SPOTLIGHT: INFFs and COVID-19
SPOTLIGHT: INFFs and COVID-19

05 June 2020

How complementary are DFAs and INFFs? Interview with Tim Strawson, SDG Finance Specialist at UNDP


Tim Strawson, Finance Specialist at the UNDP, outlines the main characteristics of the DFA and clears up some uncertainties about its complementarity with the INFF. He also stresses that, in the COVID-19 aftermath, governments should step-up their financing strategies to counter the impact of the pandemic.


Author

Antonio Ca’ Zorzi
Development Finance Consultant to the European Commission


Building Block

Inception phase

Assessment and diagnostics

Financing strategy

Monitoring and review

Governance and coordination


Tags

#DFA #INFF #COVID19 #MobilisingFinance

The INFF team is conducting a series of interviews with international experts, government officials and other stakeholders who are involved in setting up INFFs. The purpose of these interviews is to improve understanding on how INFFs work when implemented at the country level. 

Tim Strawson is a Sustainable Development Goal (SDG) Finance Specialist with the United Nations Development Programme and has contributed to the elaboration of the development finance assessment (DFA) methodology and DFA implementation in several countries in Asia-Pacific and Africa. He also led two INFF inception missions in Kyrgyzstan jointly with the author of this interview and in Indonesia. 

Antonio Ca’ Zorzi (ACZ). Hello Tim, good talking to you again. Could you please give us an overview of the origin of the DFA, its objectives, structure and main success factors? 

Tim Strawson (TS). Sure Antonio, thank you. The DFAs were effectively developed around and following the UN [United Nations] meeting on financing for development which was held in Addis Ababa in 2015. They take stock from previous experiences deployed to achieve the Millennium Development Goals to help governments establish a more comprehensive approach toward mobilising public and private resources behind national sustainable development objectives as expressed through national development plans and the SDGs.

DFAs are a tool to support governments in the inception phase of the process of operationalising an integrated national financing framework. They provide a holistic picture across public and private finance and the policy and institutional landscape, and to engage with the private sector and other actors. Slightly more than 40 DFAs have been carried out or are underway, initially in the Asia-Pacific region through the APFIN [previously Asia Pacific Development Effectiveness Facility AP-DEF] initiative, but now in every region, and with many more countries planning assessments over the next year.

DFAs help governments to think about strengthening the integration of the planning and financing functions of the government: creating a bridge between the aspirations of the country in respect to its national development plans and the Sustainable Development Goals, and the policy tools that it uses to mobilise its own resources and ensure the alignment of other resources with the national development plans. The DFA also can be a framework in which national governments collaborate with other development partners, like the IMF (International Monetary Fund), the World Bank, bilateral donors or regional multilateral development banks.

There are three different stages in a typical DFA: a set-up phase, in which the institutional structures to oversee the DFA are put in place – ordinarily this will be the same cross-governmental body that will manage an INFF. Often it is housed in the body responsible for delivering the national development plan. The second phase concentrates on research and consultation, analysing what is already in place in relation to each of the INFF building blocks, what reforms are underway and what steps can be taken to further strengthen governance of financing. It leads on to the third phase which is centred around a series of financing dialogues that bring together a wide range of public and private actors to build consensus on the key challenges and opportunities across the financing landscape as a whole and agree on ways forward. These dialogues, under government leadership, are used to shape an INFF roadmap, which is the main outcome of the DFA process.

The two main success factors of a DFA are government ownership and building effective dialogue among a wide constituency of actors. It is first of all a tool for government to initiate an integrated approach to financing for development, so the prerequisite for it to become effective is the need for buy-in from government. Within the government, specialised ministries like the ministry of finance or the ministry of the economy will be at the forefront of the process –which also brings together the ministries responsible for governance over each part of public and private financing, as the policies they are responsible for will become integral to the INFF once it is operationalised.

The other added value of the DFA is that it brings together a wide range of stakeholders that are affected by financing policy decisions. The aim is to use the DFA process to build a broad constituency for reform, with consensus around the key financing challenges and ways to build a more integrated, holistic approach moving forward. It aims to reinforce platforms for public-private dialogue within the INFF.

At its core, the DFA is a multi-stakeholder dialogue through which governments can engage a variety of actors: it is as much a process as it is a technical assessment. In this respect, the technical analysis of the DFA should be done in a way that it is accessible to other stakeholders and facilitate the discussion. 

ACZ. Thank you Tim. Now, the concept of INFFs  has become a reality: after a landmark text published by the Inter-Agency Task Force on Financing for Development in its annual Financing for Sustainable Development report, a group of 16 countries have come forward and agreed at the UN General Meeting in 2019 to pioneer implementation of the INFFs. For countries that are engaging in the INFF process or are planning to do so, it would be great to better understand the difference between a DFA and an INFF and how eventually they can be complementary.

TS. Great question, Antonio, it is a good opportunity to discuss this topic. In a nutshell, we see the INFF as a governance concept and the DFA as an analytical tool that can help governments to adopt and adapt this concept to their context. The INFF will help governments move towards an integrated approach for governance of financing that mobilises public and private resources to achieve the national development plans. The DFA is a process that looks at what exists, what reforms are underway and what can be done to strengthen the building blocks of an INFF – the existing data and analysis on financing the SDGs, a financing strategy, monitoring and review structures, and governance and coordination systems. It facilitates a process of dialogue that looks across these issues to help the government and partners to identify and shape priorities for building this more integrated approach to financing. As such, they are very complementary: a DFA may be carried out as part of the inception phase articulating a roadmap to take forward the operationalisation of an INFF.

An updated version of the methodology for undertaking DFAs is being made available now. It takes into account the lessons learned from past experiences and country demand. Importantly, the methodology also makes adjustments to ensure that the DFA considers the impact of the COVID-19 pandemic on the financing landscape and needs, as countries are starting to look towards building back better.

ACZ. Very interesting! You just mentioned the COVID-19 pandemic, which has disrupted government-led initiatives in several areas and will have a profound impact not only on human health, but also on our economies and society in general. What could be the role of INFFs in this challenging context?

TS. The COVID-19 pandemic has amplified the need for the kind of holistic, integrated approach to financing that the INFF and DFA embody. Governments around the world are looking to mobilise resources to face the health, economic and social emergencies linked to COVID-19. The pandemic has a profound impact on almost every part of the financing landscape: tax revenues will dramatically fall in the near future in many countries; conversely, public debt will grow exponentially, with many countries nearing debt distress. The private sector is suffering severely from the economic downturn, leading to layoffs, business failures and large reductions in investment; and international capital is retreating from many markets. There has been a deep shift across all these areas – and, as we move towards new development and recovery plans, countries will need to implement an integrated approach that responds to these financing shifts to reinvigorate the development path and build back better. 

ACZ. As you mentioned before, the United Nations Development Programme has worked with others to develop a new version of the DFA methodology. How will this new version enhance the DFA process?

TS. At the country level, future DFAs will, of course, consider closely the issues which have become more prominent with the pandemic. In this respect, the team has adapted the assessment so that governments can track the immediate impacts of the pandemic on financing and consider appropriate short- to medium-term measures. DFAs will increasingly use future-looking scenarios to help government assess potential future trajectories in financing and the range of policy options in the short and medium term.

The updated methodology will tie more closely to the guidance on INFFs that is being developed through the Inter-Agency Task Force on Financing for Development. And it offers expanded guidance on a number of financing policy areas for which there is high demand from the country level – for example, public debt management and building an integrated approach to public policy for private finance.

I would also point out that, due to the strong and unprecedented pressure on finance, there may be new willingness to tackle certain deep-rooted financing issues in fiscal policy or private finance that were too tough to solve, or for which the political drivers were not present. The new DFAs and INFFs will also be important to help focus – or refocus –support from development partners, including bilateral cooperation and from other international public and private financing sources.

ACZ. Thank you for your insight, Tim! We are aware that the coming months will be very busy with a host of new INFF and DFA processes about to be initiated, also with the support from the SDG Joint Fund, which launched a specific call earlier this year. We look forward to talking to you again as things go forward.

TS. Thanks, Antonio, always a pleasure!