We know that sometimes in the development sector we have a tendency to use jargon. This quick glossary gives short definitions of some of the more technical terms on our website.
The agenda agreed at a 2015 United Nations’ Conference on Financing for Development set out how nations should aim to pay for an ambitious plan to end poverty, ensure equality and achieve sustainable development.
The UK government department responsible for administering overseas aid, often known publicly as ‘UK aid’.
Find out more: DFID website
The European Commission’s Development Education and Awareness Raising Programme, DEAR, supports projects that engage the European Union public in worldwide issues of social, economic and environmental development. DEAR works with civil society organisations and local authorities to promote universal values of freedom, democracy and the rule of law.
EU DEAR fund the Citizens for Financial Justice platform.
Find out more: DEAR website
Extractivism is a highly destructive model of economic development based on the intensive extraction of finite natural resources such as metals, minerals, fossil fuels, land and water. It is a model through which the economy, social relations of class, race and gender, state policy and public discourse are organised.
Its implementation often relies on the exploitation and displacement of local communities, mainly in the global South, to produce raw materials for production and profit, mostly by corporations in the global North. While extractivism is presented as the only road to ‘economic development’, in practice it serves as a means to plunder the global South, contributing to climate change, inequality and human rights violations.
Related reports: War on Want – The Rivers are Bleeding
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’
The term ‘Global South’ refers broadly to developing countries. These nations are often described as newly industrialised or in the process of industrialising.
It is based on the fact that industrially developed countries (with the exception of Australia and New Zealand) lie to the north of developing countries. The term does not imply that all developing countries are similar and can be lumped together in one category.
The International Monetary Fund (IMF) works to is to ensure monetary stability around the world. It comprises 189 member countries who work together to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
The IMF has faced heavy criticism from many organisations, including Citizens for Financial Justice partners, largely because of the intrusive conditions [LINK TO ‘LOAN CONDITIONALITY’] they put on loans to developing nations.
Find out more: International Monetary Fund (IMF) website
‘Conditionality’ refers to the conditions attached to the provision of loans, debt relief or aid, by the provider to the recipient. The recipient is usually a sovereign government. Conditionality on loans is usually associated with those loans required for restructuring or to help a country regain positive economic momentum.
Loans could be from another country, a group of countries (such as the Paris Club group of creditor nations), or from international organisation such as the International Monetary Fund (IMF) or World Bank (WB).
The problem with conditionality
Conditions could cover economic issues (eg: fiscal deficit reductions) or broader issues such as corruption or even human rights. The funds may allocate to a specific project or targeted outcomes rather than usage being left to the discretion of the recipient.
Conditionality, even that purely based on economic factors, may be controversial. For example, funding to debt crisis countries in the late 2000s usually had conditions of fiscal austerity attached; while these may have been necessary from a debt sustainability perspective, they also undermined the ability of the affected economies to grow themselves out of the recessions associated with the crisis.
Related video: Eurodad – IMF loan conditionality
The set of eight global goals ratified by UN member states to be achieved between the years 2000 and 2015.
Financial institutions that provide finance and advising for the purpose of promoting development, such as the World Bank and the IMF.
Also referred to as ‘aid’, this refers to the flows of funding to ‘developing’ nations and multilateral institutions that are administered with the intent to promote economic and social development.
The Paris Agreement’s central aim is to strengthen the global response to climate change by keeping a global temperature rise this century well below 2 degrees Celsius Additionally, the agreement aims to strengthen the ability of countries to deal with the impacts of climate change. It was initiated at the COP 21 climate conference in Paris in 2015.
How is this related to finance?
The Paris Agreement reaffirms the obligations of developed countries to support the efforts of developing country Parties to build clean, climate-resilient futures. It seeks to align all financial flows, not only public subsidies, with the goals of the agreement.
There have been several moves by public actors to reshape finance in line with the agreement. The World Bank, for example, has committed not to finance upstream oil and gas.
Even the private sector has been responding to this demand. More than 985 institutional investors with over $6.24 trillion in assets have already committed to divest from fossil fuels (as of December 2018).
Private banks have also begun restricting their lending to the fossil fuel sector. In 2017, the Dutch Bank ING announced that it was going to cease lending to any utility with more than 5% of its power coming from coal. This followed the earlier announcements that they would not finance tar sands or tar sands pipelines.
Find out more about the agreement on the UNFCC website.
Public-private partnerships are arrangements between two or more public (government bodies) and private enterprises to fund a public infrastructure project such as a new gas line or power plant. The ‘public’ partner could be local, state or national government. In the UK these are sometimes known as PFIs.
As part of these contracts, a private company pays for, builds (and sometimes runs) an infrastructure project or service, such as schools, roads, railways and hospitals, in exchange for a guaranteed profit.
What’s the problem with PPPs?
There is a growing body of evidence to demonstrate that this type of financing works out far more expensive than projects that are directly funded by governments, produces less democratic accountability and lower quality public services, entrenches and increases existing inequalities, and leaves behind unnecessarily large public debts. Moreover, despite the widely documented failures of PPPs across Europe, European governments continue to promote private financing for development in countries across the global south in place of Official Development Assistance. Public financing for development must be viewed as part of states’ legal and moral requirements to fulfil their human rights obligations.
Detailed information: our work on private finance.
Find out more: Equality Trust #DevelopmentNotDividends campaign
Related report: Christian Aid – Financing Injustice
The 17 UN Sustainable Development Goals (SDGs) aim to address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. They build on the Millennium Development Goals (MDGs), set by the United Nations back in 2000. Find out more on the UN website.