Remarks by Rebeca Grynspan on Financing for Development

Mar 23, 2010

REBECA GRYNSPAN                              


Eight years ago in Monterrey, the world made historic commitments to eradicate poverty, promote sustainable development and advance economic growth. We are here in New York to critically assess the progress that has been made in financing these commitments.

This assessment comes at a time when the global economy is taking tentative steps out of recession – but budgets remain squeezed and there is enormous pressure on all forms of development finance, public and private.  

The World Bank has estimated that developing countries faced a shortfall in external finance as large as US$ 635 billion in 2009.

This has meant difficult – and painful choices as the demand for social services has increased, while the funds to pay for them decrease. Tragically, it also threatens hard fought progress towards the Millennium Development Goals.

Without the ability to stimulate spending and protect social spending and the most vulnerable, the consequences of the global recession can take many years to remedy. The effects of chronic hunger and reduced school attendance can impact countries’ productive potential long into the future - ultimately at a much greater cost to the national and international community than if there were adequate support at the time of need. Unfortunately very often we forget that the short term and the long term start at the same time!

Now more than ever, then, the international community must deliver on its commitments.

In 2002, G8 leaders stated that “no country genuinely committed to poverty reduction, good governance and economic reform will be denied the chance to achieve the MDGs through lack of finance”. Unfortunately, more has to be done for this to stand.

•    Official development aid has increased, but very few have achieved the target of 0.7% of GNP;

•    G8 members are far short of meeting their Gleneagles pledges to double ODA to Africa by 2010 over 2004 levels;

•    Last year in London, the G20 indicated that $50 billion out of the over $1 trillion additional resources committed to address the crisis would flow to low income countries. However, it is not clear how these resource will be delivered; and

•    Finally, in Copenhagen, developed countries undertook to provide additional resources for climate change mitigation and adaptation approaching US$ 30 billion for the period 2010 to 2012. The details of the funding arrangement and the actual pledges, however, remain to be determined.

We know from experience that with adequate resources, political responsibility and leadership at all levels, and evidence-based and well-targeted interventions, the MDGs can be met.

The world has seen remarkable progress towards the MDGs. Deaths among children under five were reduced from over 12 million in 1990 to 9 million in 2008. Many countries have already crossed the target of more than 90% of children enrolled in primary school. The number of people in low and medium income countries receiving antiretroviral therapy for HIV has increased tenfold from 2003 to 2008.

At the same time, and beneath the headlines, significant challenges remain.  Averages can hide the reality that vulnerable groups are often left behind – making it critical that we overcome what is sometimes called the “tyranny of averages” in order to identify and reach these groups with targeted assistance. Progress towards some of the Goals is also too slow and the world is getting further away from achieving others.  Maternal mortality, for example, has declined only marginally and the number of chronically hungry people globally rose to over 1 billion in 2009 – reaching the highest level yet.  

If we are to meet the 2015 deadline, the world will need to accelerate progress in the five short years remaining. Development assistance will need to be mobilised – and quickly.  

While no single financing initiative can deliver the silver bullet, there are initiatives with the potential to raise unprecedented amounts for investments in the MDGs and stable long term revenues for development. Some of them were noted in 2001 on the report of the High Level Panel on Financing for Development, some have been proposed more recently.  But the task now is to concentrate international attention and effort for their full development into practical undertakings .

Innovative sources have been piloted especially related to health, such as the International Finance Facility for Immunisation which has raised more than US$ 2 billion since 2006 and levies on air tickets which have generated EUR 220 million annually to provide HIV/AIDS, Tuberculosis and malaria treatments.

A discussion on financing for development can also no longer be meaningful without consideration of climate change. By some estimates, forty per cent of development investment from ODA and concessional lending is sensitive to climate risk. That means that if climate change adaptation is not built into national development planning, scarce resources could well be wasted.

This is one of the reasons why human development and environmental sustainability must be tackled together.

The global response requires financing, predictability and incentives that enable countries to address agricultural production, energy security and emissions not as separate challenges but as key parts of a coherent agenda for poverty reduction and sustainable development.  I believe that climate change financing – may be key to achieving both greater climate security and the MDGs.

While these initiatives have the potential of unlocking billions in financing for the MDGs, they only complement – and do not replace – sustained efforts to increase the quantity and quality of official development aid; to establish objective criteria for further debt relief; and to increase policy coherence so that what is done in one place is not undermined by another. Our efforts will not be effective, for example, if we increase financial support to countries but meanwhile practice trade protectionism; or encourage more private financial flows but fail to pay attention to curb capital flight.

Increases in the quantity of aid must be matched by improvements in the quality and effectiveness of aid. Insufficient progress has been made on commitments to untie aid, improve mutual accountability and transparency, deliver unconditional and predictable finance, aligned with country’s national priorities and systems. To make the most of ODA, governments and development partners must also increasingly strive to use it as a catalyst to make steep changes in development.

Global initiatives have cancelled around US$ 85 billion in debt owed by 35 of the world’s poorest countries but insufficient attention has been paid to the debt burdens of low and middle-income countries excluded from international debt relief schemes.

Significant scope also remains to maintain and even increase domestic resource mobilisation. Many developing countries have substantial domestic savings. The most effective way to boost domestic resource mobilisation for the MDGs, therefore, is to improve access to financial services for both potential savers and potential borrowers. Such services must also be shaped by the needs of poor households.

For our part, UNDP is working with aid recipient governments to improve the national aid management architecture, ensure national leadership of aid coordination, and support aid monitoring arrangements. We are also leading international initiatives on South-South Cooperation bringing developing country governments and practitioners together to learn about aid effectiveness from each other. We are working with countries to identify and address bottlenecks to MDG achievement – drawing from what we know has worked.

To achieve the MDGs the world must channel more financial resources to development. If we stop investing now, we risk losing hard-fought development gains. It is in our own interest to avoid costly setbacks. We all benefit when countries have vibrant economies and educated and healthy populations that are well governed, peaceful and able to support the fight against climate change.  In the five short years we have left, we must rise to the occasion; it can be done. Achieving the MDGs would be a significant achievement the world could be proud of.

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