The Addis Ababa agenda on Financing sustainable development ODI-Centre for Aid and Public Expenditure (CAPE) Gideon Rabinowitz

Outline 1) Ensuring adequate volumes and targeting of financing 2) Opportunities and challenges with new models of development finance 3) Learning lessons from aid about importance of linking to budgets and national systems 3

Ensuring adequate volumes and better targeting of financing -Problem: c80% of FSF was counted as ODA, 38% of FSF to LDCs and SIDs, poorly linked to vulnerability (Nakooda et al 2013); climate ODA has risen more quickly than total ODA, and ODA to LDCs has fallen (Steele 2015); major financing gaps on basic needs (ODI) -Solutions: Support mitigation using non-concessional IPF in credit- worthy countries, 50% target on share of adaptation finance to LDCs/SIDs; target for non-concessional IPF (ODI); mitigation for MICs not quality as ODA (IIED) -Addis Ababa: Repeats existing CF commitments, “urge” delivery of 0.7% and 50% ODA to LICs; also calls for increased South-South flows; leveraging a big agenda…BUT… 4

Opportunities and challenges with new models of development finance 5 Opportunities… - Using ODA/CF to direct private finance towards addressing SD priorities (up-front costs/proj dev, guarantees etc); tap into large volumes of private finance; …and challenges – Weak evidence of additionality and development impact, focus has been predominantly on international private finance Solutions? – Strong standards (inspired by aid principles, but going beyond these) and oversight (clearing house?) on this form of financing; focus on sector enabling env rather than projects; more focus on domestic finance Addis Ababa – Calls for transparency + account’, risk sharing, feasibility studies, monitoring of links to debt, capacity strengthening, develop guidelines/principles; EFA initiative

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Lessons from aid on linking to budgets and national systems Problem – Significant share of dev finance outside of systems, incl due to vertical funds (increase transaction costs, weakens strategic sector-wide focus, dis-incentivises focus on understanding and strengthening systems etc); momentum on reforms from mid/late 2000s lost (risks and results focus) Solutions – Commitment to deliver through systems, work with risks not avoid them and use creative approaches to results + attribution; limit use of vertical funds Addis Ababa – General reference in last paragraph of IPF section; some emphasis on vertical funds 7

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