To meet the 2030 Agenda for Sustainable Development, the UN urged the world’s most developed nations last week to increase their financial support by $500 billion each year. This crucial funding, named the SDG Stimulus after the UN Sustainable Development Goals (SDGs), will focus on improving access to long-term financing and relieving debt distress in developing countries. The hope is that this stimulus can offset difficult market conditions as a result of crises like the pandemic, the war in Ukraine, and the consequences of climate change.
Not only are these crises preventing progress toward the 2030 agenda, but the UN Secretary-General António Guterres explained that there is a great financial divide, which leaves the Global South more vulnerable to market shocks. Rising interest rates are spreading globally, but even more rapidly in developing countries. In international capital markets, developing countries often borrow at a rate of five to eight percent, versus to one percent for developed countries.
“Today’s poly-crises are compounding shocks on developing countries – in large part because of an unfair global financial system that is short-term, crisis-prone, and that further exacerbates inequalities,” stated Guterres.
According to UN DESA Policy Brief No. 134 released in June 2022, three in five of the poorest countries are at high risk or already in debt distress as of 2022, and one in four middle-income countries are at high risk of fiscal crisis. Public debt is reaching critical levels across the world, at a time when investment is vital to recovering pre-pandemic per capita income levels and coping with climate disasters. Rising energy and food costs, which are consequences of the war in Ukraine, further intensify the debt pressure on struggling economies.
The SDG Stimulus launch comes with a three-point plan from the UN, which aims to tackle the high cost of debt, scale up affordable long-term financing, and expand contingency financing to countries in need. All investments will be required to align with the SDGs. Adopted by all UN member states in 2015 alongside the 2030 Agenda, the 17 SDGs focus on water, energy, climate, oceans, urbanization, transport, science, and technology solutions. An annual SDG Progress report is developed annually in cooperation with the UN System and based on a global indicator framework.
“Investing in the SDGs is both sensible and feasible: it is a win-win for the world, as the social and economic rates of return on sustainable development in developing countries is very high,” said Guterres about the SDG Stimulus launch.
The SDG Stimulus package also proposes a new international financial architecture to ensure such funds support just, inclusive and equitable transitions for all countries. Many countries are already beginning to implement planning for the SDG Stimulus through the Integrated National Financing Frameworks (INFFs), which were introduced in the 2015 Addis Ababa Action Agenda.
Despite working towards the 2030 goal for years, the UN argues that the recent crises mentioned above set back progress and the SDGs are now out of reach. For example, the Human Development Index (HDI) fell for two years in a row globally, which has not happened in over three decades. A financing boost is desperately needed to avoid financial collapse among the world’s poorest countries.