What to expect from the next decade of development finance

The Fourth International Conference on Financing for Development in Sevilla ended with a long list of action plans, optimism about multilateralism’s survival, and lingering questions about how much of it will stick. For the experts watching closely, Sevilla wasn’t the end point. Rather, it was the start of a decade that could reshape the architecture of development finance — if the promises made there can be translated into action. Experts say that they left Sevilla feeling more hopeful that the debt crisis will be addressed, with a sense that there will be increased focus on financing regional institutions, improvements to localization, and the championing of blended finance to make sure development projects can attract private finance and improve economies long term. Discussing debt One clear outcome is that debt has moved from the periphery to the center of the conversation, said Mahmoud Mohieldin, the United Nations special envoy on financing the 2030 Agenda, during a Devex Pro Briefing on Monday. “Before Sevilla, the debt crisis was a silent one. Now I think nobody can say it's silent,” he said. Sevilla produced new commitments on debt — a mandate for an intergovernmental process to build a better debt architecture and a working group on responsible lending and borrowing. Mohieldin, along with Bodo Ellmers, the managing director of Global Policy Forum Europe, sees the next decade bringing reforms to the G20 Common Framework, improvements to debt sustainability analysis, and the creation of new rules for lending to developing economies. Mohieldin emphasized that currently small solutions — such as debt swaps for climate, nature, and development — could grow rapidly if paired with technical assistance. The geographical shift The experts said that the key to that change will be a “rediscovering of regionalism.” Financing decisions, project creation, and the assessment of how bankable those projects are, will all happen more within countries rather than from donor countries. “Regions are rediscovering themselves,” said Mohieldin, adding that we’re already seeing this both in advanced economies such as Europe, as well as through trade opportunities in the African Union and the Association of Southeast Asian Nations, or ASEAN. Philanthropies are responding to this change as well, according to Eric Pelofsky, vice president and senior advisor at The Rockefeller Foundation, who also joined the briefing Monday. He said that the foundation is considering how it can contribute meaningfully to domestic resource mobilization and capacity building, in collaboration with in-country leadership. “There was a turn — a pivot at Sevilla — towards more self-reliance,” said Pelofsky. “I think with the impending collapse of ODA, or at least a contagion of ODA cuts, aspiration becomes necessity. It's all well and good to want to change models. But when the economic situation changes so dramatically, necessity drives change.” Panelists said that the enhanced focus on regionalization, if done well, could open up new sources of trade, technology transfer, and cross-border investment — but noted that as countries focus more on individual priorities, there is the potential for further fragmentation. Blended finance Private and blended finance were key themes at Sevilla, and experts left the conference expecting the coming decade to be a boom for the involvement of the private sector in development. Convergence CEO Joan Larrea said that the next decade will require countries and their partners to play offense as well as defense. While managing debt and fiscal risks is essential, “we need to make sure that growth happens as efficiently as possible” in developing economies, she said. Larrea sees blended finance as an “entry point” — not just to attract foreign direct investment but also to “rally the domestic capital into investing in its own infrastructure, its own economy.” Standardization, large-scale transactions, and better alignment between donor priorities and local needs could help bring down the perceived risk that keeps capital out of emerging markets. Insurance companies, Larrea added, have an underexplored role in the decade ahead — not only as asset managers and risk-takers but as “advisers to transactions.” That’s part of a broader shift toward a more complex financing system, with philanthropies, private investors, and multilateral development banks working alongside governments. “No one can fill the ODA gap that’s coming,” Pelofsky warned, citing estimates of $52 billion to $75 billion disappearing from budgets over the next few years. Philanthropies, he said, will increasingly look for “innovative financial tools that can either target the most need or scale the most using small amounts of money to leverage either private capital or the remaining ODA.” A sense of hope Overall, experts seem optimistic. Sevilla helped push forward the U.N. tax convention, a long-term goal of low- and middle-income countries, something Ellmers cited as an example of incremental progress succeeding over time. The Africa Group “took a very vague commitment … and they pushed hard over the next decade at the United Nations, and then eventually kicked off this process, which now led to the actual negotiations and the mandate to develop a tax convention,” he said. “That shows you that even a very vague commitment in an outcome document of an FfD summit can lead to concrete outcomes if there's political will and if there's a driver to take it forward.” Other long-standing gaps — from the absence of a formal U.N. debt workout mechanism to the persistent disadvantage low- and middle-income countries face in borrowing costs — could also see progress if they remain high on the political agenda. But Ellmers warned that without “champions who pick up the issues and take them from the paper to the practice,” the most ambitious parts of Sevilla will remain aspirations.