28 APRIL 2022, NEW YORK - “In this moment of multiple and cascading crises, a strategic and risk-informed approach to financing recovery is indispensable. Here, integrated national financing frameworks are a powerful tool,” said Amina Mohammed, United Nations Deputy Secretary-General, in her opening remarks for the virtual launch of the Integrated National Financing Framework (INFF) Facility.
Over 500 people from 113 countries attended the event, which was hosted by the Facility’s partners: the United Nations Development Programme (UNDP), the United Nations Department of Economic and Social Affairs (UN DESA), the Organisation for Economic Co-operation and Development (OECD), the European Union (EU) and the Governments of Italy and Sweden.
The Deputy Secretary-General was joined by UNDP Administrator Achim Steiner, UN DESA Under-Secretary-General Liu Zhenmin, OECD Deputy Secretary-General Jeffrey Schlagenhauf, Ecuador’s Vice Minister of Finance H.E. Bernardo Orellana, Uzbekistan’s Deputy Minister of Finance H.E. Akhadbek Haydarov and speakers from the European Commission, Government of Tanzania, Mongolia, Sweden and Italy.
The panellists introduced audience members to the INFF Facility – a joint flagship initiative that responds to the demand for technical support from the more than 80 countries implementing INFFs – and shared high-level insights from INFFs in Uzbekistan, Ecuador, Tanzania and Mongolia.
Here, we recap key moments from the event.
Facing a ‘great finance divide’, INFF partners and government representatives appeal for urgent action
The launch event took place on the sidelines of this year’s Forum on Financing for Development (FfD Forum) in New York, where world leaders discussed the current challenges of financing sustainable development and re-upped their commitment to delivering resources for the 2030 Agenda and Paris Agreement.
World leaders met against a backdrop of a highly fragile global economic outlook. In her opening remarks to the forum, the Deputy Secretary-General set the scene, calling attention to the looming debt crisis, soaring food and fuel prices, the ongoing Covid-19 pandemic, the ‘ticking time bomb’ of climate crises and rising geopolitical tensions.
Just two weeks earlier, the UN’s Inter-Agency Task Force on Financing for Development warned of a deepening finance divide driving uneven recovery from Covid-19 in the latest Financing for Sustainable Development Report.
Leaders voiced concern that very little progress has been made since member states adopted the Addis Ababa Action Agenda in 2015. Any progress that has been made has not been distributed equitably between or within countries. Securing sufficient financing remains a major barrier to implementing the 2030 Agenda.
Panellists at the INFF Facility launch echoed these sentiments. “Even before the Covid-19 crisis hit, SDG financing was falling short,” said OECD Deputy Secretary-General Jeffrey Schlagenhauf. “Pre-Covid, the financing gap was about $2.5 trillion per year. According to our current estimates, we believe recent crises may have increased that amount by up to 50 percent.”
Katherine Baer, Deputy Director of the Fiscal Affairs Department of the International Monetary Fund (IMF), warned of the domino effect of rising food and fuel prices due to the war in Ukraine, which will further impair growth across regions and reduce fiscal space. “We could see gains in poverty reduction over the last decade reversed,” she said.
Over 80 countries adopt INFFs, ‘a powerful tool’ for financing the SDGs.
Under the spectre of a looming financial crisis and a potential lost decade for development, INFFs offer a shining light.
“We realise that we are facing an extraordinary challenge,” said UNDP Administrator Achim Steiner. “Countries are not only looking at how they can invest forward - we are scrambling to see how we can protect what we have - and stabilise economies.
“INFFs are helping countries chart their course through these very stormy waters.”
Over the last decade, the development finance landscape has shifted. New players, instruments and sources of funding have created opportunities for countries. “The landscape, in general, has changed dramatically,” said H.E. Bernardo Orellana, Ecuador’s Vice Minister of Finance.
This shifting paradigm also creates new challenges. “It adds a layer of complexity and risk,” said Mr Schlagenhauf. “Research by the OECD shows that developing countries have more than 1,000 instruments to choose from to finance their development.”
Countries are using INFFs to navigate the challenges and complexity of the current context – and have built considerable momentum. In 2019, 16 countries committed to pioneering the INFF approach. Today, more than 80 countries are developing INFFs.
Led by ministries of finance and planning, governments are using the INFF approach to put in place robust strategies for financing recovery and SDG progress. Through INFFs, countries are driving forward hundreds of reforms to align public and private finance with the SDGs.
As INFFs progress, there is growing demand from countries for technical support to help navigate this complexity and deliver prioritised reforms.
At the same time, support from a range of global and regional partners is ramping up, including from international and regional financial institutions: the IMF, World Bank, Asian Development Bank and Islamic Development Bank, amongst others. The INFF Facility will coordinate and channel this support, leveraging the expertise of UNDP, UN DESA, OECD, EU, Italy and Sweden and building new partnerships.
Of the IMF’s existing support and tools, Ms Baer said, the link with INFF progress is clear, especially when it comes to helping countries formulate financing strategies. The IMF’s ongoing work to improve tax policies and revenue administration contribute directly to domestic resource mobilisation efforts outlined within INFF-driven financing strategies.
Amb. Fabio Cassese, Italy’s Director General of Development Cooperation, believes the Facility will provide a unique platform to convene and align multilateral and bilateral support for development financing. It will build on the work Italy championed during its 2021 G20 Presidency, which led to a G20 endorsement of INFFs and a framework of voluntary support to INFF processes at the Leaders’ Summit in Rome.
Over 250 reforms hold promise for previously untapped finance, particularly from the private sector.
“2022 is a crucial year,” said Marjeta Jager, the European Commission’s Deputy Director-General for International Partnerships. Of the 80-plus countries using the INFF approach, 40 will develop their financing strategies this year.
Through these financing strategies, countries are detailing ambitious agendas to reform policies, instruments and platforms to mobilise and align finance with their sustainable development priorities. “No two financing strategies will be alike,” said Liu Zhenmin, UN DESA Under-Secretary-General. Each set of reforms is tailored to national contexts and priorities.
Over 250 reforms have already been identified. For Mr Steiner, this translates to an articulation of developing country needs on a massive scale. “We are seeing very quickly an agenda of reforms emerge,” said Mr Steiner.
Many of these reforms are already yielding results. In 2021, the Government of Uzbekistan issued a $870 million SDG bond, raising resources for national projects in water management, health, transportation, pollution control, management of natural resources and green energy.
For H.E. Akhadbek Haydarov, Uzbekistan’s Deputy Minister of Finance, the SDG bond is just the beginning. The government will roll out additional innovative financing instruments, including green bonds, blended finance mechanisms and Islamic finance instruments, to complement public finance reforms, said Mr Haydarov.
In Tanzania, the cost of the country’s latest five-year development plan is estimated to be upwards of $47 billion, almost $10 billion annually. The government is aiming for at least 35 percent to come from the private sector.
“We are finding that the government alone cannot be in a position to finance all development projects,” said Dr Charles Mwamwaja, Financial Sector Commissioner for Tanzania’s Ministry of Finance. “The INFF is a great opportunity to bring the private sector on board.”
Under its INFF, Tanzania piloted a blended finance instrument that increased private sector investment in agriculture and is developing a pipeline of bankable projects to attract investors.
Asked about Mongolia’s INFF experience, Sonor Luvsandorj, Director of Financial Markets and Insurance Division in the Ministry of Finance, lauded the INFF approach as critical to “unlocking resource mobilisation opportunities and creating partnerships.”
In addition to piloting results-based SDG budgeting and costing across ministries, Mongolia established a multi-stakeholder platform on sustainable finance. Mr Luvsandorj credits the platform for enabling discussions to take place “at a much higher decision-making level, more frequently and involving a wider range of actors.”
The INFF process has allowed Mongolia to “move away from the public finance dominant model” and leverage private investment. In 2022, the Mongolian Stock Exchange published ESG reporting guidance to align the operations of over 200 private companies, a $2 billion market capitalisation, with sustainability principles. The Central Bank included the SDG taxonomy in their 2022 monetary policy guidelines to promote sustainable investments and loans.
INFF-driven reforms present an unmissable opportunity to accelerate SDG financing.
What’s next for INFFs?
Countries further along in their INFF process, like Mongolia, see their INFF as a continuous, self-improving process and a framework for cooperation. “We do not see it as an end goal,” said Mr Luvsandorj. Mongolia will continue to evaluate and evolve the design and implementation of its financing strategy over time.
For Ecuador, a country still at the early stages of the INFF process, other countries offer valuable examples of what is possible, especially when it comes to engaging the private sector. “We see a lot of opportunities in the market,” said Vice Minister Orellana. “For example, in the Galapagos, we are looking into issuing a blue bond and have been working with different investors.”
One of the critical roles of the INFF Facility will be connecting countries operating within similar contexts or implementing similar financing reforms. Ecuador will have much to learn, for example, from the world’s first sustainable financing platform dedicated to the blue economy, launched last year under Cabo Verde’s INFF.
“We are all learning together,” said Mr Steiner, closing the first panel. “We, as international partners, bring some of the experience, templates and methodologies, but really it is a process that is led by countries and, very quickly, innovations from within countries emerge.”
This point was echoed by Alan AtKisson, Assistant Director-General of the Swedish International Development Cooperation Agency (Sida). “We see the establishment of the INFF Facility as contributing to the process of fostering an integrated approach, stimulating the innovation and reforms that are necessary,” he said.
These innovations and reforms represent a timely opportunity to accelerate the SDGs, one that has not gone unnoticed by the international community.
“We see this as a huge opportunity to transform national financial systems,” said Ms Jager on behalf of the European Commission. “As INFFs progress there is growing demand from countries for technical support to deliver on these promises. We need to work together in partnership to deliver, she added. “It is really about working hard to support the people working hard to finance the future - in a greener, more inclusive, more sustainable way.”
The INFF launch event demonstrated how many people are working on and invested in INFFs and their success. These people are working hard to finance the future we want. With less than a decade to go until 2030, all those investing in a more sustainable, inclusive and resilient future should be supported urgently.
If you missed the INFF launch event, you can watch the event recording in English, French, Spanish, Arabic or Russian. If you want to learn more about developing an INFF or becoming a potential partner, contact the INFF Facility via Tim Strawson, SDG Finance Specialist.