Written by Eric Pichon,
From 22 to 25 May, the United Nations headquarters in New York will host the second Forum on Financing for Development (FfD forum). This event will gather a variety of stakeholders: governments, local authorities, civil society organisations and international institutions. FfD forums are part of the follow-up process agreed in 2015 during the ‘Addis-Ababa Conference’: the upcoming forum will check progress in the implementation of the Addis Ababa Action Agenda (AAAA) commitments. These commitments concern all means of raising money for development. Developed countries re-committed to spend 0.7 % of their GNI on official development aid (ODA) – a target very few of them actually fulfil – while developing countries pledged to improve tax collection – an area where improvements have also not been dramatic. New commitments and recommendations are expected to take the shape of an intergovernmental agreement.
For long, development finance has been put under strain and the trend will only increase in the future. The Sustainable Development Goals adopted by the international community in 2015 are expected to cost “between billions and trillions”, and at the same time natural and man-made crises require huge financial means that are mobilized at the expense of long-term development projects.
The EU and its member states (MS) provide over half of all the global ODA, mainly through MS national budgets and the EU institutions’ budget. Or rather, the ‘budgets’ since the EU money for aid is split between the European Development Fund (EDF, a fund managed by the EU Commission, but with its own financial rules) and the EU budget – itself including several ‘development instruments’. The EU is also in the lead to help developing countries build capacity to better mobilize their domestic resources, or spend aid more effectively.
In parallel, the EU also experiments with innovative financing through public-private partnerships and several trust funds combining money from the EU budget, the EDF and voluntary contributions from some Member States. Critics consider however that new financial instruments, which blend grants with loans, risk aggravating developing countries’ debt burden, and are a way for donors to escape their commitments on ODA spending. Some aid recipients are wary that these new forms of aid are driven by donor interests, such as tackling irregular migration.
Moreover, better financing for development involves more effectiveness on the spending and use of aid. This includes limiting overhead costs by better planning, implementation and appraisal of development projects, as well as a better use of multilateral channels – which also have to improve their working methods. There will be a lot to discuss in New York!
If you are interested in this multifaceted topic, take a look at these EPRS publications:
European Fund for Sustainable Development (EFSD), February 2017
EU Trust Funds for external action First uses of a new tool, November 2015