The ‘2024 Financing for Sustainable Development Report: Financing for Development at a Crossroads (FSDR 2024)’ launched Tuesday said that urgent steps are needed to mobilise financing at scale to close the development financing gap, now estimated at 4.2 trillion dollars annually, up from 2.5 trillion dollars before the COVID-19 pandemic. underlining that investment in the country remains strong.
Meanwhile, rising geopolitical tensions, climate disasters and a global cost-of-living crisis have hit billions of people, battering progress on healthcare, education, and other development targets.
The report said that investment is expected to remain subdued globally.
“In contrast, investment in South Asia, particularly in India, remains strong. India is benefiting from growing interest from multinationals, which see the country as an alternative manufacturing base in the context of developed economies’ supply chain diversification strategies,” it said, in an apparent reference to China.
The report noted that prospects in most developing countries are also weak due to softer external demand, volatile commodity prices, high borrowing costs and fiscal consolidation pressures. “High levels of debt amid subdued growth continue to constrain fiscal space, making it harder for governments to borrow and invest. Conflicts hamper investment in parts of Africa and Western Asia,” it said. It added that the past 20 years have been marked by several large crises alongside major shifts in the geopolitical and economic landscape. “In the early 2000s, the global economy experienced a period of significant expansion driven by globalisation, advancements in technology and robust economic growth in large developing countries, notably China and India,” the report said, adding that the rise in global demand during this period fuelled a commodity boom.
Global trade activities were also buoyed by the proliferation of global value chains as well as key milestones in trade liberalisation, including China’s accession to the World Trade Organisation (WTO) in 2001 as well as the earlier formation of the European Union in 1995.
“Against this backdrop, global foreign direct investment (FDI) flows grew rapidly. This strong performance came to a halt in 2008. Developed economies were hit hard by the 2008 world financial and economic crisis, which caused severe recessions and massive job losses,” the report said.
Citing the example of digital payments in India, the report further said that advances in fintech have facilitated financial inclusion. Fintech providers have enhanced access to and the use of digital financial services for individuals and micro, small and medium-sized enterprises (MSMEs). They have improved the affordability and personalisation of financial product services that make them more relevant for diverse customer needs.
“Prominent examples include mobile payment services such as M-PESA in Kenya and online payments and messaging apps in developing countries such as China and India,” it said.
During the COVID-19 pandemic, fintech companies played a notable role in enabling quick-yet-contactless deployment of government support measures via digital financing to MSMEs and individuals, especially those living in marginalised and poor communities.
With only six years remaining to achieve the Sustainable Development Goals, hard-won development gains are being reversed, particularly in the poorest countries. If current trends continue, the UN estimates that almost 600 million people will continue to live in extreme poverty in 2030 and beyond, more than half of them women.
“This report is yet another proof of how far we still need to go and how fast we need to act to achieve the 2030 Agenda for Sustainable Development,” UN Deputy Secretary-General Amina Mohammed said.
“We are truly at a crossroads and time is running out. Leaders must go beyond mere rhetoric and deliver on their promises. Without adequate financing, the 2030 targets cannot be met,” she said.
According to the report, debt burdens and rising borrowing costs are large contributors to the crisis. Estimates are that in the least developed countries debt service will be 40 billion dollars annually between 2023 and 2025, up more than 50 per cent from 26 billion dollars in 2022.
Stronger and more frequent climate-related disasters account for more than half of the debt upsurge in vulnerable countries. “The poorest countries now spend 12 per cent of their revenues on interest payments — four times more than they spent a decade ago. Roughly 40 per cent of the global population live in countries where governments spend more on interest payments than on education or health,” it said.
“We’re experiencing a sustainable development crisis, to which inequalities, inflation, debt, conflicts and climate disasters have all contributed,” UN Under-Secretary-General for Economic and Social Affairs Li Junhua said.
“Resources are needed to address this, and the money is there. Billions of dollars are lost annually from tax avoidance and evasion, and fossil fuel subsidies are in the trillions. Globally, there is no shortage of money; rather, a shortage of will and commitment,” he said.
