Finance Minister Nirmala Sitharaman exhorted the need to urgently take action in closing the $4 trillion SDG financing gap.
It is in this regard that Finance Minister Nirmala Sitharaman called for urgent action to bridge the estimated USD 4-trillion annual financing gap impeding progress on SDGs in developing economies. Virtually addressing the third Voice of Global South Summit, Sitharaman said access to developmental finance remains a huge impediment to realizing these global goals.
Recent reports have indicated that most of the SDGs in developing countries are static or even reversing, which has become a cause for concern in global development. “The financing gap toward the attainment of SDGs is about USD 4 trillion a year for developing countries,” she pointed out, calling for greater mobilization of financial resources to support the efforts on sustainable development.
The recent events have intensified the uncertainties at the global level, disproportionately affecting developing economies, while the World Bank expects that by the end of this year, one in four developing countries will be worse off economically than before the pandemic. Sitharaman said that this slowdown in growth has a bearing on development and poverty reduction and called for bridging the large financing gap that has opened up.
Against this backdrop of challenges, the G20, under the presidency of India, called for a wider application of instruments for social impact and blended finance tools, as well as robust monitoring and measurement frameworks. In addition, the already started G20 Sustainable Finance Technical Assistance Action Plan under the Brazilian presidency will work on capacity building for scaling up sustainable finance in a Global South-tailored way.
“Our efforts have been to see that we have a framework that will support scaling up sustainable finance and making development financing accessible and effective,” Sitharaman explained. She called for people-centric growth that gives each person in society, particularly the vulnerable and marginalized groups, the opportunity to contribute actively to development. The process of development is indispensable for economic and social issues; growth will create a virtuous cycle where better economic performance will lead to greater financial opportunities, she said.
Sitharaman said that indeed multilateral development banks can play a role in mobilizing additional financial flows to developing countries. She added that what multilateral development banks need is comprehensive reforms so that they become more responsive and agile to quickly respond to financing needs, such as fresh capital infusions, balance sheet optimization, and new financial innovations. “It is imperative that the financing needs made to the MDBs must be matched with speed and agility,” Sitharaman said, calling for operational and strategic reforms in multilateral banks so they can be fitted in a more relevant manner for development financing requirements.
On concessional finance, Sitharaman said windows for financing committed towards mitigating and adaptation strategies of climate change were very important. She said that basically, there were to be financing windows targeting middle-income countries, though low-income countries would get priority in terms of support. She called for an effort by MDBs to engage credit rating agencies and work out incentives so more private capital could flow to development financing.
Sitharaman’s call to action reflects a broader recognition that the world realizes, with urgency, the requirement for financial innovation and systemic reform in bridging a huge financing gap which may undermine global development efforts. Her remarks underlined a commitment to sustainable development to be forged with better financing strategies and collaboration at the summit.
In a world struggling with economic uncertainties and development challenges, Sitharaman’s advocacy epitomizes that mobilization of resources and formulating financial strategies to back it up will be very instrumental in achieving the goals of sustainable development, more so in closing the SDG financing gap.