We have crossed the halfway point to the target date for meeting the UN Sustainable Development Goals (SDGs), which were established at a special UN summit meeting in 2015.
However, a recent UN report on the progress achieved so far on the 17 SDGs, which are subdivided into 169 sub-goals addressing various aspects of economic, social, and environmental development, including climate change, found that of the 140 assessable sub-goals, only 12 per cent were on track to being achieved by 2030 and that over 50 per cent of them were off target.
Worse still, in more than 30 per cent of the subsidiary target areas, including those concerned with poverty and hunger, the situation was worse than when the SDGs were first set out in 2015.
These dismal findings have led the UN secretary-general to launch a call for action to spur urgent development financing through foreign debt reduction. It is well known that the heavy debt burden on the developing nations eats away at their revenues and that servicing such debts alone often costs more than what they spend on education, healthcare, and other essential public services combined.
The ratio of foreign debt to exports in the developing nations has climbed from 71 per cent in 2010 to 110 per cent in 2022. In tandem, the ratio of commercial loans from private lenders has risen to 62 per cent, compared to 24 per cent from multilateral financial institutions and 14 per cent from bilateral loan arrangements. Also telling is the fact that the African countries pay an average of 12 per cent interest on loans, compared to around 1.5 per cent paid by Germany before the recent rate increases.
It is little wonder that many nations are gripped by a crippling debt crisis. Half of them must allocate at least 7.4 per cent of the export earnings to debt-servicing. For many of them, the figure is much higher.
After Germany was defeated in World War II, the international community agreed that it allocates only five per cent of its export revenues to paying off its war debts so as not to hamper reconstruction efforts. This was set out in the London Convention of 1953. But what war did the developing nations engage in for them to be doomed, to be so shackled by debt, that some new debts have to go to paying off previous ones?
As for the money received in other loans, in some cases this may be traced through illicit financial flows to safe havens outside of the developing world. The remainder has in some cases been allocated to projects some of which have brought no noticeable economic or social benefit to the developing country concerned, though some projects have included a high import component that has also benefited the creditor country.
In order to service and pay back their debts, the developing nations are left with little choice but to deduct money from essential investment in development, education, and healthcare, as well as adding further financial burdens on the people, society and the private sectors in these countries. No significant development can occur without adequate financing. Moreover, such financing must not take the form of additional commercial debt, which has only wrought more harm than good.
No matter how you juggle the figures, these tell us that the countries of the Global South have been driven further into underdevelopment than the other way around.
The draft declaration on Sustainable Development Goal that is to be presented at the SDG Summit to be held at the UN General Assembly in September calls for a stimulus through significant increase in financing for sustainable development by at least $500 billion per year and for mechanisms to strengthen contingency financing and crisis response.
In addition, the declaration calls for urgent reforms to the global financial system, which it describes as “integral” to the success of the SDG Stimulus, although it is something of an exaggeration to call the hodgepodge of arrangements in place to govern international financial transactions a “system.”
It would be mistaken to think that there is an international consensus over these needs. As the US journalist Colum Lynch reported earlier this month on the global development media platform Devex, several developed countries continue to block agreement on the draft declaration that advocates the need to accelerate progress towards critical SDGs.
Apparently, the representatives of these developed countries still insist on maintaining the bureaucratic boundaries between multilateral financial institutions and international organisations, out of their determination to perpetuate the post-World War II arrangements that ensure their continued hegemony and influence over the mechanisms, priorities, and governance of the intercontinental financial architecture.
Paradoxically, such intransigence could become an accelerator of change in an obsolescent world order that no longer suits the new balance of power.
The demands to increase SDG financing come at a time of the relative decline in development assistance and the large gap between the limited resources offered by the multilateral development banks and actual financing needs. Although the members of the Organisation for Economic Cooperation and Development (OECD) earlier have increased official development assistance, that increase was directed to humanitarian and refugee relief and to other such fallout from the war in Ukraine.
Meanwhile, the paid-in capital to support the multilateral development banks themselves has not kept pace with the growth in the global economy and the GDP of the developing nations. As a result, the financing on offer is meagre, especially for middle-income countries that are additionally forced to contend with unfavourable conditions in terms of interest, costs, and fees, as well as grace periods and payment maturities.
The resistance on the part of the advanced economies to the call for increased development financing contradicts the text and spirit of the Addis Ababa Action Agenda they approved in 2015 with the aim of generating financing for the SDGs that were adopted that year.
Not only have the developed countries failed to follow through on their pledges, but the international financial institutions also pledged to increase their financing capacities and to introduce guarantees and risk-mitigation mechanisms to leverage private investment in development projects.
Very little of that has happened either.
This article appeared in Arabic in Wednesday’s edition of Asharq Al-Awsat.
* A version of this article appears in print in the 10 August, 2023 edition of Al-Ahram Weekly