Q&A: Seven Questions on Financing for Development

Author:Amadou Sy
Pages:8-13
SUMMARY

Now that the Third International Conference on Financing for Development (FfD) has concluded in Addis Ababa, Ethiopia, in July 2015, policymakers are getting ready for the next United Nations General Assembly in New York in September 2015, which should result in a global agreement on the post-2015 Sustainable Development Goals (SDGs). The third and final meeting of this critical year for the... (see full summary)

 
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IMF Research Bulletin
6
Now that the Third International
Conference on Financing for Developm ent
(FfD) has concluded in Addi s Ababa,
Ethiopia, in July 2015, policymakers
are getting ready for the next United
Nations General Assembly in New
York in September 2015, which should
result in a global agreement on the po st-2015 Sustainable
Development Goals (SDGs). The third and final meeting
of this critical year for the de velopment agenda will be
in December in Paris, France , with the United Nations
Conference on Climate Change (COP 21). As policymakers
are setting the global develo pment agenda, it is impor tant
that the rapid pace they have set be matched by e conomists.
This is important a s the results of their research can gu ide
policies and, perha ps more importantly, help improve
their effectivene ss. The following seven questions aim at
informing researchers about some of the cur rent issues in
the Financing for Development program .
Question 1. Financing for Development: What is at stake?
Shortly before the Addis Ababa Fina ncing for Development
meeting, IMF Ma naging Director Christine Laga rde
announced a number of measures to a ssist developing
countries in their pu rsuit of the post-2015 Sustainable
Development Goals. The IMF pledged to (i) expand access
to all of its concessional faci lities by 50 percent; (ii) apply a
zero interest rate for low-income countries strugg ling with
natural dis asters and conflict; and (iii) scale-up its support
for raising domestic revenue potential a nd pay greater
attention to equity and inclusion.
The measures taken by t he IMF are part of a broader
effort to formulate, fi nance, and implement a new agenda
for sustainable development, which aims at “overcoming
poverty and protecti ng the planet” (AfDB, ADB, EBRD,
EIB, IADB, IMF, and World Bank 2015). The proposed 17
Sustainable Development Goals (SDGs) and 169 targets seek
to address a broad range of chal lenges, including clim ate
change, employment, infra structure, and inequality t hat
will require a n unprecedented surge in financing and
investment.
In a report entitled “From Billions to Tril lions,” referring
to the needed resource f lows, which surpass existing
development flows, seven multilater al development
institutions, includi ng the IMF, have called for a paradigm
shift to come up with a w ide-ranging financing fra mework
to channel domestic and exter nal finance from both public
and private sources, toward the SDGs . The challenge will be
two-fold. Policymakers w ill need to efficiently deploy $135
billion of officia l development assistance (ODA) currently
available. In addition, t hey will have to find ways to attract
and use effectively $1 tri llion of non-ODA resource flows
for development, which include philanthropy, remittances ,
Seven Questions on Financing for Development
Amadou Sy
Q&A
human and physical capita l in the country. Efficient
domestic investment strategies i nvolve planning ahead ,
anticipating bott lenecks that wi ll be encountered during
a resource boom, and mak ing public investments that
will support priv ate sector activit y in a resource abundant
eco nomy. Third, natural resource fu nds should be used
in support of this domestic i nvestment strategy, rather
than as ends in t hemselves; long-run asset accu mulation is
better done in the domestic economy tha n through “i nter-
generational” offshore fu nds; parking and stabilizat ion
funds are appropriate where they meet wel l-defined
objectives that support domestic ec onomic growth. With
the commodity super-cycle comi ng to a close, now is an
appropriate time to prepare for the next cycle.
References
Collier, P. 2010. The Plundered Planet, Oxford University Press,
New York.
van der Ploeg F. and A.J. Venables. 2011. “Harnessing Windfall
Revenues: Optimal Policies for Resource Rich Developing
Economies.Economic Journal 121:1–31
Venables, A.J. and S. Wills. 2015. “Resource Funds: Stabilizing,
Parking and Inter-Generational Transfer” Oxcarre Working
Paper. University of Oxford, Oxford, U.K.
1 Amadou Sy is with t he Africa Growth I nitiative at Brookings In stitution.

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