Resetting development finance

At the Fourth International Conference on Financing for Development this week in Seville, delegates are calling for urgent action to fix a system that has stopped working.

- CARLOS CUERPO JOSEPH E STIGLITZ

Prior to the third such gathering a decade ago, in Ethiopia, we had witnessed unprecedented advances towards reducing poverty, increasing school enrolment, and providing clean water worldwide. Today, however, progress is not only slowing but potentially stagnating — or, worse, reversing.

Global growth this year is expected to slow to its lowest rate (outside of a crisis) since 2008. The outlook is especially problematic for developing countries that are already growing well below historical averages, and for those 35 countries, mostly in Africa, that are already in or at high risk of debt distress. One out of every three countries now spends more repaying creditors than on health or education.

As debt payments crowd out money needed for development, these countries' futures are being jeopardised. Meanwhile, the global gap between the richest and the poorest continues to grow, with Oxfam estimating that the new wealth of the top 1% surged by more than US$33.9 trillion since 2015 — enough to end poverty 22 times over.

The situation won't change unless there are greater flows of finance to developing countries. Moreover, quality matters as much as the quantity: There has been far too much finance of the kind that leads to financial distress, and far too little of the kind that promotes sustained growth.