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Reality is not yet matching rhetoric in moving from “billions to trillions” to finance the SDGs—how can we accelerate sustainable development finance?
To meet the Sustainable Development Goals, the world must ramp up development financing from billions to trillions. We must think beyond aid, to private finance and unlocking developing countries’ own resources. How development financing is mobilized and allocated must also change. Shared problems like climate change and the threat of pandemics can only be addressed through international cooperation. In addition, the rise of China as a major bilateral development partner and the emergence of new development agencies raise the question of whether the existing multilateral financing system is fit for purpose.
Our research focuses on four questions: How can international finance produce sufficient funding for development? How should it be allocated to meet both ongoing needs and future challenges, such as climate change and pandemics? How can financing most effectively mobilize private capital, safeguard public monies, and keep debt levels sustainable? And how should existing institutions be changed to best assist?
Shantayanan Devarajan, William R. Easterly and Howard Pack
While many analysts decry the lack of sufficient investment in Africa, we find no evidence that private and public investment are productive, either in Africa as a whole (unless Botswana is included in the sample), or in the manufacturing sector in Tanzania. In this restricted sense, inadequate investment is not the major obstacle to African economic development.
The paper sets out two views of the facts about the effects of globalization on world poverty and inequality. The bottom line: globalization is not the cause, but neither is it the solution to world poverty and inequality. The paper then explores why and how the global economy is stacked against the poor, making globalization asymmetric, at least up to now. It concludes with some ideas about a new agenda of good global politics, an agenda to shape a future global economy and society that is less poor and less unequal—not only because it is more global and competitive, but also because it is more fair and more politically representative.
The paper addresses three key issues raised by the G-7 in its proposals to reform the multilateral banks, in 2001. One, the restructuring of IDA with a part of its lending in the form of grants rather than loans. Two, the harmonization of procedures, policies and overlapping mandates among MDBs. And three, the volume of support by MDBs for Global Public Goods (GPGs) and the rankings and priorities among them.
We assess the dynamic behind the high net resource transfers of donors and creditors, IDA, bilaterals, IBRD, IMF and other multilateral creditors to the countries of sub-Saharan Africa in the 1980s and 1990s. Analyzing a panel of 37 recipient countries over the years 1978-98, we find that net transfers were greater in poorer and smaller countries. The quality of countries' policy framework mattered little, however, in determining overall net transfers.
Public policy on financial crises in emerging markets has implicitly been grounded in economic theory calling for lender-of-last-resort intervention when the country is solvent, and on theory recognizing that reputational damage is the quasi-collateral enabling lending to sovereigns with no physical collateral. The call for Private Sector Involvement — PSI — in the financing of crisis resolution has appropriately arisen from the desire for fairness as well as for successful outcomes. This paper identifies an array of PSI modalities and argues that in each crisis case the most voluntary type consistent with the circumstances should be chosen, to speed return to market access.
Global private capital flows have barely touched the poorest nations; the rich invest mostly with the rich. It is possible that failures in the global capital market prevent capital from exploiting high returns in poor countries; it is also possible that fundamental returns to investment are lower in poor countries. In this paper, a novel empirical framework uses standard data to conclude that 85% of wealth bias, whether caused by market failure or not, is domestic in origin. That is, poor country lenders are deterred from investing in poor countries to nearly the same degree that rich-country lenders are.
What should the World Bank optimally do with the US$10 to $20 billion it can loan each year? Has it, in fact, done what is optimal? This study suggests a simple framework within which to measure the World Bank against an optimal international public financier for development. It goes on to argue that a careful treatment of the empirical evidence on Bank lending strongly contradicts optimal behavior under different assumptions. The evidence, in fact, rejects any notion that the Bank has substituted for private capital or that it has successfully catalyzed private development finance.