Covid-19 to leave developing countries $1.7trn short of development goals

13 Nov 20

Developing countries face a huge gap in the financing they would need this year to keep them on track for the 2030 Sustainable Development Goals, according to research from the OECD.

 

The report found a gap of $1trn in public spending on pandemic recovery measures compared with what is being spent in advanced economies, alongside a $700bn drop in external private finance in 2020.

These shortfalls are due to the relative ease with which richer countries can borrow, as well as falls in private portfolio investments, foreign direct investment and remittances sent home by migrant workers, the OECD said.

Combined, they will make it much harder for the world’s 122 developing countries, 90 of which are in economic recessions, to make progress on the SDGs – a collection of targets in areas such as education, climate and poverty reduction set by the UN to help spur development.

“Covid-19 is erasing years of development progress and causing major setbacks to all sources of finance for developing countries under stress, many of which entered the crisis with already severe structural impediments,” said OECD secretary-general Angel Gurría.

“With Covid-19 already reversing development advances and many challenges still ahead, it is urgent that we redesign global finance to incentivise sustainable investment and step up our efforts to help developing countries recover from the crisis in an inclusive, resilient and sustainable manner.”

The OECD said fixing the inefficiencies in the global tax system would stop some money “draining away” from developing countries through tax evasion and avoidance.

The report also called for better incentives to guide financing to poorer countries, increased transparency and accountability of financial flows, and a solution to developing country debt problems.

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