The 2020 Financing for Sustainable Development Report warns COVID-19 could derail financing for SDGs

The annual Financing for Sustainable Development Report (FSDR) published in April 2020 by the Inter-agency Task Force on Financing for Development, issues a stark warning that the global economic recession and financial turmoil from COVID-19 are derailing the Addis Ababa Action Agenda and achievement of the Sustainable Development Goals (SDGs).

The FSDR calls for immediate action – coordinated stimulus, debt service suspension and a large-scale liquidity injection – to address the crisis.

The most imperative need is to reverse backsliding on meeting commitments on development financing agreed upon in the Addis Agenda in 2015. This trend, which was already apparent before the current crisis, could intensify considerably with the pandemic. For example, one in five countries is likely to see per capita incomes stagnate or decline in 2020, affecting billions of residents living in poverty. Almost half of all low-income and least developed countries were already at high risk of or in debt distress before COVID-19.

With the pandemic and its dramatic impact on financing flows, trade disruptions and rising debt risks, economic prospects in developing countries will deteriorate further. Such a scenario threatens the achievement of the 2030 Agenda, particularly for least developed countries, small island developing states and other vulnerable countries.

To avoid derailing our global goals, the FSDR calls for debt service suspension for poor countries for bilateral debt, and for other creditors to join the moratorium or adopt equivalent measures. It calls for provision of fresh concessional financing, including by reversing the decline in official development assistance. And the report calls for actions to take advantage of two promising ‘accelerators’: digital financial technologies and growing interest in sustainable investment by the private sector, which could contribute towards filling the financing gap for the SDGs.

Integrated national financing frameworks (INFFs) have become mainstream in this report: the Inter-agency Task Force calls upon member countries to use the INFF as a strategic tool to address financing shortcomings for most of the financing areas of the Addis Ababa Action Agenda. Expenditure frameworks and other budgeting and revenue agendas may form part of an overall financing strategy outlined in the INFFs, along with public investment plans. Similarly, creating enabling environments for international investment should be part of the financing strategy; this will encompass, among others, evaluating trade-offs and enforcing environmental and labour standards aligned to the SDGs.

INFFs “can also be a useful tool to improve the effectiveness of development cooperation by matching plans, strategies and resources” (Financing for Sustainable Development Report 2020, p. 82). For example, graduating countries – i.e. those that change category based on national per capita income levels face the challenge of transitioning from concessional to less concessional and non-concessional financing. The INFF can provide a framework for both development partners and beneficiary countries to manage this transition and to ensure sufficient financing for essential programmes.