By Bineswaree Bolaky
The achievement of the Sustainable Development Goals (SDGs) is a development priority in the global South, where most of the scope for reducing poverty and inequality and creating decent jobs lie.
The SDGs have been mainstreamed in the national development strategies of many developing countries from the global South. For the goals to be realized, massive investment in a range of sectors is required over a prolonged period of time. According to some estimates, the average SDG financing gap per year for the 59 low-income developing countries (LIDCs) is in the order of US$400 billion between 2019 and 2030.
Thus, the critical question is: How can such an ambitious agenda be financed with only ten years to go, and even more so in a post-COVID-19 context? Financing the SDGs in a world fighting COVID-19 has indeed become a serious challenge. The traditional sources of development finance have come under strain, a trend that started before the advent of COVID-19, but which is likely to be aggravated by the latter.
South-South finance, investments and trade, while capable of impulsing positive development change, have also met with criticism, especially when originating from China to Africa. Scrutiny over-development effectiveness applies as much to Southern-led aid, finance and investments as to Northern-led sources. Lack of transparency in data disclosures, improper monitoring and evaluation, the lack of distinction between aid and development finance and resorting to commodity-backed loans in Africa has been questioned (Sun, 2014). It could be added that the absence of governance-related conditionalities in South-South finance can breed, in some cases, adverse governance outcomes, which calls for strengthening development governance5 including building capacities of the Entrepreneurial State6 and capacities for monitoring and evaluation backed by transparency and accountability mechanisms, and development-oriented policymaking.
Indeed, the move towards a Southern-led financial architecture, anchored around a set of common principles for development effectiveness, yet putting at heart the national interests of recipients and their needs for broad-based sustainable development has to gain further momentum. The main challenges are three-fold: How to mobilize resources within this new architecture?; What should constitute its guiding principles to ensure development effectiveness?; and What type of public-private relationships should it involve including how should the latter’s impact be evaluated in relation to the achievement of the SDGs?
These are the questions to be addressed by this paper. The paper will first revisit the case for realizing and financing sustainable development and looks at implications of emerging challenges, such as the effect of the post-COVID-19 context on achieving the SDGs. Emerging financial mechanisms designed to foster resource mobilization in the global South will be analysed and their implications assessed, including for local private sector development. The paper next critiques the existing Northern-led global financial governance architecture with the purpose of identifying its weaknesses and strengths. The case will be made for a new, emerging Southern-led financial architecture with active local private sector participation and sketches what should be the guiding principles underlying this architecture and the modalities and instruments that can be deployed to mobilize resources within it. How South-South Cooperation can facilitate use of the new financial mechanisms. to promote sustainable broad-based development in the global South will be addressed. Finally, the case will be made for new forms of public-private relationships within the Southern-led financial order.