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The business of money: who pays for development?
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At the heart of development lies a simple yet unresolved question: how do we finance a fairer future? Today, the business of money is failing those who need it the most.
There are five years remaining in the 2030 Agenda with fewer than 20 per cent of SDG targets on track. The 2024/25 Human Development Report warns that decades of progress, reflected in the Human Development Index, have flatlined, with no clear recovery from the blows dealt by the Covid-19 pandemic and subsequent crises. With deep cuts and reductions from traditional donors, along with rising, but still aspirational funding possibilities from non-traditional donors, philanthropies and the private sector, development needs still face a widening financing gap at a time of fiscal stress uncertainty.
According to the State Bank of Pakistan, the country's external debt stock reached around $271 billion as of March 2025. Debt servicing has nearly tripled over the past 15?years – from $4.5?billion in FY2008-09 to $14.7?billion in FY2023-24. The recently announced FY2025-26 federal budget allocates nearly $28.9?billion to debt servicing, amounting to almost half of total federal expenditures.
In contrast, development spending is budgeted at just $3.5?billion. This sharp disparity highlights the deep fiscal compression Pakistan faces and the urgent trade-offs between stabilisation and investment. The tension between austerity, fiscal reform and stabilisation, investment, and growth has never been more acute.
For these new uncharted development financing waters, the question is not if we need more financing; it is where it will come from, and how will it be blended and deployed for maximum effectiveness.
Globally, resources exist. But with the traditional aid paradigm rapidly changing, the misalignment between development needs and resources is hard to ignore. For example, the UNDP SDG Finance Hub estimates that $4.2 trillion annually is required to bridge the development financing gap and meet the Sustainable Development Goals. With global private wealth exceeding $460 trillion, redirecting just 1 per cent could bridge the divide.
As the world prepares for the fourth international Financing for Development Conference (FFD4) in June 2025, a growing consensus is needed: a new, integrated, inclusive development finance architecture is required that puts people and results at the centre, and crowds in more investors.
For Pakistan, aligned with Prime Minister Shehbaz Sharif's Reform and Economic Transformation Plan, the way forward will require renewed fiscal discipline, stronger domestic resource mobilisation, and bold policy reform. It will also require a shift from transactional support to transformational capital.
Encouragingly, local innovations are showing the way, many of which are profiled in the latest issue of Development Advocate Pakistan: The Business of Money – a flagship quarterly publication by the United Nations Development Programme (UNDP) in Pakistan. The Government of Punjab's pioneering Integrated Financing Strategy places climate finance, private-sector engagement, and impact investing at the heart of provincial development planning. UNDP's Insurance and Risk Finance Facility is helping to build the foundations of a national risk financing ecosystem, one that protects both vulnerable people and public finances.
There are also signs of growing investor confidence. In early 2025, the State Bank of Pakistan launched its first Shariah-compliant Green Sukuk. Initially valued at over $100 million, the instrument was oversubscribed five-fold, underscoring strong appetite for climate-smart investments. This momentum is reinforced by the State Bank's draft National Green Taxonomy, released in February 2025, which sets out clear criteria for environmentally sustainable economic activities. Once adopted, it is expected to improve transparency, build investor trust, and direct public and private capital toward the estimated $348 billion required for climate mitigation and adaptation by 2030.
Pakistan's venture capital market, while volatile, remains a space of enormous potential. Between 2015 and 2024, Pakistani startups raised approximately $1 billion in funding. Though 2024 saw a significant decline, from $355 million in 2022 to just $37 million, the underlying fundamentals remain strong: a thriving digital economy, a vibrant entrepreneurial culture, and one of the world's youngest workforces.
Philanthropy also holds untapped promise. Pakistan's charitable donations represent about 1 per cent of GDP. Structured philanthropic finance, or donor-backed blended models, as piloted by the Pakistan Microfinance Investment Company, can bring new resources to the table for social impact at scale.
What Pakistan needs now is not just more money, but better financing: smarter, aligned, and anchored in national priorities. A deliberate approach that builds trust, reduces risk for private investors, and normalises public-private collaboration will be essential.
Ultimately, the business of money must become the business of purpose, where public and private financial decisions serve people, and where inclusion, dignity, accountability, and sustainability guide every investment. The future depends not just on how much we receive and how much we spend, but on the transformational quality of development financing and expenditure. Pakistan, today, appears willing and able to meet this challenge.
