The Addis Ababa agenda on Financing sustainable development

ODI-Centre for Aid and Public Expenditure (CAPE)Gideon Rabinowitz

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Outline

• 1) Ensuring adequate volumes and targeting of financing

• 2) Opportunities and challenges with new models of development finance

• 3) Learning lessons from aid about importance of linking to budgets and national systems

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Ensuring adequate volumes and better targeting of financing

- Problem: c80% of FSF was counted as ODA, 38% of FSF to LDCs and SIDs, poorly linked to vulnerability (Nakooda et al 2013); climate ODA has risen more quickly than total ODA, and ODA to LDCs has fallen (Steele 2015); major financing gaps on basic needs (ODI)

- Solutions: Support mitigation using non-concessional IPF in credit-worthy countries, 50% target on share of adaptation finance to LDCs/SIDs; target for non-concessional IPF (ODI); mitigation for MICs not quality as ODA (IIED)

- Addis Ababa: Repeats existing CF commitments, “urge” delivery of 0.7% and 50% ODA to LICs; also calls for increased South-South flows; leveraging a big agenda…BUT…

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Opportunities and challenges with new models of

development finance• Opportunities… - Using ODA/CF to direct private finance towards addressing SD priorities (up-front costs/proj dev, guarantees etc); tap into large volumes of private finance; …and challenges – Weak evidence of additionality and development impact, focus has been predominantly on international private finance

• Solutions? – Strong standards (inspired by aid principles, but going beyond these) and oversight (clearing house?) on this form of financing; focus on sector enabling env rather than projects; more focus on domestic finance

• Addis Ababa – Calls for transparency + account’, risk sharing, feasibility studies, monitoring of links to debt, capacity strengthening, develop guidelines/principles; EFA initiative

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Lessons from aid on linking to budgets and national systems

• Problem – Significant share of dev finance outside of systems, incl due to vertical funds (increase transaction costs, weakens strategic sector-wide focus, dis-incentivises focus on understanding and strengthening systems etc); momentum on reforms from mid/late 2000s lost (risks and results focus)

• Solutions – Commitment to deliver through systems, work with risks not avoid them and use creative approaches to results + attribution; limit use of vertical funds

• Addis Ababa – General reference in last paragraph of IPF section; some emphasis on vertical funds

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