Why it is time for a new era for global aid and development
Traditional models of aid are no longer fit-for-purpose.
The global challenges we face, are becoming increasingly complex and interconnected. The world is shifting rapidly. Our approach to development is changing too.
Next week in Seville, Spain, the world will come together for the Fourth Financing for Development Conference (FfD4) to set out a new vision for how we can collectively use finance to drive global progress on development over the next decade – tackling the climate and nature crisis, investing in health and education, and creating growth and jobs.
It comes at a critical moment. Unprecedented levels of conflict and the impact of climate change are driving record humanitarian needs and threaten to reverse decades of development gains. We must make choices on how we use public funding innovatively and raise greater volumes of finance from all sources, including the private sector.
Global South countries want a different relationship, and we are ready to offer a new approach. One based on listening; offering partnership not paternalism; sharing expertise; acting as investors, not donors, supporting countries to raise their own finances and driving reform across the Global Financial System. Global prosperity and security are crucial for delivering on our Plan For Change in the UK too.
The summit in Seville must set a clear roadmap towards achieving three major changes.
First, we will show we have listened to countries by helping them raise their own revenues. They have told us they want to become self-sufficient so we will offer partnership and expertise to help them build their own tax and economic systems, so that in time, they can thrive without aid.
This means tackling money lost through crime and corruption. The UN estimates that Africa loses $90 billion to illicit finance flows, undermining public finances but also public institutions, affecting trust, political stability and national security. This hidden money is a problem for us all.
We will work with partners to take urgent action on unsustainable debt. More than 50 per cent of lower-income countries are either in, or at high risk of, debt distress.
That is why we are championing reform, so countries with unsustainable debt get quick and effective support. We are also pressing for more responsible and transparent lending, and have championed Climate Resilient Debt Clauses, which pause debt repayments when crises hit.
Secondly, we know the costs of solving these challenges cannot be met by governments alone. We need more investment from the private sector. Through the City of London, the UK is a world-leading green financial hub. We are well placed to lead the charge, providing opportunities for UK businesses and investors and ultimately unlocking growth, jobs and trade.
Only a small fraction of the money from big investors like pension funds currently goes to low- and middle-income countries. Shifting this by even a small amount would be game-changing for financing development and climate action. That is why the UK has recently set up an industry-led Investor Taskforce - bringing together investors and government to take action that will unlock more private capital for emerging markets and developing economies. We will launch a coalition in Seville that aims to help unlock trillions of pounds in untapped high-quality investment for developing countries through use of public markets.
Finally, we must focus on making the international system work better for developing countries, creating a fairer system where they have greater voice and participation to shape the outcomes they need. That is why the UK is calling for just this in the World Bank and the International Monetary Fund.
We also need to ensure countries can better manage climate shocks. Since 2015, 1.7 billion people's lives have been devastated by the climate crisis. Despite the fact that we can predict and model over a third of climate events, just 2 per cent of crisis finance is pre-arranged and ready to go before a disaster strikes. Putting finance in place ahead of disasters means it can be immediately released to countries and communities in moments of crisis.
Tackling this is vital to ensure long-term growth and development.
The launch of the global coalition in Seville will also enable us to scale up availability of pre-arranged finance, working with the UK insurance industry towards an ambition of increasing it tenfold by 2035.
No nation can tackle global challenges alone. Seville must be the beginning of a new chapter in how we work together to deliver global development.
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