Meeting SDG 1: The Role of IPF Romilly Greenhill, Team Leader, Development Finance 4 February 2015 We are very focused on IPF – not to say that other forms of finance are not important, but that it is helpful to focus on a particular part of the picture – other work looks at other forms of finance. Also focusing particularly here on concessional IPF – i.e. ODA plus ODA-equivalent from non-DAC donors. Other colleagues have just done a report on non-concessional IPF – see roadmap. Also focusing on finance –recognise that are other policy and governance issues, and also international level ‘means of implementation’ – these are also important, but again not our focus.

SDG Goal 1 ‘End poverty in all its forms everywhere’ By 2030, eradicate extreme poverty for all people everywhere, implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable by 2030 build the resilience of the poor and those in vulnerable situations, and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters The SDG goal and proposed targets as proposed by the Open Working Group on the SDGs #GlobalChallenges

Zero poverty by 2030 looks achievable… #GlobalChallenges

…but there are real risks Key risks are: Growth is lower: if developing countries grow at half the rate of the 2000s, then poverty could still be above 10% by 2030. Inequality: Projections assume constant income inequality BUT if inequality gets worse it would heavily impact on poverty figures. Inequality HAS increased over the past two decades. The graph here shows variations in projections depending on growth and inequality trajectories No scenarios factor in climate change risks, but potential impacts on poverty are substantial, including through reduced access to water and deteriorating crop yields. Also likely to increase in natural disasters. Also likely indirect impacts via the ability of governments to tackle poverty because of focus on other issues. #GlobalChallenges

Poverty concentrated amongst the hardest to reach groups Roughly 2/3 of poor people are in ethnic minorities Roughly ¾ of poor people are in rural areas #GlobalChallenges

Using IPF to promote growth is only part of the solution Impact of growth on poverty is gradual and uneven The impact of ODA on growth is small Can external actors influence growth? Investing in social sectors helps promote inclusive growth Promoting growth is top of the agenda – this is critical, but the question is the balance between using IPF to promote growth directly, or to support other policies that can tackle poverty more immediately. Impact of growth on poverty is gradual and even. Average poverty statistics can mask large regional disparities, and even fast growing economies leave people behind. Evidence of impact of IPF on growth is small. Stefan Dercon’s estimate – even if we allocated ALL ODA to promoting growth, this would only increase the annual growth rate by 1 % and hence reduce poverty by 1 percentage point by 2030. Our ability to influence growth is highly uncertain. Investing in the social sectors itself promotes growth. #GlobalChallenges

Policies for poverty reduction and more equal growth Social protection Universal primary and secondary education Universal health coverage Peace and state-building Need growth that is accompanied by reductions in inequality and a focus on the poorest – particularly those in vulnerable groups and fragile states. Are many examples of successful MICs pursuing these policies, such as Brazil and Mexico on social protection. Indonesia has just announced that it will be rolling out social protection, health and education programmes. Social protection is a particularly neglected area at the moment, despite the fact that it Has prevented 150 million people from falling into poverty worldwide Helps to promote pro-poor growth, for avoiding the need for negative coping strategies in the face of shocks that can undermine growth, e.g. selling productive assets and removing children from school. Putting money in people’s hands can have multiplier effects on the local economy: e.g. in Kenya and Lesotho, income multipliers were estimated at 1.81 – 2.23 There are also good examples of the use of social protection in fragile states, even though it is more challenging Peace and state-building are important objectives in FCAS, alongside the social sectors. #GlobalChallenges

Social sectors need public financing Finance is a necessary but not sufficient condition for progress Public financing is important Social protection schemes need public financing Health: compulsory public financing mechanisms that pool resources outperform private voluntary financing mechanisms Education: user fees have blocked access, and private schools not reaching poorest Domestic public finance is ideal, but not always sufficient Need to bear in mind context of dealing with hardest to reach populations and those in fragile states. ODI’s development progress case studies have found that in all cases of progress, there were also rising resources, and that progress was associated with a shift from households to governments and in some cases donors. Health mechanisms relying on out-of-pocket expenditures tend to leave behind those in the poorest and most vulnerable groups. #GlobalChallenges

LICs will need more IPF #GlobalChallenges Source: Marcus and Hoy (forthcoming) Note that these figures are tentative – still fine-tuning the methodology and costings Tentative figures suggest that the additional IPF required in LICs will be $75bn – some of this could come from reallocating away from MICs, but that is a political decision which will also have implications. Note that there are also additional financing requirements for other SDG sectors, in particular infrastructure. We have factored that in to some extent by assuming that only half of existing revenues and IPF can be spent on the social sectors, but a fuller costing may show additional requirements. #GlobalChallenges

But IPF needs to change Volume and allocation More concessional IPF for LICs and fragile states More non-concessional IPF for LMICs Delivery Use of ‘adaptive programming’ approaches and greater risk sharing, especially in FCAS Architecture Greater use of multilaterals, especially in FCAS New ‘Bolsa Familia Global’ #GlobalChallenges

Current aid allocations are unequal Source: Marcus and Hoy (forthcoming) #GlobalChallenges

Why a ‘Bolsa Familia Global?’ National ownership and country-leadership Improved allocation to countries in need Predictable multi-year funding commitments An important global voice for civil society Transparent resource mobilisation parameters Effective financing for technology transfer - Using SDSN’s own list of benefits for global partnerships Also SDSN’s criteria are: 1. Program- or system-based financing needs (as opposed to project-based financing) 2. Substantial ODA needs, particularly for operating expenditure 3. Need to mobilize different types of stakeholders, including the private sector 4. Need to harmonize the international development finance architecture #GlobalChallenges

r.greenhill@odi.org.uk #GlobalChallenges | odi.org