World Bank report: Financing for Development Post-2015

The World Bank has released a new report entitled “Financing for Development Post-2015”. It argues that to effectively finance a post-2015 agenda will require international cooperation, a framework for implementation, and functioning institutions capable of mobilising resources. It further notes the central role of domestic resource mobilisation, assistance to developing countries and innovative sources of finance such as carbon markets and Diasporas. Read extracts from the executive summary below.

“As we approach the 2015 deadline for the Millennium Development Goals, the international community is elaborating a new framework to promote sustainable development for all beyond 2015, which will build on achievements to date and address new challenges arising from an evolving and complex landscape. Three major trends are emerging: first, most of the poor live in middle-income countries and many live in high-income countries. Second, the Eurozone crisis and turmoil in MENA demonstrate that developed and developing countries alike are confronted with the difficult task of generating growth and creating jobs. Moreover, beyond the financing needs associated with these protracted crises, the impact on a number of traditional donors reduces the volume of available official development assistance (ODA). Third, trade, finance and other links among emerging market and developing economies are growing. This shift offers opportunities for new, mutually beneficial partnerships.

The ability to adequately finance a post-2015 development framework depends on many factors. First, we need global development cooperation that attracts aid from diverse sources, emphasizes domestic resource mobilization, and capitalizes on the potential of the private sector. Second, the success of cooperation requires good polices (and the capacity to implement them), and credible institutions to increase the impact of scarce resources and leverage additional resources from both domestic and foreign, public and private sources. The relative significance of each source, and the associated leveraging challenges, will differ between low-income countries and fragile and conflict-affected states, middle-income countries with limited market access, and middle-income countries with market access.

Aid has been essential to helping low-income countries accelerate economic growth and lift people from extreme poverty over the last few decades. For many developing countries, ODA—and the reforms it supports—needs to continue to be a stable source of development financing; especially for the poorest economies and fragile states with limited or no access to capital markets. It represents the biggest financial inflow to fragile states, after remittances and foreign direct investment (FDI). ODA is expected to remain a critical input to achieve the new development goals.

Financing a transformative development agenda will require that available resources be used more effectively and strategically to catalyze additional financing from official and private sectors. Developing countries will need to step up efforts to finance their own development by improving domestic resource mobilization, including by strengthening tax administration, better harnessing natural resource revenue, and curbing illicit financial flows. The public sector has a catalytic role in attracting private sector financing, such as for scaling up infrastructure investments. This paper reviews a range of existing and potential financing sources and tools: bond financing, institutional investors, diaspora bonds, pull mechanisms, advance market commitments, resources-for-infrastructure deals, climate finance, and more. Not all of these options are feasible for all countries; the challenge lies in establishing a supporting country-level policy framework and credible commitment to build domestic capacity and combat poverty in order to expand the options available.”

Click here to access the full report.