverables on financing for sustainable development as well as to update the policy framework to reflect the current global realities. 

I highly enjoyed the FfD Forum and found it to be one of the most interesting forums hosted at the UN due to the direct impact that financing has on achieving the Sustainable Development Goals (SDGs). My biggest takeaway was realising that our international financing systems only benefit a minority of the global population. We must reshape our systems and institutions to ensure they drive progress and equality.

Throughout the Forum, I observed three key priorities:

  1. Closing the financing gap
  2. Reforming international financing architecture
  3. Financing the SDGs

You can read a summary of these priorities below. 

 

How do we close financing gaps?

Currently, we see a huge financing gap between developed and developing countries, with developing countries paying at least twice as much on their interest repayments. The direct consequence is that four in ten people worldwide live in countries where the government spends more on interest repayments than social services like education and healthcare. 

This is of particular concern as budget deficits continue to rise and debt-to-GDP ratios increase. Debt sustainability is further threatened by climate crises and conflict, as these are raising debt burdens and impacting countries’ ability to meet interest repayments. The current economic climate, characterised by high inflation and war, also poses the risk of an economic recession, which would deepen debt levels. 

These are potential actions we can take to close the financing gaps: 

  1. Call on donor countries to meet donor targets.
  2. Attract private finance for developing countries.
  3. Implement bold actions for debt relief.
  4. Increase the representation of developing countries at decision-making levels.

 

How can we make international financing architecture more fit for purpose?

The global financing architecture is no longer fit for purpose and needs to be reformed. The Bretton Woods institutions were crafted for a different time and created in favour of countries that were present at decision-making tables. This has led to lasting structural inequalities, leaving many developing countries trapped in poverty.

A major structural inequality faced by developing countries is that they are commodity and import dependent. Over half of UN countries rely on commodities as their main economic export. A major issue is that profits are primarily absorbed by middle and end producers, exploiting the primary producer. Additionally, fluctuations in commodity prices impact revenue and economic stability. 

We are also seeing changes in the trade landscape. Global value chains have slowed down and domestic supplies have increased. Trade fragmentation has also grown, limiting opportunities for developing countries and forcing them to take sides in economic wars. Ultimately, international trade architecture is disconnected from policy and needs to be reimagined to support international development.

These are potential actions we can take to reform international financing architecture:

  1. Support commodity dependent countries in transitioning to the renewable energy sector.
  2. Reform the structure of markets to benefit primary producers, middle manufacturers, and end consumers equally.
  3. Build trade capacities through education and facilitation projects, particularly those that support women and youth in accessing global networks.
  4. Replace the Common Framework with a strategy that reduces structural inequalities.

 

How can we deliver on the SDGs?

Achievement of the SDGs requires immediate financing. In particular, I believe we need to finance climate change, social protection, and gender equality. Throughout the conference, there was a significant focus on the need for climate financing but little mention of financing for social protection and gender equality.

Climate breakdown is impacting those who have contributed the least to climate change. Notably, Indigenous peoples are the first to experience the impact of climate change because they are the most connected to the land. Countries like Fiji are relocating communities that have been displaced by rising sea levels. This relocation leads to a loss of culture and ecological knowledge. We must fund the preservation of Indigenous elder knowledge and ensure Indigenous people are at the decision-making table. Additionally, financing natural disasters is increasing deficits, which further contributes to debt burdens. We need to have loss and damage financing that does not take away from social development financing.

More than half of the global population does not have access to social protection. To achieve SDG 1: No Poverty, countries need to provide social protection services to break the cycle of intergenerational poverty. Surprisingly, there was minimal mention of social protection in the FfD Zero Draft. We also need to finance gender equality and ensure women have equal levels of financial literacy and access to financial services.

Tax revenue is the primary way to finance the SDGs, yet this is threatened by tax evasion and ageing populations. Tax evasion is a huge barrier to tax collection, with many systems in Latin America collecting less than half of the revenue they should receive. Additionally, countries with an ageing population are at risk of declining tax revenue, accompanied by increased demand for social expenditure. This calls for innovative taxation initiatives that tackle tax collection, tax transparency, and illicit financial flows. These are potential solutions:

  1. Implement innovative taxes to strengthen tax collection. For example, Zimbabwe has a tax on sugar and mining, and Fiji has taxes on plastic, super yachts, and trust funds.
  2. Improve tax transparency by making tax data accessible and free for the public. Additionally, implement clear budget processes and systems, and engage with civil society and multilateralism to build trust in tax institutions.
  3. Build international tax cooperation to define tax standards and rules that fight illicit tax flows. The UN should be leveraged to share initiatives on taxation and promote information sharing.

 

This summary provides an overview of topics that I felt were most important. You can read the outcome document below to learn more about key issues discussed throughout the FfD Forum.

FfD Outcome Document

 

Author: Lauren Grant, Youth Representative 

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