2024 Financing for Sustainable Development Report

Recently, United Nations Department of Economic and Social Affairs launched the ‘2024 Financing for Sustainable Development Report: Financing for Development at a Crossroads (FSDR 2024).

Key highlights of the report:

Investment Trends in India:

• Multinationals are increasingly viewing India as a viable alternative for manufacturing, particularly amid efforts to diversify supply chains.
• The report highlights India’s attractiveness as an alternative to China, particularly in the wake of geopolitical tensions.
• The country’s investment attractiveness remains strong, buoyed by factors such as favorable policies and a skilled workforce.
• The report highlights the role of fintech in facilitating financial inclusion and digital payments in India.

Challenges Facing Developing Countries:

• The report indicates subdued investment globally, attributed to rising geopolitical tensions, climate disasters, and a global cost-of-living crisis.
• The report points to a substantial financing gap in developing countries, estimated at $2.5 trillion to $4 trillion annually.
• Developing nations encounter significant obstacles in accessing both long-term and contingency financing, exacerbating development challenges.
• Developing countries face challenges such as softer external demand, volatile commodity prices, and fiscal constraints, impacting investment prospects.
• The enabling environment is weak due to policy, regulatory, and tax frameworks that are not adequately aligned with the Sustainable Development Goals (SDGs).

Reasons for low financing:

Impact of Systemic Risks:

• Systemic risks, such as the COVID-19 pandemic and escalating climate disasters, have strained national financing frameworks, hindering progress towards sustainable development goals (SDGs).
• Average GDP growth rates in developing countries have declined to just over 4% annually, further complicating efforts to mobilize resources.

Debt Burdens and Climate-Related Challenges:

• Rising debt burdens and borrowing costs pose significant challenges, especially for the least developed countries.
• Developing countries, especially the least developed, face mounting debt burdens, with the median debt service burden reaching 12% in 2023.
• Climate-related disasters contribute significantly to the debt upsurge in vulnerable nations, underscoring the interconnectedness of environmental and economic challenges.

Recommendations for Addressing Financing Gaps:

• Enhancing tax capacity to increase tax revenue and support SDGs.
• Need for greater commitment to tackle issues such as tax avoidance, fossil fuel subsidies, and inequalities to mobilize resources effectively.
• Strengthening international development cooperation to mobilize additional financial resources, including blended finance approaches focused on sustainable trade and responsible business conduct.
• Taking decisive action to alleviate debt challenges in developing countries.
• Promoting coherence between trade, investment, and sustainable development agendas.
• Allocating funding for data and statistical systems to generate actionable insights for advancing SDGs.

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