Preparing post-2025: Transformation amid geo-economic tensions

The global economy shows signs of resilience but faces slower growth, widening gaps between high- and low-income countries, and heightened geopolitical tensions. Financing needs for sustainable development are rising, with the annual gap projected to exceed USD 4 trillion by 2030. Climate financing needs could quadruple in the same period. The Fourth International Conference on Financing for Development (FfD4) is expected to play a critical role in shaping a renewed global financial framework.

Domestic public resources

Tax-to-GDP ratios in developing countries remain below 15% in many cases, constraining public investment. While reforms have improved tax systems in parts of Africa, Asia-Pacific, and Latin America, challenges such as illicit financial flows and limited administrative capacity persist. Official development assistance (ODA) continues to support domestic resource mobilisation, but further efforts are needed to enhance revenue collection efficiency and equity.

Domestic and international private business and finance

Foreign direct investment (FDI) inflows to ODA-eligible countries reached USD 335 billion in 2022, close to 2015 levels, yet their quality varies. Remittances remain a stable source of finance at USD 476 billion in 2023, though transfer costs average 6.4%, more than twice the SDG target. Private capital markets remain volatile, and sustainable finance instruments such as green, social, and sustainability bonds are expanding but unevenly distributed. Policies to reduce remittance costs and scale blended finance are recommended.

International development co-operation

ODA flows reached USD 211 billion in 2022, the highest recorded, but humanitarian needs and in-donor refugee costs account for a growing share. Aid to the most vulnerable countries, including least developed countries (LDCs), remains below commitments. Enhancing the effectiveness of development co-operation is essential, with recommendations to strengthen country ownership and improve alignment with national priorities. Total official support for sustainable development (TOSSD) is expanding but requires clearer monitoring.

International trade as an engine for development

Global trade continues to be a driver of growth, but trade finance gaps, estimated at USD 2.5 trillion, disproportionately affect small and medium enterprises in developing countries. Aid for Trade disbursements have grown, yet further integration of developing economies into value chains is needed. Strengthening rules-based trade and supporting environmentally sound technologies can help achieve inclusive outcomes.

Debt and debt sustainability

Public debt levels are at historic highs, with over half of low-income countries in or at risk of debt distress. Debt service burdens absorb fiscal space needed for development and climate investment. Existing mechanisms, such as the G20 Common Framework, have had limited impact. Expanding debt transparency, innovative debt relief (e.g., debt-for-climate swaps), and coordinated restructuring are highlighted as priorities.

Addressing systemic issues

Global reserves have increased, yet many countries face limited access to liquidity. Inflation and food price shocks continue to undermine stability. Calls are made for reforming the global financial safety net, enhancing multilateral development bank capitalisation, and scaling concessional finance. Strengthening international tax co-operation and addressing illicit financial flows are also critical.

Science, technology, innovation and capacity building

Research and development expenditure remains concentrated in high-income countries, with low-income countries lagging significantly. Internet access has expanded globally, yet the digital divide persists, particularly in LDCs. Scaling investment in environmentally sound technologies and digital infrastructure is recommended, alongside capacity-building initiatives to support innovation and equitable growth.