Development Financing | "Progress has been undone by the crises"

Ten years after the Addis Ababa Conference, the fourth International Conference on Financing for Development will take place in Seville from June 30 to July 4. In 2015, the main focus was on developing financing sources for the United Nations' 17 global Sustainable Development Goals (SDGs), which are to be achieved by 2030. What has been the outcome so far?

Unfortunately, it's devastating. UN member states are lagging far behind their targets, and in some cases the situation has even worsened compared to 2015. This is primarily due to four major global events in recent years: the COVID-19 pandemic, the war in Ukraine, which together fueled the global inflation crisis, and finally, Donald Trump's second term in office. The number of people living in extreme poverty, living on $2.15 a day or less, rose by 23 million to 712 million compared to 2022. Today, 100 million more people are hungry than in 2019. The bottom line is that the past five years have been bad for the global economy, and this has had, in some cases, dramatic effects on many people. Life expectancy has fallen. Some of the progress made in the 2010s has been wiped out.

In Ethiopia, the international community agreed on the Addis Ababa Action Plan in 2015. Has it been implemented?

The civil society organizations represented in Addis Ababa already considered the action plan inadequate at the time. But even this action plan has not been implemented. This is particularly evident in the funding for official development cooperation, which has declined contrary to the targets. This has not only been the case since Donald Trump, and not only in the USA. In Germany, too, cuts in the development budget have been commonplace since at least 2023 ; if inflation is taken into account, even longer. The promise of industrialized countries, including Germany, to spend at least 0.7 percent of gross national income on official development assistance (ODA) dates back to 1970. Fewer and fewer countries, including Germany, are keeping it. Added to this are the distortions in trade policy caused by Trump's tariff increases and the worsening debt crisis in the Global South. Even beyond the wars, the global situation is dire.

According to projections, an additional 2.5 to 4 trillion US dollars would have to be raised annually by 2030 to achieve the SDGs.

I'm not a fan of this calculation of huge funding gaps, where everything is lumped together, which quickly leads to enormous numbers. But regardless of that, it's clear that more resources must be raised to ensure sustainable development. This applies to social measures as well as climate protection and climate adaptation measures. There are enormous funding gaps, especially in public budgets, which are offset by enormous capital accumulations in the private sector.

Closing the public gaps with private capital, for example through progressive taxation and combating tax evasion, seems like a natural solution. Are such proposals on the table in Seville?

Things are moving in that direction. On the one hand, it's about improving public budget revenues, especially in the Global South, by increasing tax revenues. On the other hand, governments are trying to channel private capital into investments for sustainable development. Private investors should be offered incentives to do this. This also involves subsidizing private investments. If this is not combined with changed international framework conditions that ensure that private investments really drive sustainable development in the Global South, the same old story threatens to happen: the bottom line is that, despite the investments, more funds flow from the Global South to the Global North because the profits from private sector investments do not remain in the South but are transferred to the North. So far, the Global South has subsidized the Global North. The outflow of capital exceeds the inflow. This must stop.

Will that be the starting point in Seville?

There are some nascent plants, for example, in the area of ​​international tax cooperation. The final declaration, agreed upon in advance on June 17 without the USA, contains some positive approaches. It advocates taxing the super-rich and establishing a global transparency register regarding corporate ownership, to identify the individuals behind and profiting from complex corporate structures. None of this is wrong, but it doesn't go far enough. Systemic reforms are left out of the final declaration, whether in the area of ​​taxation or public debt, and certainly not in the area of ​​private investment or trade. The right to have a say in international financial institutions such as the International Monetary Fund and the World Bank, which have long since outgrown the real balance of economic power, were also left out of the discussion in Seville.

What can we expect from the federal government in Seville? The coalition agreement states, among other things: "We are committed to the effective management of sovereign debt crises, involving all creditors. We support countries in the global South in developing their tax systems." Is this evident in government practice?

In the area of ​​taxation, this approach follows that of previous governments. Indeed, since 2015, they have invested in building tax administrations in the Global South. This is to be welcomed. The problem is that at the same time, they have either shown only reluctance to support or even prevented systemic reforms at the global level. The German federal governments have essentially passively relied on solutions emerging from various processes within the Organization for Economic Co-operation and Development (OECD). This hope has effectively been dashed with the Trump presidency. The new federal government has been in office too short a time to evaluate it yet. We are counting on it to take the path that other countries such as Great Britain and Belgium have already taken: enacting national laws in the area of ​​debt that prohibit private creditors from seeking enforcement options against countries in the Global South, instead of participating in debt restructuring. For this, a law with a majority in the Bundestag is sufficient.

Who comes to Seville?

A high-level presence would be desirable. Development Minister Reem Alabali Radovan, certainly, but why not Finance Minister Lars Klingbeil or Chancellor Friedrich Merz? Anyone who values ​​multilateralism should advocate for strong global institutions and a strong United Nations on the ground. If the financial situation doesn't improve dramatically, large portions of the UN's staff will have to be laid off. The German government can change that. It can provide funding, and it can reach agreements with other countries on how to secure funding in the long term. And that's what we expect from the German government now.