Experts call for real change at upcoming UN conference on financing for development

The Financing for Development summit is a series of global conferences that brings together countries, international institutions and private sector actors to address financial challenges for achieving sustainable development. So far, three conferences have been held, starting with the Monterrey Consensus in 2002 followed by the Doha Declaration in 2008 and the Addis Ababa Action Agenda in 2015. 

Over the years, the discussions have covered the alignment of finance with Sustainable Development Goals (SDG), encouraging innovative mechanisms to boost development and address climate finance challenges. However, despite the progress made, the global financial system has been slow to respond to environmental and social concerns. Major financing gaps have persisted through the years — a recent report emphasised a $4.2 trillion gap in development financing.

In this regard, the Fourth International Conference on Financing for Development (FfD4), set to be held between June 30 and July 3, 2025, in Seville, Spain, presents a renewed opportunity for global financial actors to revitalise sustainable development and empower developing countries by enabling a long-term, cooperative economic framework that reduces systemic risks. In view of the upcoming conference, the International Commission of Experts on Financing for Development — established to offer insights from a wide range of expert views — released a critical report in February 2025 that provides recommendations for tackling the major challenges faced by developing countries in particular. 

The report highlighted a holistic and robust vision of change, one that moves away from risk-averse short-termism towards transformative and inclusive financial approaches for sustainable and “more equal” development. It specified the following key areas of concern for the upcoming FfD4: Tax cooperation and illegal financial flows, the role of multilateral and national development banks, official development assistance (ODA) and concessional finance, environmentally sustainable finance, trade and investment issues, sovereign debt restructuring, the global financial safety net and crucial institutional and regulatory issues. 

Taxation, development banks & ODA

Among the major proposals is international tax cooperation and fair taxation of Multinational Corporations (MNC). The Commission recommended increasing the global minimum corporate tax rate from 15 per cent to 25 per cent, removing tax incentives for corporations involved in natural resource exploitation, adequate taxation of very rich individuals, and ensuring that existing international agreements (such as Investor-State Dispute Settlement clauses) do not block the required changes. For combatting illicit financial flows, governments must adhere to stringent regulatory frameworks and enforce country-by-country reporting on corporations’ trade transactions along with the identification of shell companies.

The Commission also puts forward proposals to strengthen the role of development banks by tripling the lending capacities of multilateral development banks (MDB), increasing local currency lending, fostering cooperation among MDBs, and enabling national development banks to provide large-scale, long-term capital for economic development. 

On ODA, the report underlines the need to increase aid commitments and accountability from donor countries by institutionalising an ODA target of 0.7 per cent of GNI into national laws or binding strategic frameworks. Further, South-South cooperation and triangular cooperation are highlighted alongside the maximisation of concessional finance that prioritises low-income countries. 

Environmentally sustainable finance, trade, investment issues

The Commission pointed towards an integrated approach between climate, biodiversity and development to ensure equitable and effective climate action. To this end, it is important to enhance public climate finance, follow the principle of common but differentiated responsibilities and balance the allocation of resources for mitigation and adaptation.

The report emphasised the importance of mobilising private sector finance for the climate transition and strengthening domestic resource mobilisation by incentivising sustainable investments. It also proposed that central banks should exclude climate-adverse investments from their bond portfolios.

On trade and industrialisation, the Commission prescribed the World Trade Organization (WTO) to follow the principle of special and differentiated treatment to provide developing countries the space for effective industrial policies. Intellectual Property Rights is another area of consideration, with recommendations including an automatic waiver of disease-related IPRs during epidemics and waivers for climate and biodiversity in the Global South. 

The report also talked about supporting fairer commodity markets for developing countries that can contribute positively to global economic stability. This can be done through the creation of buffer stocks to cushion sharp commodity price fluctuations (particularly for important food products) and stabilisation funds for supporting producers in the countries of origin of such commodities.

Sovereign debt, global financial safety net, institutional reforms

The issues around sovereign debt in the Global South include improving and expanding the Common Framework for Debt Restructuring launched by the G20, greater support from MDBs through multi-year support programmes, the participation of private creditors and bilateral creditors in burden sharing during restructuring processes, and the expansion of green bonds and debt-for-nature swaps.

The report further underscored the need for an integrated global financial safety net to lessen the impact of economic crises in developing countries. To this end, it urges the International Monetary Fund (IMF) to improve and expand credit lines — especially for low-income countries — and to consider the spillover effects of the macroeconomic policies of major economies within the IMF agenda. Another proposal pointed towards strengthening the Special Drawing Rights system as it remains an important source of financing and can serve as a global countercyclical instrument.

Lastly, the Commission emphasised on regulatory and institutional matters, recommending the realignment of financial flows away from high-carbon activities, regulation of digital financial markets, and expanding the voice and participation of developing countries in the IMF and World Bank.

Divergent reality, worsening financial challenges 

In a drastic contrast to the Commission’s wide-ranging set of transformative recommendations, recent progress in the development finance ecosystem has left some glaring gaps. Climate finance, for instance, has continued to be withheld by Global North countries, with the COP29 finance outcome — which allocates $300 billion annually for developing countries by 2035 — falling dramatically short of the trillions of dollars required for climate finance.

Moreover, recent cuts in development aid — dominated by 90 per cent cuts by the United States, and the United Kingdom announcing an aid reduction from 0.5 per cent of GNI to 0.3 per cent by 2027 — serve as a stark departure from the actual needs of the Global South. Given such a pattern of withdrawal from international development finance by major developed economies, it remains to be seen whether FfD4 can provide meaningful pathways for revitalising the sustainable development agenda.