Financing for sustainable development is facing significant challenges. Growing geopolitical tensions, armed conflicts, massive aid cuts by rich countries and increasing debt levels are undermining Global South countries’ capacities to deliver on development and climate goals. Even more, the firm belief in the role of the private sector in development has resulted in the problematic privatisation -and even financialisation- of development. Moreover, the United Nations system - which aims to foster international cooperation and uphold human rights- is facing significant funding cuts. Indeed, its very existence has been challenged by its most powerful member, the US. 

The Financing for Development (FfD) process at the UN had its founding moment in 2002 in Monterrey. The goal was to align global financial flows and policies with the economic, social, and environmental goals that could deliver sustainable development. Since then, official development assistance (ODA or aid) and the Bretton Woods Institutions have been part of two of the six pillars of the FfD agenda. This was renewed recently in Sevilla at the Fourth International FfD conference. The Compromiso de Sevilla - the outcome of this conference - reflects a watered-down consensus on financing for development, with the Global North defending an unjust status quo. Yet, it also offers civil society windows of opportunity to keep pushing for the transformational reforms that are needed.

The broken promise of aid

Over 50 years ago, rich countries committed to deliver 0.7 per cent of their Gross National Income to ODA, but only a handful of countries have met this commitment. Even more troubling, a third of rich countries have announced cuts in their aid budget within the next two years, with the recent estimates projecting a 9 to 17 per cent drop in 2025, on top of the 9 per cent drop last year. Yet, these countries have faced no accountability for this broken promise - because they set the rules themselves within the rich countries’ club, the Organisation for Economic Co-operation and Development’ Development Assistance Committee (DAC).

While the outcome reaffirms the role of ODA as a source of development finance, Global North countries have no time-bound commitments to deliver these flows. Indeed, this symbolic step rings hollow. The Global South has been calling for much more far-reaching reforms to international development cooperation, including how it is governed and what accountability mechanisms exist. While the international community had already agreed on the aid effectiveness principles a long time ago, rich countries keep ignoring their calls, closing themselves off in their exclusive club.

In response to the criticism it has received about its lack of inclusiveness, the DAC has offered to review itself. This, however, was not the commitment CSOs and the Global South had been asking for, which was instead a demand for a more inclusive governance of international development cooperation under the auspices of the United Nations. A review which results in an expanded DAC in terms of membership and remit risks further undermining the role for the UN on these issues and a further deterioration of ODA as a unique and vital resource for development in the Global South.

The financing for development agenda and the illusion of private finance

The Compromiso de Sevilla sees multilateral development banks (MDBs) as institutions that mobilise private finance for development, and increasingly climate finance. The underlying rationale for the global financial architecture remains the Wall Street consensus, which places global finance centre stage. However, evidence shows that the idea of turning billions to trillions - as promoted by the World Bank and others - has not delivered either on quantity or on quality. Even the World Bank Group’s Chief Economist has recognised that this slogan has been little more than a fantasy.

Civil society and academics have warned against the high risks associated with policies and financing mechanisms - including blended finance and guarantees - aimed at attracting private investors. All too often they serve to increase the profiteering of large companies and disregard local needs, ownership, human rights, fiscal risks and climate justice principles. These concerns also apply to the European Union’s Global Gateway strategy, which risks diverting scarce development resources to serve geopolitical and commercial interests. Indeed, what has shaped up to be a European private sector promotion strategy is financed with funds intended for development cooperation with a poverty reduction mandate.

What remains unaddressed, yet urgent, is the need to overhaul the international financial architecture. Worryingly, the Bretton Woods Institutions have resisted meaningful reforms and have been refusing to allow for broader Global South participation in the decision-making, a call that was restated in Sevilla by CSOs and Global South countries. Unless MDBs change course — shifting from quantity-driven incentives and Global-North-dominated governance (as in the World Bank Group) — they will remain ill-suited to meet today’s challenges.

Looking forward

The conference in Sevilla was an important opportunity for civil society organisations to set out their agenda in a unique UN-led process where all countries participate on an equal footing. The overall message will continue going forward - that a more just and democratic international financial architecture is needed to deliver on the Sustainable Development Goals and a just transition agenda.

This includes reclaiming the value of aid and for public finance to be recognised as the main driver of development, alongside greater policy space for socio-economic structural transformation of countries in the Global South. One thing is certain - FfD will remain a space for democratising global economic governance.

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