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The 4th International Conference on Financing for Development

The forthcoming UN Conference on Financing for Development, set for mid-2025, continues a great sequence started in Monterrey in 2002, followed up in Doha in 2008 and in Addis Ababa in 2015. The preparatory process is in full swing, with a broad agenda captured by the conference’s Elements Paper just made public by the co-facilitators. The agenda reflects a high level of ambition and builds on the—also ambitious—Addis Ababa Action Agenda. 

This year, UN Member States will need to act decisively to put in place a functional and equitable system of global economic governance to address the development needs of lower-income countries, restore lost progress towards the UN Sustainable Development Goals (SDGs), and address the global environmental crisis. Several critical priorities are on the global agenda in 2025 that leaders are expected to address. What are they? 

A pressing challenge is how to manage the over-indebtedness that affects about a third of Global South countries today, but also high debt levels in many others due to both economic imbalances accumulated during COVID-19 and high interest rates in recent years. One of the most important problems in managing this issue is that the current instrument for debt renegotiation—the Common Framework for Debt Treatment—is very difficult to use and excludes middle-income countries.

Another vital issue is financing environmental sustainability for both climate change mitigation and adaptation, and biodiversity conservation. The recent Conferences of the Parties (COP)—COP16 and COP29, respectively—adopted agreements that are considered insufficient in providing adequate financing for developing country parties, particularly for low-income countries. The financing shortfall is especially concerning as global temperatures reached 1.5°C above pre-industrial levels, the threshold set by the Paris Agreement. At the same time, the world continues to experience massive loss of vegetable and animal species and increasingly frequent and severe natural disasters.

Increasing development financing is another major target, given the massive financing gap to achieve the Sustainable Development Goals (SDGs), which is estimated by the United Nations and other analysts to be more than USD 4 trillion. This requires Official Development Assistance and increased financing from multilateral development banks (MDBs). 

Encouraging private sector investment in eco-friendly production is crucial. This can be achieved through credit solutions and complementary mechanisms facilitated by MDBs, such as guaranteed funds managed by development banks and potentially providing liquidity to venture capital funds in Global South countries.

Strengthening international tax cooperation is also essential, particularly to deter profit shifting by multinational firms to low-tax jurisdictions and tax havens, and ensuring the ultra-rich are adequately taxed. Advocating for a fair allocation of taxing rights to all countries where multinationals operate must be a priority based on the principle of ‘significant economic presence’. To effectively tax the rich, it would be essential to create a global asset registry based on beneficial ownership of all assets. In both areas, the main objective should be to promote a robust UN Tax Convention, following the terms of reference approved by member states last August.

In the international monetary system, beyond the ongoing enhancement of existing credit facilities, a key objective should be frequent issuance, and—more importantly—active use of the International Monetary Fund’s Special Drawing Rights (SDRs). Despite representing a substantial resource pool of approximately 900 billion dollars, SDRs remain largely underutilized. These funds could be channeled into various mechanisms, including those established in the MDBs, to finance development or environmental goals. At the same time, it is essential to preserve the role of SDRs as reserve assets for member countries.

International financial regulation has not been the subject of past financing for development conferences. Still, several important issues should be on the agenda, notably the appropriate regulation for digital financial assets (sometimes called ‘currencies’) and more robust regulation of international commodity futures markets. The latter should be complemented with public market interventions for strategic commodities, using national or international buffer stocks. In the area of private investment, it is essential to revisit existing protection agreements to avoid demands against national provisions that protect social and environmental standards.

Finally, several institutional reforms should be on the agenda. The first should be the longstanding call for greater ‘voice and participation’ for the Global South in Bretton Woods institutions, by reallocating capital shares and expanding basic voting rights. Additionally, the selection of the heads of these institutions should involve inclusive and transparent processes, allowing candidates from all member countries to participate. 

A second set of reforms involves establishing adequate institutions, ideally within the United Nations, to effectively manage international tax cooperation and sovereign debt renegotiations. The third priority is strengthening the global network of institutions across all areas of international economic cooperation. This includes creating robust regional institutions in monetary and tax cooperation, in a sense establishing a system similar to that of multilateral development banks.
 

José Antonio Ocampo is Professor at Columbia University’s School of International and Public Affairs, a former United Nations Under-Secretary-General for Economic and Social Affairs, and a former Minister of Finance of Colombia.

The views expressed in this piece are those of the authors, and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.