Abstract
The Fourth International Conference on Financing for Development (FfD4) presents a significant opportunity to weave together development, climate, and nature into a cohesive sustainable development agenda. In an era marked by geopolitical competition and swiftly evolving intellectual frameworks, FfD4 stands as the sole forum capable of fostering a political consensus around a comprehensive new strategy, ensuring that every member state has an equal voice, allowing for the later elaboration of supportive tactical elements within their respective technical spheres.
The first aspect of this innovative strategy involves recognizing and broadly quantifying the substantial new investments that emerging markets and developing economies (EMDEs) must pursue over the next decade or two. FfD4 should transition the dialogue from one focused on aid to a model driven by investments. The practicalities of crafting and executing high-quality investments—supported by all development partners—can be explored through national platforms.
The second aspect is the establishment of a supportive financing strategy incorporating a revitalized approach to private finance and investments. Private finance is complex and, if guided through effective blended and mobilized financing frameworks, can yield positive outcomes. However, when left unregulated, it may become costly and unstable. Principles emphasizing “Know thy investment” should govern private lending to sovereign entities to promote responsible practices.
Fourthly, a novel perspective on fiscal space that promotes high-return, quality investments is essential. Sustainable development and ongoing improvements in creditworthiness are unattainable without this shift. The present emphasis on reducing debt-to-GDP ratios beneath arbitrary limits has skewed fiscal policies towards underinvesting in human, physical, social, and natural capital, necessitating change. A more favorable approach would involve comparing debt levels to the value of assets generated through debt-financed investments.
When combined, these four components have the potential to make FfD4 a pivotal moment in the financing of sustainable development in EMDEs.
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