Development finance – UNCTAD SDG Pulse 2025

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.

Bringing South-South cooperation into focus: the journey to measurement

sonia — Fri, 06 Mar 2020 13:10:24 +0000

SDG indicators

Goal 17: Partnerships for the goals

Target 17.2: Developed countries to implement fully their official development assistance commitments.
Indicator 17.2.1 Net official development assistance, total and to least developed countries.

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.

Heads of state and government gather at FfD4 this year¹ to reshape the global financial architecture for sustainable development. Amid mounting global challenges, from geopolitical tensions and related refugee crises to climate shocks and systemic financial risks, the conference seeks to catalyse a renewed commitment to equitable and resilient financing. While ODA to developing economies is failing to reach commitments, new solutions are sought. 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.

Official Development Assistance turning downwards, increasing the gap to agreed targets

Despite recent growth, longstanding aid commitments remain unmet. In 2024, ODA fell by 7.1% in real terms compared to 2023 – for the first time in five years – declining to $212.5 billion -—
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—- and representing just 0.33% of donor countries’ GNI², a sharp reversal from previous modest gains.

For the first time in five years, ODA fell in 2024 (-7.1%).

For LDCs, 2023 marked a further ODA decline in an already stagnant decade (figure 1). These levels fall far short of what is needed to support sustainable development for all. Net bilateral flows to LDCs were $35 billion in 2023. The spending gap to achieve, for instance, education transformation was estimated at $5 756.8 billion for LDCs per year, and $20.6 billion for inclusive digitalization -—
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—- ³. ODA plays an essential role, often serving as catalytic funding in areas where private investment is scarce. For some vulnerable countries it is the only reliable source of external financing making it indispensable for achieving the 2030 Agenda.

Figure 1. The falling ODA has increased the gap: disbursements now less than half of what developed economies have committed to

ODA as a percentage of GNI (SDG 17.2.1)

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Notes: 2024 is not shown in the LDCs graph as ODA data by detailed recipient are not yet available.

The previous increases of ODA were driven by conflict-related aid, e.g., to Ukraine, and in-donor refugee costs, and their decrease has contributed to the fall in 2024. This decline was further impacted by reduced contributions to international organisations and lower levels of humanitarian aid. Amidst these shifts, ODA with climate objectives has gradually increased over the past decade, reaching nearly $50 billion in 2021/2022 -—
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—-. Climate finance, a broader concept accounting for both bilateral and multilateral flows, including export credits and other public funds and mobilized private finance, surpassed $100 billion annually for the first time in 2022, hitting almost $116 million -—
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South-South data supporting strategic allocation of resources to reach the 2030 Agenda

South-South cooperation, alongside other international development support, is key to achieving the 2030 Agenda, but is the only form of development cooperation lacking systematic data. This hampers its strategic management and the effective allocation of flows to achieve sustainable development.

Figure 2. UNCTAD has engaged in close collaboration with partners to advance work on SDG indicator 17.3.1

Source: UNCTAD.

Momentum to measure South-South cooperation is rapidly building following the endorsement of SDG indicator 17.3.1 in March 2022 at the UN Statistical Commission -—
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—-. Developed by the South for the South, the UN Framework can enable globally balanced, inclusive and representative information on development support through reporting of South-South data to the SDG indicator, first time alongside data on North-South flows which have existed for decades.

The new UN Framework enables globally balanced, inclusive and representative South-South data.

Interest in measuring South-South cooperation is quickly increasing. The first expert meeting in July 2023 in Brasilia brought together 16 member States, and in June 2024, 66 developing economies met in Doha. Four countries have reported preliminary South-South data in the ’Framework’ and eleven are pilot testing it in 2025 (map 1). Early data by pioneering countries confirm non-financial support as essential to South-South cooperation, with scholarships, humanitarian assistance and technical cooperation reported most frequently, targeting (ordered by number of reported activities) SDGs 4 (quality education), 9 (industry and innovation), 8 (decent work and economic growth), 17 (partnership for the goals) and 3 (enhancing health), showcasing the diversity of South-South cooperation.

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

UNCTAD leads a Development Account project⁴ carried out with the UN Regional Commissions, UNDESA, and UNOSSC to support countries of the South in collecting and reporting South-South data through the new Manual -—
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—-. The project enhances developing economies’ capacities to collect data on their mutual support flows, and use it for multiple analytical, policy information and reporting purposes.

Map 1. Pioneering and pilot countries are driving South-South data measurement

Source: UNCTAD, ECA, ECLAC, ESCAP, ESCWA.

Note: Situation reflected on the map as of April 2025.

Notes

4th International Conference on Financing for Development Sevilla, Spain | 30 June – 3 July 2025; https://financing.desa.un.org/ffd4
Developed economies have committed to a target of 0.7% of ODA/GNI and 0.15 to 0.20% of ODA/GNI targeted to the LDCs -—
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The cost estimates presented are extrapolated values derived by scaling a population-weighted median of per capita costs from sampled LDCs to total LDC population.
Project website: https://stats.unctad.org/measuringSSC.

References

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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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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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Costlier debt servicing undermines the achievement of the SDGs

sonia — Wed, 06 Mar 2019 10:22:40 +0000

SDG indicators

Goal 17: Partnerships for the goals

Target 17.4: Assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring, as appropriate, and address the external debt of highly indebted poor countries to reduce debt distress.
Indicator 17.4.1: Debt service as a proportion of exports of goods and services (Tier I)

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

Amid global uncertainty and recurring external shocks, the cost of capital for developing countries has risen, undermining their capacity to achieve SDGs. High debt costs are draining vital public resources needed for development. In this context, the development crisis continues to intensify, particularly in LDCs and SIDS. To salvage the 2030 Agenda, an ambitious and comprehensive multilateral response is essential -—
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The external debt of developing economies reached $11.7 trillion in 2024, up from $11.4 trillion in 2023. Even though the value of total external debt continues to rise, the pace of that increase has slowed significantly since the COVID-19 pandemic, leading to moderate annual growth of 2.6% in 2024 – less than a third of the long-term average annual growth rate (8.4%) prior to the pandemic.

Figure 1. Debt servicing costs have risen sharply for the poorest economies

Long-term external public and publicly guaranteed debt service as a percentage of exports of goods and services (SDG 17.4.1)

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Note: Values in 2024 are estimated.

LDCs increased debt service ratio in 2024 most pronouncedly, reaching 13.5%.

For developing economies as a group, the ratio of debt service on long-term external PPG debt to exports has been on an upward trend since 2010 (figure 1). The increase was particularly pronounced for the poorest: in 2024, the ratio was 13.5% for LDCs as a group, more than three times as high as in 2010 (3.5%) and also significantly higher than before the pandemic (9.7% in 2019). For the group of SIDS excluding Singapore, a group of particularly climate-vulnerable economies, this ratio increased sharply in 2020 as a result of decreasing services exports mainly due to falling tourism at the times of the lockdowns. After returning to its pre-pandemic level, the indicator has increased again since 2022, primarily due to higher debt servicing costs.

Figure 2. External debt has become more expensive to service, especially for low-income economies

Ratio of external debt service to external debt by income groups (percentage)

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—- classification by income level.

Low income countries experiencing sharpest rise in external debt service, reaching 10.5% of their debt in 2024.

The ratio of external debt service to external debt – which considers the impacts of both maturity and interest costs – has been on a rising trend in the groups of the low, lower-middle and upper-middle income developing economies over the past decade (figure 2). The ratio was highest for upper-middle income economies, reaching 15.2% in 2024, as compared to 9.9% in 2014. Lower-middle income economies recorded a steady increase after the pandemic, with total external debt service rising to 12.5% of total external debt in 2024, up from 10.3% in 2020. The increase over the past decade was most pronounced in low income developing economies where this ratio rose from 3.8% in 2014 to 10.5% in 2024.

References

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Measuring illicit financial flows for stronger domestic resources

sonia — Wed, 06 Mar 2019 10:21:23 +0000

SDG indicators

Goal 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

SDG target 16.4: By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.
SDG indicator 16.4.1: Total value of inward and outward illicit financial flows (in current dollars)

The 2030 Agenda identifies the reduction of IFFs as a priority, as reflected in target 16.4. This target is essential not only for financing the SDGs but also for ensuring economic sustainability. After global agreement on concepts and methods¹, the first official estimates of IFFs were reported in 2023 revealing alarming volumes of funds crossing countries’ borders due to criminal activities.² In addition, experimental estimates of tax and commercial IFFs also reveal significant flows, ranging from 5 to 30% of official goods trade in many African pilot countries. For instance, in Namibia, such flows were estimated to exceed 8% of GDP in 2022.³ If redirected into the formal economy, these illicit flows could serve as a vital source of funding for sustainable development, helping to bridge the financing gap -—
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—- and limiting the impact of the destabilizing international development assistance crisis.

Pilots in Africa show trade-related IFFs could reach 5 to 30% of official goods trade.

Recognizing this, the UN General Assembly welcomed the first official estimates of IFFs based on internationally endorsed methodology. It called on co-custodian agencies, UNCTAD and UNODC, to strengthen support for member States, especially developing economies, by providing technical guidance and tools for data compilation and reporting, and invited all member States and international organizations to engage with the custodian agencies for more informed and effective policy action and reporting of data on SDG indicator 16.4.1 -—
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Map 1. 22 countries have studied the measurement of IFFs in 2018-2022 and 12 countries are doing so between 2023 and 2026

Source: UNCTAD and UNODC.

Note: Situation reflected on the map as of April 2025.

To date, 22 countries have piloted IFF measurement. Among them, 14 countries (12 in Africa and two in Asia) have tested methods to measure tax and commercial IFFs while nine countries have tested measuring IFFs from illegal market and exploitation activities.

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

The co-custodian agencies continue to support countries' IFFs measurement efforts through different projects: a global United Nations Development Account project, spanning 2023-2026,⁴ in coordination by ECA and implemented with UN Regional Commissions in eight developing countries; UNODC is supporting Costa Rica in measuring drug-trafficking related IFFs; UNCTAD is also supporting Ghana, Namibia and Zambia in another project⁵ to refine their preliminary estimates on tax and commercial IFFs for reporting on SDG indicator 16.4.1. Countries are integrating these data into policy formulation for more targeted efforts to address IFFs, recognizing that effective policies require detailed data and analytics on the sources, destinations, types, activities and channels of IFFs. Without reliable data, government efforts risk remaining ineffective or inadequate.

Towards Agenda 2030: closing country data gaps

Over the years, UNCTAD and partners have trained over 2 000 experts in analysing tax, customs, and banking transactions to identify sings of illicit finance. Dialogue between statisticians and policy makers is key to effective response. To this end, UNCTAD hosted a Joint Measurement and Policy Workshop⁶ in February 2025 in Geneva, bringing together 30 experts, including 13 women, from Ghana, Namibia, and Zambia and academic and research institutes. Findings shared at the seminar, illustrated high IFF risks related to the trade of raw minerals, like gold, manganese, copper, and uranium, and crude oil, as well as agricultural produce. Some countries revealed significant under-invoicing for certain critical minerals, such as copper or cobalt.

The experience of these countries shows that inter-agency collaboration is key in tracking and fighting IFFs. Institutionalizing platforms such as national coordination mechanisms, technical working groups, or establishing a dedicated IFF unit, strengthens both the measurement process and the broader governance of IFF data. These structures enhance transparency and help address persistent challenges, such as lack of data-sharing agreements and confidentiality constraints, as well as technical issues related to data coverage, quality, and interoperability. Building the capacity of key staff is crucial for effective tracking and curbing of IFFs. Equally important are the adoption of global standards for IFF reporting and reinforcing legal and institutional frameworks at the national level. Together these efforts support both the measurement and policy dimensions of combatting IFFs.

Figure 1. UNCTAD and UNODC have engaged in close collaboration with partners to advance work on SDG indicator 16.4.1

Source: UNCTAD and UNODC.

With five years until 2030 Agenda concludes, global and concerted action is needed to report data to SDG 16.4.1 to track and curb IFFs.

There is a growing political momentum to measure and monitor sustainable development more effectively and strengthen domestic resource mobilisation. 2025 is a crucial year to strengthen global dialogue and commitment at the FfD4. Countries are increasingly recognizing the high returns on data investment — estimated at an average of $32 for every $1 invested in strengthening data systems in developing economies -—
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—- — and the significant progress many countries have made in enhancing their national statistical systems. However, despite this momentum, investment in data remains insufficient, and as illicit finance continues to leak out of countries, including in the form of undervalued domestic natural resources, developing countries are seeking solutions to weak development financing. Efforts to track and recover resources lost to IFFs will be a central element in this discussion.

Notes

Conceptual framework for the statistical measurement of illicit financial flows -—
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Selecting data series to reflect SDG indicator 16.4.1 on SDG Indicators Database: https://unstats.un.org/sdgs/dataportal/database returns Indicator 16.4.1 series: Total value of inward illicit financial flows (DI_ILL_IN) and Total value of outward illicit financial flows (DI_ILL_OUT).
Report from the Joint Measurement and Policy Workshop on IFFs, https://unctad.org/system/files/information-document/20250203- 07_measurementpolicyworkshop_finalreport.pdf
Project “Measuring and curbing illicit financial flows”, 2023-2026, https://unctad.org/project/measuring-and-curbing-illicit-financial-flows
Project “Statistical measurement of illicit financial flows to enable more targeted policy action”, 2024-2026, https://unctad.org/project/statistical-measurement-tax-and-commercial-illicit-financial-flows-enable-more-targeted.
Joint Measurement and Policy Workshop on IFFs, https://unctad.org/meeting/joint-measurement-and-policy-workshop-illicit-financial-flows

References

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