Published 2021
International financing of the Sustainable Development Goals
By Homi Kharas and Meagan Dooley

This article examine four international financing flows for the Sustainable Development Goals that have consistently decreased over recent years, with many countries now facing a ballooning debt crisis that could impede development efforts. While private financing is the largest contributor to development financing, it carries risk due to its procyclical nature.

The authors present four emerging trends in international development financing (Figure 1). First, private financing dominates the overall picture of financing for development. Second, multilateral financial institutions have continued to expand their operations through grants and loans. Third, non-Development Assistance Committee (DAC) creditors are showing a decline in support that began prior to the COVID-19 pandemic. Fourth, DAC countries have retreated from the non-concessional lending space in favour of grants and credits.

The article goes on to highlight that though the multilateral response to the pandemic was fast, it was insufficient. Demand for official aid is growing, with limited funding making it difficult to ensure appropriated funds are additional rather than relocated. The authors call for international financial systems to step up efforts by providing more ambitious lending through multilateral development banks, additional support through new special drawing rights allocations, and renewed support for architecture reforms.