World leaders meet to agree to global targets to improve the lives of people in all countries.
Deodat Maharaj, Commonwealth Deputy Secretary-General for Economic and Social Development.
World leaders will meet this weekend in New York to agree to global targets to improve the lives of people in all countries. These ambitious goals, officially known as the Sustainable Development Goals (SDGs), are commendable and certainly a step in the right direction.
The big challenge for governments and international partners in achieving the Sustainable Development Goals is that while there is general agreement on the overall framework, there is less clarity on how they will be financed.
What we know is that the estimated US$135 billion in annual overseas aid is nowhere close to the resources required to finance this new development agenda. In Ethiopia in July of this year, at the United Nations International Conference on Financing for Development, the global community emphasised the fundamental importance of “domestic resource mobilisation” – the revenues raised by government, such as through taxation. This we fully endorse, whilst at the same time calling for aid commitments to be met.
Notwithstanding the urgent need to mobilise more domestic resources in developing countries, many countries face severe challenges, especially the Commonwealth’s 31 small states, many of which have populations well under 1.5 million. Earlier this week, in my role as Commonwealth Deputy Secretary-General, I visited the Pacific, where I was able to see first-hand the devastation unleashed by Cyclone Pam on Vanuatu, where a generation of development was lost in a matter of hours. On the other side of the world, in the Caribbean, we saw earlier this month the destruction caused by Tropical Storm Erika in Dominica.
Although many developing and small states face similar challenges, a one-size-fits-all approach to development and finance is not appropriate. Whereas we, at the Commonwealth Secretariat, fully support the emphasis on domestic resource mobilisation, we note with concern the exclusion of many of our small states from access to concessional finance and call on the international community to consider their inherent vulnerability when allocating overseas development assistance and determining access to affordable finance.
The reality is that these countries have neither the population size nor the tax base that can quickly generate the resources required. Additionally, many face crippling debt burdens with 15 Commonwealth countries having debt to GDP ratios of over 75 per cent, 5 of which exceed 100 per cent.
Given these challenges, the Commonwealth has long recognised that traditional financing cannot generate the resources to meet the needs of our member states. Indeed, Commonwealth Finance Ministers indicated the importance of innovative financing for development and pledged their commitment to supporting a number of new financing initiatives.
Consequently, the Commonwealth proposed the pioneering Multilateral Debt for Climate Swaps Initiative which aims to unlock funds to finance climate change adaptation and mitigation projects. This will assist Commonwealth small states to safeguard themselves against climate change whilst simultaneously reducing their debt burdens. On the issue of debt, it is important to recognise that there should be a facility which allows small vulnerable countries the ability to suspend debt payments facing economic shocks or natural disasters. Such counter-cyclical loans better take into consideration the realities of small and vulnerable states.
It is also important to look at new sources of financing including the potential of crowdfunding as well as maximising the development potential of remittances. Remittances represent a key external financial flow for many developing economies in the Commonwealth. In regions such as Asia and the developing Caribbean, remittances are often the biggest external financial flow in net terms, far outweighing foreign direct investment, overseas development assistance, portfolio equity and other private flows.
The Caribbean for example received a bit over US$5 billion from remittances last year. Recipient countries need to closely examine how remittances and indeed the diaspora can be more effectively leveraged to encourage investment. On generating resources to address climate change, it is not only an issue of making resources available, it must also be about increasing capacities in countries so they can more effectively access new and existing funding. To this end, it is crucial that technical expertise be provided where it matters, on the ground to help vulnerable states access climate financing.
As the global community deliberates on the Sustainable Development Goals, this issue of financing must also be addressed, of which innovative instruments have to play a defining role.