Development finance

sonia — Sat, 17 Jun 2023 08:09:56 +0000

The persisting lack of financing for sustainable development is worsening in 2025. With ODA falling for the first time in five years (down 7.1% in 2024), and a stagnant overall FDI to developing economies, with declines in 2024 observed in Latin America and the Caribbean (-12%) and Asia (-3%), as well as a drop of SDG-related investments (-26%), heads of state and government gather at FfD4 this year to discuss how to reshape the global financial architecture for sustainable development. South-South cooperation, grounded in peer-to-peer partnerships, knowledge exchange and non-financial support, plays a critical role in sustainable development for all, reinforcing other mechanisms, especially through mutual support, cooperation and knowledge sharing. The Bridgetown Covenant -—
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—- strongly emphasized the essential contribution of ODA, private investment, and South-South and triangular cooperation, in addressing the challenges related to development finance, including mounting debt of the most vulnerable economies.

Approaching UNCTAD 16, redefining international support to developing countries is high on the agenda. The following chapters address related challenges:

We need a global financial architecture that puts people and planet first.Read more on this in UNCTAD SG’s report ahead of 16^th session of the Conference.

Early pilots showcase non-financial support is an essential South-South cooperation modality.

Investments in SDG-related sectors dropped 26% globally in 2024.

The external debt of developing economies reached $11.7 trillion in 2024.

Without reliable data, government efforts risk remaining ineffective or inadequate.

References

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Donec tincidunt vel mauris a dignissim. Curabitur sodales nunc id vestibulum tempor. Nunc tortor orci, sodales nec eros eget.

With falling foreign direct investment, investment-promoting regimes increasingly more important to reach the SDGs

sonia — Fri, 17 May 2019 12:33:43 +0000

SDG indicators

Goal 17: Partnerships for the goals

Target 17.3: Mobilize additional financial resources for developing countries from multiple sources
Indicator 17.3.1 Additional financial resources mobilized for developing countries from multiple sources

Target 17.5: Adopt and implement investment promotion regimes for least developed countries
Indicator 17.5.1: Implement investment promotion regimes for LDCs

Bridging the financing gap to achieve the SDGs and facilitate long-term economic transformation requires effective mobilization and utilization of various financing sources. Many developing economies face challenges in mobilizing sufficient funds, often hindered by their inability to secure affordable borrowing for investment. As they transition to higher income groups, losing eligibility for concessional finance (or part thereof) can exacerbate these challenges, creating a greater incentive to engage in South-South cooperation, but also reliance on private financial markets.

Continued decline in foreign direct investment to developing economies

Global FDI flows reached an estimated $1.5 trillion in 2024, an apparent increase of 4%. However, this headline figure is distorted by financial flows routed through European conduit economies¹. Excluding these intermediary flows, global FDI actually fell by about 11% year-on-year -—
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—-. Global volatility of FDI appears to be flatlining in recent years, however FDI flows to developing economies, after having exhibited a flat trend since 2010, experienced a sharp increase in 2021-2022 (figure 1). 2023 saw a drop in FDI and 2024 remained flat compared to the year before for the global South, undermining progress on the SDGs, as these economies rely heavily on international financing. FDI declines in 2024 were observed in Latin America and the Caribbean (12%) and Asia (3%), while FDI increased in Africa, a record 75% rise -—
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Figure 1. Since the start of the 2030 Agenda, the only major FDI inflow jump to developing economies (2021-2022) is now losing momentum

FDI inflows, billions of dollars (SDG 17.3.1)

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Investments in SDG-related sectors dropped sharply, by more than a quarter in 2024.

Greenfield project announcements, primarily in industrial sectors, saw a moderate increase of 3% in number, yet fell 5% in value. Despite the drop, the value of greenfield projects remained high ($1.3 trillion), second only to the 2023 record value, driven primarily by investments in data centres and data processing. -—
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Investments in SDG-related sectors dropped sharply, by more than a quarter in 2024. Investment flows to developing economies for infrastructure fell 35%, renewable energy 31%, water and sanitation 30%, and agrifood systems 19%. Only the health and education sector saw growth (25%) -—
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—-. This underscores the persisting gap in attracting FDI to developing economies.

Facilitating outward foreign direct investment key to achieving the SDGs

Mobilizing private sector finance is crucial to achieve the SDGs, with FDI playing a key role. FDI promotion is not solely the objective and responsibility of host economies; home economies can also support investment in developing economies and LDCs through dedicated OFDI promotion schemes. In this regard, SDG indicator 17.5.1 tracks the number of economies with OFDI promotion schemes for developing economies, including LDCs.

In 2024, at least 51 countries, including 21 emerging or developing economies, had in place at least one type of investment promotion mechanism for OFDI.

In 2024, at least 51 economies, including 21 emerging or developing economies, had in place at least one type of investment promotion mechanism for OFDI. This represented 71 per cent of developed economies and 15 per cent of developing economies. Among the economies with OFDI promotion mechanisms, an increasing number (27) had adopted schemes specifically targeting developing economies, including least developed economies. Globally, the most common mechanisms supporting OFDI were investment facilitation services (44 economies), followed by fiscal and financial support (38 economies), investment guarantees (35 economies) and State equity participation in foreign investment projects (25 economies) (figure 2).

Figure 2. Also in 2024, outward FDI promotion schemes towards developing economies, including LDCs, are predominantly provided by developed economies

Number of economies with an investment promotion mechanism for OFDI, by mechanism (SDG 17.5.1)

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Notes

Several European economies, including Ireland, Luxembourg, the Netherlands and Switzerland, where FDI statistics are significantly affected by conduit financial flows, reported large fluctuations and negative numbers in 2023 and 2024. Fewer negative numbers in 2024 exerted a net positive effect on global flows of about $230 billion. -—
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References

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Donec tincidunt vel mauris a dignissim. Curabitur sodales nunc id vestibulum tempor. Nunc tortor orci, sodales nec eros eget.

Goal 2: Zero hunger – UNCTAD SDG Pulse 2025

Development finance

References

With falling foreign direct investment, investment-promoting regimes increasingly more important to reach the SDGs

Continued decline in foreign direct investment to developing economies

Facilitating outward foreign direct investment key to achieving the SDGs

Notes

References