FINANCING FOR DEVELOPMENT (FfD)
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Financing for Development (FfD) is an evolving initiative aimed at aligning global financial systems and policies with broader economic, social, and environmental objectives. The idea gained momentum in 1997 when the UN General Assembly adopted the Agenda for Development, which advocated for the possibility of convening a global conference on FfD.
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As noted by the Earth Negotiations Bulletin of the International Institute for Sustainable Development (IISD), the first International Conference on Financing for Development took place in 2002 in Monterrey, Mexico. This led to the creation of the Monterrey Consensus, which committed participating nations to tackle financial challenges affecting development, with a focus on poverty reduction, sustained economic growth, and environmental sustainability.
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The process continued with a follow-up meeting in Doha, Qatar, in 2008, and further evolved in 2015 with the third FfD conference in Addis Ababa. This gathering produced the Addis Ababa Action Agenda, which laid out a comprehensive financial policy framework to support the implementation of the 2030 Agenda and the 17 Sustainable Development Goals (SDGs). A decade later, a subsequent FfD conference was hosted in Spain.
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Today, numerous nations are grappling with rising debt levels, reduced foreign investments, diminishing development aid, and growing trade restrictions. The latest FfD Conference aims to address a massive $4 trillion annual financing shortfall, which is critical for accelerating development, reducing poverty, and making progress toward the SDGs, which are currently behind schedule.
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Alarmingly, 3.3 billion people were living in countries last year where debt interest payments exceeded public spending on healthcare or education. This figure is expected to rise to 3.4 billion this year, as per Rebeca Grynspan. Additionally, developing nations are projected to pay a staggering $947 billion in debt servicing this year, a steep increase from $847 billion the previous year
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Expanding upon the principles of the 2015 Addis Ababa Action Agenda, the Sevilla Commitment reinforces a strong dedication to sustainable development. It emphasizes the full implementation of the 2030 Agenda and its 17 Sustainable Development Goals (SDGs), while also reaffirming the foundational values and principles they represent.
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As the world nears the 2030 deadline for achieving the SDGs, the Sevilla Commitment lays out a comprehensive roadmap focusing on three major areas: generating large-scale investment for sustainable development, confronting the challenges of global debt and development, and initiating reforms in the current international financial systems.
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According to a UN press release, the Sevilla Platform for Action introduced innovative financial tools aimed at addressing unsustainable debt levels. It also unveiled measures to improve crisis response, strengthen climate resilience, broaden access to social safety nets, and promote both local and digital economic initiatives.
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One of the key outcomes was the launch of the Debt Swaps for Development Hub, an initiative spearheaded by Spain and the World Bank. This platform is intended to build technical capacity and enhance cooperation among nations, thereby expanding the use of debt swaps to ease debt repayment pressures.
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In addition, Italy introduced a Debt-for-Development Swap Programme, through which €230 million worth of debt owed by African nations will be redirected into development-oriented projects. The Sevilla Forum on Debt was also established to enable knowledge sharing and coordination among countries in managing and restructuring public debt.
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Another notable announcement came from Brazil and Spain, who launched an initiative focused on ensuring effective taxation of high-net-worth individuals, aiming to promote fairer taxation systems and reduce inequality by holding the wealthiest accountable for their financial contributions
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Just days before the Fourth International Conference on Financing for Development (FfD4) commenced, the World Bank released a report titled ‘Foreign Direct Investment in Retreat’. The report highlighted a significant drop in Foreign Direct Investment (FDI) to developing nations, which stood at $435 billion in 2023—the lowest figure recorded in nearly two decades. The report cautioned that increasing restrictions on trade and investment could seriously undermine global initiatives aimed at financing development.
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M. Ayhan Kose, Deputy Chief Economist of the World Bank Group, emphasized that this sharp fall in FDI should act as a major warning signal. Reversing this decline, he stressed, is not only crucial from an economic standpoint but is also vital for generating employment, ensuring consistent economic growth, and fulfilling broader development targets.
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The report further noted that this prolonged weakness in investment across emerging markets and developing economies (EMDEs) has led to an accumulation of unmet infrastructure demands.
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The slow pace of investment is proving to be a major obstacle to achieving key global development targets. This includes efforts to address climate change, facilitate a smooth transition to clean energy, and combat poverty and inequality. Estimates suggest that EMDEs must increase their investment by at least 1.4% of GDP annually through 2030 to meet the challenges posed by climate change and the energy transition.
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Among all EMDEs, China emerged as the leading recipient of FDI between 2012 and 2023, attracting nearly one-third of total inflows. It was followed by Brazil with 10%, and India, which received about 6%, according to the World Bank data.
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Although global FDI data is currently available only up to the year 2023, figures from the Reserve Bank of India (RBI) show that FDI inflows into India rose to $81.04 billion in 2024–25, compared to $71.28 billion in 2023–24. However, when adjusted for repatriation of funds by foreign investors and outbound investments made by Indian companies, net FDI sharply declined to $353 million in the most recent fiscal year from $10.13 billion the previous year
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For Prelims: Financing for Development (FfD4), UN General Assembly (UNGA), Foreign Direct Investment (FDI)
For Mains: GS II & III - International organisations & Environment and ecology
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