What is Financing for Development 4 and why is it a big deal?

In one month, the biggest names in development finance, country leaders, civil society, and private sector representatives will be meeting in Seville, Spain, for a conference that’s been a decade in the making: the Fourth International Conference on Financing for Development, or FfD4. This conference might be the most anticipated of the year among development professionals — in part due to its infrequency, but also for what it is meant to achieve: FfD is where countries establish a norm-setting agenda for the next 10 years of development finance. The very first FfD conference was in March of 2002, just six months after the 9/11 terrorist attacks struck the U.S. That conference, and the two that followed, have served as a space to shape the principles of development finance. FfD is also considered critical because it gives low- and middle-income countries an equal say in negotiations, unlike other finance-focused forums. While FfD does not produce a legally binding outcome, it usually produces an action plan that outlines the priorities of the world in terms of development. This sheet is typically agreed to by consensus, but if that’s unachievable, it is agreed to by vote. Each conference — 2002 in Monterrey, Mexico, 2008 in Doha, Qatar, and 2015 in Addis Ababa, Ethiopia — established a set of broad goals and priorities. Looking back, those conferences serve as time stamps in the history of development finance. Overall, FfD4 is expected to be another such moment — one that once again defines development commitments based on the world we live in today. But the world has changed. The U.S. has outwardly opposed the Sustainable Development Goals, which were the basis for most of what happened over the last 15 years, and President Donald Trump’s unprecedented tariff threats and sharp reduction of official development assistance, or ODA, could eliminate streams of development funds. There is also a chance that the protectionism we’re seeing from the U.S. opens up a new pathway for collaboration. Just last week, for example, in the absence of the United States, nations at the World Health Assembly finally voted to pass the Pandemic Agreement, a decision to get a more egalitarian global response to future pandemics. Negotiations have been going on for three years. “That agreement was locked for a while. Then, when the Trump administration withdrew, suddenly it opened up new possibilities of making it legally binding,” said Minh-Thu Pham, CEO and co-founder of Project Starling, a nonprofit focused on making global governance more inclusive and effective. Pham also served as the previous executive director for global policy at the United Nations Foundation. Time will tell what role the U.S. decides to play in FfD4, but experts say there are opportunities for other countries to step up. Norms through the decades The first FfD gathering in Monterrey endorsed a target established by the United Nations in 1970 that among wealthy countries should commit 0.7% of their gross national income to ODA. In exchange, low- and middle-income countries would improve their governance and management of resources. “It was kind of a grand bargain,” said Pham. By the 2008 conference, talks were somewhat derailed due to the global financial crisis, though delegates still managed to adopt the Doha Declaration on Financing for Development at a follow-up conference by vote. The declaration reaffirmed the commitment to the 0.7% target, vowed to improve the effectiveness of aid, and promised to address illicit financial flows and debt sustainability. The 2015 conference took place about 10 months after the United Nations proposed the new Sustainable Development Goals. The SDGs outlined what needed to be done, and Addis Ababa was the place to figure out how to finance it. “Developing countries were really empowered in the SDG negotiations, because they succeeded in getting developed countries to say it's not just about the charity agenda of ending extreme poverty and dealing with health issues. But we also want a sustainable planet to live on, and we want lives that are worth living,” said Pham. Countries adopted the Addis Ababa Action Agenda by consensus. The agenda highlighted the need for capacity building within low- and middle-income countries and a tax body that operates under the U.N. It also called for an increase in private sector and blended financing, improved debt sustainability, and reaffirmed the commitment to 0.7% ODA and to the Doha Declaration. For some, this is where development peaked. “I think we see 2015 more as a high point in global cooperation, rather than as a stepping stone to greater heights,” Masood Ahmed, president emeritus of the Center for Global Development, told Devex. Pham agreed, but added that the conference still failed on two fronts: First, delegates did not agree on their goal of creating a new tax body under the U.N., though this has since made progress as part of a separate convention. Second, according to Pham, it accelerated the World Bank’s “billions to trillions” agenda, which she said has largely served as a distraction from the need for public finance. “Billions to trillions” is meant to leverage financing. For example, they wanted to turn $130 billion in ODA into $2 trillion to $3 trillion, leveraging private finance, but as yet, the success of the strategy has been relatively limited. “The narrative became one about private finance, blended finance,” said Pham, adding that “the harm here is that we took the eye off the ball about the importance of public finance.” This is the background against which delegates will fly to Seville in a month. Several key topics are likely to dominate the agenda: 1. Doubling down on debt More than half of low-income countries are either in, or at high risk of being in, debt distress. Underlying that are rising debt service costs, especially as interest rates remain high globally. Countries are cutting health, education, and climate spending just to keep up with the debt payments. At the core of the debate in June will be who will restructure sovereign debt and how. Currently, the restructuring process — which allows countries to negotiate better terms for debt plans rather than pay it all off — operates under the G20 Common Framework, which is widely criticized for being slow and lacking transparency. 2. A new era for development cooperation Another big topic of discussion will be how to handle official development assistance moving forward. The U.S. and European countries have all announced cuts to their ODA. Though countries have repeatedly committed to the 0.7% target throughout the history of FfD, most countries still have not reached it. With the U.S. removing itself from the center of the ODA space, we could see new alliances emerge. “This conference in Seville is also an opportunity to have new types of coalitions,” said Jean Van Wetter, CEO of Enabel, during a Devex Pro event. “To not be too focused on the decision to dismantle USAID, but actually show that there is an alternative to that.” 3. Tough talk on trade Export revenues are one of the most important sources of funding for LMICs, but with the uncertainty about tariff hikes by the U.S. and rising protectionism, trade is undoubtedly going to be a big topic at FfD4. Least developed countries are likely to focus on boosting trade, as well as how countries can facilitate their own development through critical minerals and commodities they can source from within, according to Mariangela Parra-Lancourt, chief of strategic engagement and policy integration at the United Nations Department of Economic and Social Affairs, or UNDESA. The first draft of the outcome document for FfD4 for Seville indicated that trade needs to be an “engine for development.” But a leaked document, which Devex has seen, showed that the U.S. suggested deleting this line and other uses of the word “inclusive,” among many other parts of the trade section. 4. Taxes In 2015, low- and middle-income nations called for more equitable international tax rules and asked for those rules to be housed under the U.N. rather than the Organisation for Economic Co-operation and Development, which represents only 38 largely wealthy countries. The push did not make it to the finish line in 2015, but a coalition of such countries has been working on a new, more inclusive system outside of the OECD. In November 2023, a majority of U.N. member states voted to begin negotiations for a U.N. Framework Convention on International Tax Cooperation, or FCITC. This year, nations are hoping to get support to fully operationalize FCITC and integrate that into the final document to come out of Seville. But they're likely to hit opposition from the U.S. and other wealthy countries that prefer the status quo. 5. Domestic resource mobilization Domestic resource mobilization is likely to be a central theme, with delegates emphasizing the need for low- and middle-income countries to strengthen their tax systems and broaden their revenue base. Discussions will likely focus on finding more efficient and effective use of funds, better regulatory enforcement, and making sure that multinational corporations pay their fair share locally. Critical minerals could also surface as an important part of domestic resource mobilization discussions. Many low- and middle-income countries have access to these minerals, but lack the infrastructure to benefit from them. 6. Private finance and international financial institutions Mobilizing private finance is set to be a central theme of FfD4. Financial instruments like blended finance, green- or sustainability-linked bonds, and development-oriented venture capital funds are all likely to be discussed. But it might be lacking in new creative solutions — experts say that they just expect more of the same calls for increased financing — and that they’re wary of conversations that seek to replace declining ODA with a rise in private investment. 7. Seville Platform of Action In addition to a final outcome document, the conference is expected to produce the Seville Platform of Action at the end of the conference, designed to translate those high-level commitments into actionable initiatives. Partners are already submitting initiatives, and those ideas will come up throughout the conference.