Financing for Development

1. Financing for DevelopmentFinancing for Development
Pravin GodsePravin Godse

2. StructureStructure of the presentationof the presentation
 Structure of presentationStructure of presentation
 Brief about ‘Development’Brief about ‘Development’
 Sustainable DevelopmentSustainable Development
 Sustainable Development Goals (SDGs)Sustainable Development Goals (SDGs)
 Describe Principal sources of financeDescribe Principal sources of finance
 International Public FinanceInternational Public Finance
 International Private FinanceInternational Private Finance
 Domestic Public FinanceDomestic Public Finance
 Domestic Private FinanceDomestic Private Finance
 Blended FinanceBlended Finance
 Multilateral Development BankMultilateral Development Bank
 MDB Response to the Financial CrisisMDB Response to the Financial Crisis

3. Development
 Development means so much, both for theDevelopment means so much, both for the
world and for the individual human being.world and for the individual human being.
Development is a life in peace ,a life withoutDevelopment is a life in peace ,a life without
poverty and without inequalities ,respect ofpoverty and without inequalities ,respect of
human rights, belief in governance and in goodhuman rights, belief in governance and in good
and strong institutions , access to educationand strong institutions , access to education
and health care, employment opportunities,and health care, employment opportunities,
availability of clean air and safe drinkingavailability of clean air and safe drinking
waterwater..

4. Sustainable Development
 As per the World Commission on Environment andAs per the World Commission on Environment and
Development, Sustainable development isDevelopment, Sustainable development is
“Development that meets the needs of the present“Development that meets the needs of the present
without compromising the ability of futurewithout compromising the ability of future
generations to meet their own needsgenerations to meet their own needs
 Sustainable development promotes the idea thatSustainable development promotes the idea that
social, environmental, and economic progress are allsocial, environmental, and economic progress are all
attainable within the limits of our earth’s naturalattainable within the limits of our earth’s natural
resources. Sustainable development approachesresources. Sustainable development approaches
everything in the world as being connected througheverything in the world as being connected through
space, time and quality of lifespace, time and quality of life

5. Sustainable Development Goals
 Sustainable development is a complex challenge, with urgentSustainable development is a complex challenge, with urgent
requirements, resulting in enormous financing needs. Therequirements, resulting in enormous financing needs. The
means to finance the agreed-upon goals will not be found inmeans to finance the agreed-upon goals will not be found in
one solution, nor borne by one set of actors. All financingone solution, nor borne by one set of actors. All financing
streams need to be optimized towards sustainable developmentstreams need to be optimized towards sustainable development
and coordinated for the greatest impact. An integratedand coordinated for the greatest impact. An integrated
sustainable development agenda demands an equallysustainable development agenda demands an equally
synergistic financial framework.synergistic financial framework.
 The goal of sustainable development is a difficult one to beginThe goal of sustainable development is a difficult one to begin
with. Without the availability of adequate sources of financingwith. Without the availability of adequate sources of financing
it will remain an elusive one as well.it will remain an elusive one as well.

6. THE 17 SUSTAINABLE DEVELOPMENT GOALS

7. ELEMENTS UNDERPINING THE SUSTAINABLEELEMENTS UNDERPINING THE SUSTAINABLE
DEVELOPMENT GOALS (SDGs)DEVELOPMENT GOALS (SDGs)
The Goals will stimulate action over the next 15 years in 5The Goals will stimulate action over the next 15 years in 5
areas of critical importance: People, Planet, Prosperity, Peaceareas of critical importance: People, Planet, Prosperity, Peace
& Partnership& Partnership.

8. The role of financing in developmentThe role of financing in development
 Initial focus:Initial focus:
 Capital investment and financial resourcesCapital investment and financial resources
(big push, priority of capital investment)(big push, priority of capital investment)
 Gradual evolution towards:Gradual evolution towards:
 More complex appreciation of of developmentMore complex appreciation of of development
process and of the role of finance in relationprocess and of the role of finance in relation
to other factors (human capital, institutions,to other factors (human capital, institutions,
governance, knowledge, geography)governance, knowledge, geography)
 Current conception:Current conception:
 Finance is essential but not sufficient forFinance is essential but not sufficient for
developmentdevelopment

9. Sources of Financing for the DevelopmentSources of Financing for the Development
 International Public FinanceInternational Public Finance
 International Private FinanceInternational Private Finance
 Domestic Public FinanceDomestic Public Finance
 Domestic Private FinanceDomestic Private Finance
 Blended FinanceBlended Finance

10. International Public FinanceInternational Public Finance
 International public funds that are lessInternational public funds that are less
concessional than ODA, such as some loansconcessional than ODA, such as some loans
from international and regional financialfrom international and regional financial
institutions, are additional key sources ofinstitutions, are additional key sources of
medium and long term finance.medium and long term finance.
International public finance including aid,International public finance including aid,
climate finance, and other types ofclimate finance, and other types of
assistance will remain central in financingassistance will remain central in financing
sustainable developmentsustainable development

11. International Public FinanceInternational Public Finance
 Member States of the United NationsMember States of the United Nations
should honor their commitments in full andshould honor their commitments in full and
in a timely manner. Basic public servicesin a timely manner. Basic public services
would be sufficiently supported in thosewould be sufficiently supported in those
countries most in need, while assistancecountries most in need, while assistance
would still be available for infrastructurewould still be available for infrastructure
projects, climate financing, and other areasprojects, climate financing, and other areas
of needof need

12. Official Development Assistance (ODA)Official Development Assistance (ODA)
 It is a source of international public finance.It is a source of international public finance.
ODA funding is concessional in character andODA funding is concessional in character and
is provided by governments and officialis provided by governments and official
agencies to finance development in low andagencies to finance development in low and
middle income countries. ODA hasmiddle income countries. ODA has
traditionally been the primary public,traditionally been the primary public,
international resource flow focused on theinternational resource flow focused on the
development outcomes and welfare ofdevelopment outcomes and welfare of
developing nations.developing nations.

13. ODA Eligible InternationalODA Eligible International
OrganizationsOrganizations
 Agencies to which core contributions are reported asAgencies to which core contributions are reported as
ODA in whole or in part include;ODA in whole or in part include;
 Many United Nations & UN Administered FundsMany United Nations & UN Administered Funds
 European CommissionEuropean Commission
 International Monetary Fund (concessional windowsInternational Monetary Fund (concessional windows
only)only)
 World Bank (IDA)World Bank (IDA)
 World Trade Organization (technical assistanceWorld Trade Organization (technical assistance
activities)activities)
 Regional Development BanksRegional Development Banks
 Other MultilateralsOther Multilaterals

14. International Private FinanceInternational Private Finance
 Private companies also invest across borders,Private companies also invest across borders,
generating financial flows to developing countriesgenerating financial flows to developing countries
that support development. These flows consistthat support development. These flows consist
primarily of: (i) Foreign Direct Investment (FDI) inprimarily of: (i) Foreign Direct Investment (FDI) in
developing countries; (ii) remittances from migrantsdeveloping countries; (ii) remittances from migrants
back to their home countries; (iii) privateback to their home countries; (iii) private
philanthropy, e.g., from foundations; and (iv)philanthropy, e.g., from foundations; and (iv)
financial market-based financing like portfolio equityfinancial market-based financing like portfolio equity
flows, bonds, short-term debt flows and syndicatedflows, bonds, short-term debt flows and syndicated
bank loans.bank loans.

15. International Private FinanceInternational Private Finance
 There is an important role for international privateThere is an important role for international private
finance. Policies are needed to overcome obstacles tofinance. Policies are needed to overcome obstacles to
private investment, including by long-termprivate investment, including by long-term
institutional investors such as pension funds andinstitutional investors such as pension funds and
sovereign wealth funds, while addressing riskssovereign wealth funds, while addressing risks
associated with some types of private flows. Privateassociated with some types of private flows. Private
capital flows should be managed in a way thatcapital flows should be managed in a way that
encourages long-term investment. Public policiesencourages long-term investment. Public policies
could encourage thiscould encourage this

16. Domestic Public FinanceDomestic Public Finance
 Developing countries must mobilize domesticDeveloping countries must mobilize domestic
resources for development. National budgetsresources for development. National budgets
contain potential for savings andcontain potential for savings and
redistribution. Governments can makeredistribution. Governments can make
additional resources available for sustainableadditional resources available for sustainable
development by reforming their tax systemsdevelopment by reforming their tax systems
and eliminating harmful subsidies andand eliminating harmful subsidies and
unproductive expenses.unproductive expenses.

17. Domestic Public FinanceDomestic Public Finance
 Raising domestic public finance is critical forRaising domestic public finance is critical for
financing sustainable development. The reportfinancing sustainable development. The report
emphasizes both domestic tax reform and deeperemphasizes both domestic tax reform and deeper
international cooperation. Tax systems should be fair,international cooperation. Tax systems should be fair,
efficient and transparent. However, domestic effortsefficient and transparent. However, domestic efforts
need to be complemented by internationalneed to be complemented by international
cooperation to address tax evasion and illicit flows.cooperation to address tax evasion and illicit flows.
ODA can play an important role in building capacityODA can play an important role in building capacity
for domestic resource mobilization. Platforms forfor domestic resource mobilization. Platforms for
dialogue can facilitate experience sharingdialogue can facilitate experience sharing

18. Domestic Private FinanceDomestic Private Finance
 Domestic large and small companies will playDomestic large and small companies will play
a pivotal role in financing for the development.a pivotal role in financing for the development.
Private investment underpins economicPrivate investment underpins economic
growth, know-how and technology transfer,growth, know-how and technology transfer,
job creation, and productivity gains. Privatejob creation, and productivity gains. Private
sector firms seek investment opportunitiessector firms seek investment opportunities
based on risk/return considerations.based on risk/return considerations.

19. Domestic Private FinanceDomestic Private Finance
 However, the lack of long-term corporate bondHowever, the lack of long-term corporate bond
markets limits the availability of long-termmarkets limits the availability of long-term
financing for companies in many countries.financing for companies in many countries.
Ultimately, the drivers of private finance areUltimately, the drivers of private finance are
distinctly different from the motivations ofdistinctly different from the motivations of
domestic public finance. Private sector firmsdomestic public finance. Private sector firms
seek investment opportunities based onseek investment opportunities based on
risk/return considerationsrisk/return considerations

20. Domestic Private FinanceDomestic Private Finance
 To be effective, public sector measures toTo be effective, public sector measures to
encourage private investment need eitherencourage private investment need either
to decrease perceived risk or to increaseto decrease perceived risk or to increase
anticipated returns. You will be able toanticipated returns. You will be able to
better understand the importance ofbetter understand the importance of
domestic private finance and having indomestic private finance and having in
place an enabling environment forplace an enabling environment for
sustainable private sector growth in Weeksustainable private sector growth in Week

22. Multilateral Development BanksMultilateral Development Banks
MDBs are institutions that provide financial support andMDBs are institutions that provide financial support and
professional advice for economic and socialprofessional advice for economic and social
development activities in developing countries. Thedevelopment activities in developing countries. The
term Multilateral Development Banks (MDBs)term Multilateral Development Banks (MDBs)
typically refers to the World Bank Group and fourtypically refers to the World Bank Group and four
Regional Development BanksRegional Development Banks::
 The African Development Bank (AfDB)The African Development Bank (AfDB)
 The Asian Development Bank (ADB)The Asian Development Bank (ADB)
 The European Bank for Reconstruction andThe European Bank for Reconstruction and
Development (EBRD)Development (EBRD)
 The Inter-American Development Bank GroupThe Inter-American Development Bank Group
(IADB)(IADB)

23. What MDBs do?What MDBs do?
The MDBs provide financing for development throughThe MDBs provide financing for development through
the following:the following:
 Long-term loans:Long-term loans: based on market interest. Forbased on market interest. For
funding these loans the MDBs borrow on thefunding these loans the MDBs borrow on the
international capital markets and re-lend to borrowinginternational capital markets and re-lend to borrowing
governments in developing countries.governments in developing countries.
 Very long-term loansVery long-term loans (often termed credits):with(often termed credits):with
interest well below market interest. These are fundedinterest well below market interest. These are funded
through direct contributions for governments in donorthrough direct contributions for governments in donor
countries.countries.
 Grant financing :Grant financing : is also offered by some MDBs,is also offered by some MDBs,
mostly for technical assistance, advisory services ormostly for technical assistance, advisory services or
project preparation.project preparation.

24. MDB Response to the Financial CrisisMDB Response to the Financial Crisis
While the IMF is the focal point for the response to theWhile the IMF is the focal point for the response to the
systemic liquidity threat, the MDBs play a criticalsystemic liquidity threat, the MDBs play a critical
complementary role in limiting the spread and thecomplementary role in limiting the spread and the
impact of the crisis by:impact of the crisis by:
 Financing for fiscal measures targeted towardsFinancing for fiscal measures targeted towards
maintenance of jobs and social protection of the poormaintenance of jobs and social protection of the poor
 Closing gaps and mitigating rollover risks in projectClosing gaps and mitigating rollover risks in project
financing, including infrastructure directly and byfinancing, including infrastructure directly and by
crowding in private and other official financingcrowding in private and other official financing
 Catalyzing trade financingCatalyzing trade financing
 Supporting financial systems and credit flows toSupporting financial systems and credit flows to
private sector and SMEsprivate sector and SMEs

25. MDBs’ role after the crisisMDBs’ role after the crisis
 Even beyond the crisis, the global financialEven beyond the crisis, the global financial
environment is likely to be much more difficult thanenvironment is likely to be much more difficult than
in the past years.in the past years.
 MDBs can still play a critical role in mobilizing long-MDBs can still play a critical role in mobilizing long-
term market financing through its direct borrowingterm market financing through its direct borrowing
and by catalyzing stable private sector financing.and by catalyzing stable private sector financing.
 MDBs remain the most effective channel to provideMDBs remain the most effective channel to provide
concessional financing for low income countries.concessional financing for low income countries.
 New challenges: climate change and food security,New challenges: climate change and food security,
global in nature and require globally coordinatedglobal in nature and require globally coordinated
action.action.

26. What’s next?What’s next?
 Need for a clear and shared vision and strategy onNeed for a clear and shared vision and strategy on
the role of the MDBsthe role of the MDBs
 Strengthen and reform the global developmentStrengthen and reform the global development
architecture for responding to the world’s long-termarchitecture for responding to the world’s long-term
challenges. Increase coordination with other bilateralchallenges. Increase coordination with other bilateral
and multilateral institutions.and multilateral institutions.
 Key to learn lessons from the crisis. This includes:Key to learn lessons from the crisis. This includes:
promote greater use of guarantees to providepromote greater use of guarantees to provide
insurance and catalyze private financing, simplifyinsurance and catalyze private financing, simplify
lending requirements, shift from an excessive focuslending requirements, shift from an excessive focus
on ex-ante safeguards and conditionality to countryon ex-ante safeguards and conditionality to country
systems and ex-post evaluation…systems and ex-post evaluation…

27. Country ODA Analysis (INDIA)Country ODA Analysis (INDIA)
 India is one of the beneficiary of ODA for variousIndia is one of the beneficiary of ODA for various
development activities in economic infrastructuredevelopment activities in economic infrastructure
&services, Production Sectors, Multisector/Cross&services, Production Sectors, Multisector/Cross
Cutting, Health & Population, Education, SocialCutting, Health & Population, Education, Social
Sectors, Other development sectors in terms of grantsSectors, Other development sectors in terms of grants
and loans.and loans.

28. Country ODA Analysis (INDIA)Country ODA Analysis (INDIA)
 The net ODA amount received average of lastThe net ODA amount received average of last
five years from 15 top donors is 4007.27five years from 15 top donors is 4007.27
US$M.This amount includes concessionalUS$M.This amount includes concessional
loan/equity & capital subsc. Out of thatloan/equity & capital subsc. Out of that
multilateral and country have contribution ofmultilateral and country have contribution of
2556.59 US$M & 1450.68 US$M2556.59 US$M & 1450.68 US$M
respectively.respectively.

29. Country ODA Analysis (INDIA)Country ODA Analysis (INDIA)
 The total commitment given by the ODA for differentThe total commitment given by the ODA for different
development sectors was 5449.40 US$M.development sectors was 5449.40 US$M.
 The Sector wise Disbursement Commitment in %The Sector wise Disbursement Commitment in %
Development Sector Disbursement commitment in %
Economic infrastructure and services 42.6 %
Production sector 12.9%
Multisector/cross cutting 10.5 %
Health and population 8.9%
Education 8.8 %
Other social sectors 14.0%
Other sectors 2.3%

30. Country ODA Analysis (INDIA)Country ODA Analysis (INDIA)
 The total gross ODA disbursement for different developmentThe total gross ODA disbursement for different development
sectors was 3578.46 US$M .sectors was 3578.46 US$M .
 The Sector wise Actual Disbursement in %The Sector wise Actual Disbursement in %
Development Sector Disbursement made in %
Economic infrastructure and services 33.5 %
Production sector 10.6%
Multisector/cross cutting 8.9%
Health and population 19.3%
Education 11.2%
Other social sectors 15.1%
Other sectors 1.5%

31. Effective mobilization of ODA:Effective mobilization of ODA:
 ODA remains an important source of finance toODA remains an important source of finance to
promote sustainable development. In order to live uppromote sustainable development. In order to live up
to current challenges, ODA can also be used toto current challenges, ODA can also be used to
mobilise more resources (especially from the privatemobilise more resources (especially from the private
sector) for sustainable developmentsector) for sustainable development
 using ODA better to support developing countriesusing ODA better to support developing countries
and especially fragile states in mobilising their ownand especially fragile states in mobilising their own
domestic revenue through tax assistance, capacitydomestic revenue through tax assistance, capacity
development, partnership/twinning arrangements anddevelopment, partnership/twinning arrangements and
tailored tax advice.tailored tax advice.

32. Effective mobilization of ODA:Effective mobilization of ODA:
 using ODA to help support countries create a conduciveusing ODA to help support countries create a conducive
environment for investment, including the long-term financingenvironment for investment, including the long-term financing
required for infrastructure developmentrequired for infrastructure development
 using ODA to support developing countries in making theirusing ODA to support developing countries in making their
growth green and inclusive.growth green and inclusive.
 developing a global tracking and co-ordination mechanism fordeveloping a global tracking and co-ordination mechanism for
new and emerging sources of development finance.new and emerging sources of development finance.
 using ODA to leverage resources from the private sector byusing ODA to leverage resources from the private sector by
diversifying and sharing risk.diversifying and sharing risk.
 ODA providers also need to make a firm commitment to aODA providers also need to make a firm commitment to a
concrete target for support to the least developed countries andconcrete target for support to the least developed countries and
fragile states.fragile states.