The approach taken by the UN and public development banks, as outlined by the Addis Agenda, which signals the shift from ‘funding’ to ‘financing’ to implement development objectives such as the Sustainable Development Goals (SDGs). [LINK TO SDGS IN GLOSSARY].
In other words, the mechanisms used to generate the capital needed to deliver the SDGs should now go beyond international aid (also referred to collectively as Official Development Assistance or ODA), to include finance available from governments directly and through private sector investment.
FfD can include the mobilisation of domestic resources (such as tax revenues), international financial resources (such as Official Development Assistance (ODA) and other international public flows), harnessing the role of the private sector in financing development, maximising the use of innovative financing sources and mechanisms, increasing trade capacity and investment to create jobs and drive economic growth and promoting debt sustainability.
How financing for development began:
The Sustainable Development Goals were adopted by 193 member states at the UN in 2015. However, there was a challenge to identify how developing countries would find the money to fund the projects and infrastructure needed.
In July 2015, the Addis Ababa Action Agenda (AAAA) on Financing for Development (FfD) was agreed by the United Nations (UN), formally signalling the shift from ‘funding’ to ‘financing’ to implement the goals.
The UN Conference on Trade and Development (UNCTAD) has estimated that the ‘gap’ in finance needed to achieve the SDGs in developing countries amounts to US$2.5 trillion.
The intergovernmental Financing for Development Forum takes place in April each year, bringing together senior officials from governments, intergovernmental bodies, as well as recognised stakeholders from civil society and the private sector to discuss policy, progress and action on financing the SDGs.
The outcome document of the FfD Forum and the annual monitoring report prepared by the Inter-Agency Task Force (IATF) on Financing for Development are fed-back into the High-level Political Forum on Sustainable Development, at which the progress of implementing the 2030 Agenda is reviewed.
Related reports: World Bank strategy for ‘Maximizing Finance for Development’