Background

In introducing the item, the Secretary-General noted that, as discussions on a post-2015 development agenda advanced, increased attention was being paid to its means of implementation, particularly financing. A renewed global partnership was needed to support the implementation of the future goals and targets of the post-2015 development agenda. He observed that the post-2015 financing framework needed to build on the Monterrey Consensus and the Doha Declaration and integrate the three dimensions of sustainable development in a balanced manner. In view of the large financing needs for sustainable development, resources needed to be mobilized from all sources, national, international, public and private. In addition, innovative financing mechanisms should be further developed to complement more traditional sources of funding.

Discussion

Noting that the United Nations system had an important contribution to make in achieving a new financing framework, he stressed three key action areas requiring further consideration by the Board: close cooperation in support of an appropriate monitoring and accountability framework; coherent engagement with Member States at the national level; and mobilization of the governing bodies and partners of organizations to develop institutional strategies for sustainable development financing.

In addition, the third International Conference on Financing for Development, to be held in 2015 or 2016, would be a central venue for advancing a strengthened global partnership for sustainable development, underpinned by a holistic and comprehensive financing framework. The United Nations system had an important role to play in contributing to the success of the conference. In closing, the Secretary-General thanked Queen Maxima of The Netherlands for her personal commitment to this issue as his Special Advocate for Inclusive Finance for Development and for her engagement in the current CEB session.

Following the intervention by the Secretary-General, the Deputy Managing Director of the International Monetary Fund provided an economic briefing on the macrofinancial outlook for emerging market economies and sub -Saharan Africa.

Global activity had increased during the second half of 2013 and was expected to improve further in the period 2014-2015, largely driven by advanced economies. Activity in emerging market and developing economies was projected to pick up only modestly as they adjusted to a more difficult external financing environment. The renewed increase in financial volatility early in 20 14 had highlighted the challenges for emerging market economies posed by the changing external environment. The global recovery was still fragile and downside risks continued to dominate. Recent geopolitical tensions across the globe could cause disruption in commodity markets and trading routes and trigger volatility in financial markets.

The Deputy Managing Director concluded by saying that more policy efforts were needed to fully restore confidence, ensure robust growth and reduce downside risks. Specifically, the advanced economies needed to avoid a premature withdrawal of monetary accommodation; emerging market economies would have to weather turbulence and maintain a high level of medium-term growth; and low-income economies would need to adjust fiscal policies to avoid a build-up of public and external debt.

Queen Maxima thanked the Secretary-General for inviting her to join the members of CEB, in her capacity as his Special Advocate for Inclusive Finance for Development, in a discussion on the important topic of financing for sustainable development. She indicated that the implementation of an ambitious post -2015 sustainable development agenda would require the leveraging of different sources of funding, including public, private, domestic and international funds. Cooperation between Governments, traditional donors, the multilateral system, the private sector, non-governmental organizations and civil society would be critical in this regard.

Financial inclusion was a cross-cutting enabler for any of the post-2015 focus areas under consideration, including poverty eradication, the empowerment of women, economic growth and employment, sustainable agriculture, food security and nutrition and health. For example, by reducing vulnerability to economic shocks and boosting job creation, financial inclusion could be a key driver for poverty reduction and inclusive economic growth while contributing to greater equality.

The Special Advocate for Inclusive Finance for Development emphasized that domestic resources were a critical component of an overall financing framework for the sustainable development agenda. Small and medium-sized enterprises contributed significantly to economic growth and full-time employment. For individuals and businesses, particularly small and fledgling firms, access to financial services such as credit, savings, payments and insurance could unlock innovation, job creation and growth. Ultimately, this would lead to increased mobilization of domestic revenues. However, about 200 million enterprises worldwide lacked adequate access to financing and financial services. That lack of financial inclusion hindered sustained growth, contributed to overall inequality and made it more difficult for countries to raise the domestic resources required to achieve their development goals.

In conclusion, the Special Advocate encouraged the organizations of the United Nations system dealing with development to consider highlighting the importance of financial inclusion during the preparations of the 80 Development Assistance Frameworks due during the next two years in support of national development priorities. Such efforts, combined with specific programmatic support from Governments and the United Nations development system, could help advance financial inclusion as countries worked with the United Nations and other partners to implement the post-2015 agenda.

In his intervention, the President of the World Bank Group noted that any bold future vision for sustainable development needed to be grounded in the realities of implementation. Every sustainable development goal required the right mix of instruments, ranging from clear implementation plans and policies to effective financing mechanisms, for its successful achievement. In that context, the role of the private sector in supporting national development objectives needed to be underscored.

The President further expanded on this point by stressing that climate finance and development finance needed to be complementary. Both public and private financial flows were indispensable for climate finance, as 80 per cent of the investment required to address climate change would need to come from private sources.

He observed that countries had to take the lead in mobilizing domestic resources for development, noting that the domestic resources of emerging and developing economies had grown by 14 per cent annually between 2000 and 2012. Improving taxation capacity, capturing revenues from natural resource wealth, achieving more efficient public spending and curbing illicit financial flows were areas that could provide substantial additional funding for development. Moreover, demonstrating an enhanced capacity to mobilize domestic resources also improved credit ratings and facilitated better and cheaper access to capital markets.

In addition, countries needed to strengthen their domestic private and financial sectors. A well-developed and inclusive financial system provided opportunities for small and medium-sized enterprises to grow and create jobs. Echoing a point made earlier by the Secretary-General’s Special Advocate for Inclusive Finance for Development, the President stated that financial inclusion would provide poor people with access to much-needed savings, credit and payments services.

The President concluded by emphasizing that the purpose and utilization of development aid needed to be rethought. Development aid needed to be used better and become a more effective catalyst in leveraging other sources of financing. Existing levels of official development assistance (ODA) were too low to meet the enormous financing needs of sustainable development. ODA needed to be used more extensively to catalyse mutually beneficial partnerships with the private sector in order to leverage private sector funding in support of transformative development projects. He announced that the World Bank Group was supporting such an approach by increasing its annual lending commitment from about $50 billion today to more than $70 billion over the next decade.

Focusing on ongoing intergovernmental processes, the Under-Secretary-General for Economic and Social Affairs recalled that deliberations on financing for sustainable development were currently taking place in several forums, both within the United Nations and beyond. In New York, the Intergovernmental Committee of Experts on Sustainable Development Financing, established in follow -up to the United Nations Conference on Sustainable Development, had been exploring options for an effective sustainable development financing strategy. The Committee had aimed to produce a set of ambitious proposals that would advance the discussion on the mobilization of financial resources and their effective use for sustainable development. In parallel, the Open Working Group on Sustainable Development Goals had been discussing the means of implementation, including financing, for the proposed set of sustainable development goals. Both bodies had been closely coordinating their work and would present their respective reports to the General Assembly in September 2014.

In addition, under the auspices of the Economic and Social Council, the 2014 Development Cooperation Forum would address the question of how a new global partnership for development beyond 2015 could be realized. Discussions were also under way on climate financing. The Under-Secretary-General asserted that ensuring coherence and maximizing synergies among these different financing streams would be a major task in arriving at a comprehensive financing framework beyond 2015.

He added that, together, the outcomes of those processes would inform the intergovernmental negotiations on the post -2015 agenda and would provide important inputs to the preparations for the Third International Conference on Financing for Development.

Speaking on the issue of public and private resource flows, the Under-Secretary-General stated that funding from the two sources needed to be mutually reinforcing and complementary. The new financing framework would have to address the issue of how to unlock and better utilize a diverse pool of financial resources. He further noted that domestic resource mobilization would be a critical element of public financing. Developing countries faced a range of challenges in raising domestic resources, including weak administrative capacity, illicit financial flows and tax avoidance and evasion.

In  the  view  of  the  Under-Secretary-General,  ODA  remained  a  critical component of the future financing mix, particularly for the least developed countries, small island developing States and other vulnerable countries. While the apparent reversal of the recent downward trend was most welcome, ODA flows still fell short of commitments. However, ODA alone would not be sufficient, even if all countries met their commitments. Private investment would play an increasing role in meeting sustainable development needs. Appropriate incentives needed to be put in place in order for the private sector to invest adequately in sustainable development. For those reasons, he concluded, public policies that stimulated investment in public goods, along with public financing, would remain the lynchpin of a sustainable development financing framework.

The ensuing discussion, which was moderated by the Deputy Secretary-General, focused on a number of key issues, including the concept of untapped or weakly tapped resources; the need to think beyond ODA; the objective of building a framework that combined national and international actions; the emerging focus on domestic resource mobilization; and the need to overcome existing institutional silos and contradictions.

The members of CEB were joined in the conviction that ODA needed to be used to leverage funds from other sources, be catalytic and build capacity. There was also general agreement that financial inclusion was a cross-cutting enabler and a key driver for poverty reduction, equality and sustainable development. Increased access to financial services was an important component of a future financing framework; solutions must focus on people; and access to financing needed to be accompanied by human rights safeguards and supported by appropriate regulation. The role of national postal organizations as providers of financial services, including to the poor and marginalized, was highlighted.

The role of trade as an enabler of economic growth was also emphasized, as trade could spur investment, create jobs and reduce inequality. Economic growth in the least developed and other vulnerable countries needed to be fostered through enhanced access to international markets and reduced trade barriers.

The United Nations system needed to rethink the role of the private sector in public welfare funding, such as health and education. Innovative approaches were necessary to create incentives (including financial incentives) for public-private partnerships. A mix of public and private funding was viewed by many members of CEB as the model of the future. However, public-private partnerships needed to be scrutinized to ensure that they did not contradict the core values of the United Nations, including the protection of human rights.

Private capital, institutional investors (pension and health funds), remittances, sovereign wealth funds, regional financial institutions and South-South cooperation were seen as untapped or weakly tapped resources that should be included in the new financing framework. Addressing illicit financial flows was also cited as an area that required further action.

On the broad subject of strengthening domestic resource mobilization, many participants emphasized that taxation (both domestic and global) needed to be increased to fund global public goods. In that regard, enhancing domestic administrative capacity was a precondition in many countries.

The role of multilateral development banks should be further enhanced, not just as a source of funding, but as partners in building development capacity at the country level. In addition, the new funding framework must take into considera tion that the geography of poverty had dramatically changed in the past 15 years, with 80 per cent of the poor now living in middle-income countries.

On the subject of overcoming existing silos, the members of CEB agreed that, in order to be credible, the United Nations system must avoid the contradiction of pursuing development objectives at the expense of environmental goals and must work on climate change. Funding for sustainable development, climate finance and humanitarian aid were interrelated and needed to be explored in an integrated and coherent way. The United Nations system had an important role to play in promoting greater coherence of the work being undertaken on development, humanitarian and climate change issues and in developing a compell ing narrative that would weave the different strands together.

Action

  • In his concluding remarks, the Deputy Secretary -General thanked the Special Advocate for Inclusive Finance for Development and the members of CEB for an open and constructive conversation.
  • Pointing out that the level of attention being paid to the issue of financing for sustainable development was expected to rise in preparation for the Third International Conference on Financing for Development, he emphasized the need for a coherent and coordinated response across the United Nations system.
  • The organizations of the system needed to make a concerted effort to lead by example and incorporate the three dimensions of sustainable development into their own strategic and funding frameworks.
  • In addition, efforts would continue to be needed to increase coherence at country level, to overcome institutional silos and jointly engage with a broader range of partners and stakeholders.
  • As the international community moved towards a framework for financing for sustainable development, it must build on the spirit of the Monterrey Consensus in bringing more voices and partners around the table.