As much has been written about the world’s development agenda in post-2015, now it is time to ask how this agenda will be realized. What financial instruments and concepts will shape the future of financing for development?

World leaders adopted sustainable development goals (SDG) in September 2015 in New York at the United Nations Sustainable Development Summit. In July 2015 there was also another important event shaping the future of the international development scene – the Third International Conference on Financing for Development (FfD), held in in Addis Ababa, Ethiopia. This was where the international community agreed on what it would take to implement the SDGs. As the third UN conference, Addis Ababa builds on previous two international conferences on financing for development (Monterrey in 2002; Doha 2008).[1]

The proceedings of these two conferences outlined domestic resource mobilization (DRM), now considered a cornerstone of financing for development efforts. So it is not a completely new concept. What is new is that from this year on official development assistance (ODA) will primarily be considered as means to attract other forms of financing, such as private financing (the “billions to trillions agenda”). The term of financing is therefore expanding its meaning, and the idea behind that is to unlock all possible financing resources. It is not yet clear how this will be realized, but it seems that multilateral development banks (MDB) and the IMF will play the major role in helping to generate the financial flows. It is also clear that the OECD-DAC will be collecting data on resources mobilized by official interventions.

Based on the proceedings of the conference, the cornerstone of the 2030 agenda is now clearly represented by DRM. DRM simply means more effective mobilization of countries’ own resources to be invested in development needs or, to put it another way, to fund national development plans. This objective goes hand in hand with effective spending of public funds which could be translated into more effective public finance management (PFM). While the focus is now on DRM, the international community cannot simply expect development to happen if there is no strong and open PFM in place. Some articles (World Bank Group 2015; USAID 2015) and Addis Ababa Action Agenda itself suggest that PFM and DRM are complementary and both “essential for ensuring the sustainability of development gains”. As there is a clear need to strengthen revenue systems, it is encouraging that one of the first proceedings of Addis Ababa FfD was launching of the Addis Tax Initiative that outlines donor countries’ commitment to double support in DRM. This new initiative along with other projects, such as the OECD/G20 Base Erosion and Profit Shifting (BEPS) project,[2] and new diagnostic assessments, such as TADAT – Tax Administration Diagnostic Assessment Tool, show that DRM is high on the international development agenda.

So, it seems that financing for development in post-2015 will be focused on two processes: DRM along with PFM and the “billions to trillions agenda”. Obviously, this ambitious agenda will require coordination between donors, international financial institutions and all countries due to its holistic nature. Neither should we forget about non-financial efforts, namely support to capacity development that is crucial to bring about reforms.

In this regard, knowledge hubs play a role by opening space for learning to create an enabling environment that will bring about reforms.

[1] We should not forget also about the 21st Conference of the Parties on the United Nations Framework Convention on Climate Change in December 2015. This conference was the third event shaping the future of international development in post-2015.

[2] Tackles tax avoidance activities of international corporations.

References:

World Bank Group. 2015. To mobilize trillions, better public financial management matters. Available at: http://www.fin4dev.org/2015/07/30/to-mobilize-trillions-better-public-financial-management-matters/.

USAID. 2015. Domestic Resource Mobilization. Available at: https://www.usaid.gov/what-we-do/economic-growth-and-trade/domestic-resource-mobilization.