## sdnea2021003

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### Executive summary and context
- COVID-19 pushed millions into extreme poverty, shrunk government resources for SDG spending, and put the SDGs firmly out of reach by 2030 in most countries.
- Focus: five SDG sectors — education, health, roads, electricity, and water and sanitation.
- Pandemic-era statistic: By mid-April 2021, the pandemic had infected 140 million people and killed over 3 million.
- Pre-pandemic trajectory: Even following pre–COVID-19 trends, the world was not on track to meet the SDGs by 2030.

### Long-term macroeconomic framework (methodology)
- Framework features:
  - Focus on the real economy and the fiscal sector; fully dynamic with a long time horizon (2050).
  - First five projection years aligned with IMF World Economic Outlook country projections.
  - Imposes standard macroeconomic accounting identities and interlinkages across real, fiscal, and external sectors.
  - Models relationship between investment and growth using the DIG model and its extension to include human capital.
  - Distinguishes three capital types: human capital, publicly financed public capital, and privately financed public capital ("bankable" projects).
  - Allows user-defined macroeconomic and financing scenarios (domestic revenue mobilization, private sector funding, donor contributions) and tests timing to meet SDGs.

### Pandemic impacts and illustrative case studies
- General impacts:
  - Pandemic induced a deep recession and dramatically affected government deficits, debt, and debt service capacity.
  - Emergency IMF and G20 Debt Service Suspension Initiative financing mitigated worse outcomes.
- Four illustrative case studies representing country groups:
  - Rwanda: Poverty fell from 60 to 38 percent between 2000 and 2019; human development score doubled to 0.52 between 1990 and 2019.
  - Cambodia: By end-2018 extreme poverty was practically eradicated; three-quarters had some access to electricity and decent roads; more than half had access to clean water. Over the past decade spending on health and education doubled and tripled, respectively.
  - Nigeria: Healthy life expectancy at birth is 49 years; only 4 percent connected to a safe water supply; growth had decelerated prior to COVID-19.
  - Pakistan: In education, water, and sanitation it is below the LIDC average; poverty (national line) fell by 40 percentage points to 24 percent between 2000 and 2015.
- Case-study pandemic-specific impacts:
  - Rwanda: projected to contract in 2020 vs growth of more than 9 percent in 2019; government deficit to rise to almost 10 percent of GDP; long-term permanent output loss of some 10 percent even if returning to previous growth path in five years.
  - Nigeria, Pakistan, Cambodia: also experienced recessions; 2020 deficits expected to have increased by a relatively modest 1¾ percentage points of GDP on average compared with pre-pandemic projections.

### Key quantitative finding on financing needs
- Average additional public and private spending required to meet selected SDGs in the five sectors: some 14 percent of GDP additionally every year between now and 2030 (based on four case studies).
- This required additional spending is "some 2½ percentage points—or 21 percent more—than before the pandemic."
- Country-specific annual additional spending needs (on top of current spending on SDG sectors) under a relatively quick recovery (return to precrisis growth path in five years):
  - Cambodia: between 8 and 9 percent of GDP (main shortfalls in health and education).
  - Pakistan: 9 percent of GDP (main shortfalls in health and education).
  - Rwanda: 21¼ percent of GDP (mainly needs to build physical infrastructure).
- Pandemic-induced increase extrapolated to all LIDCs: additional annual financing need of 2½ percent of GDP, or $59 billion a year.
- If recovery is slower or persistent scarring occurs:
  - Long-term scarring scenario (growth returns to only three-quarters of pre-pandemic potential) implies an additional 1.7 percent of GDP in resources every year over and above the 14 percent estimated under no-scarring assumption.
- Timing delays to achieve SDGs without additional resources:
  - Cambodia: delayed by one year.
  - Rwanda, Pakistan, and Nigeria: delayed by four to six years.

### Inequality, human capital, and social effects
- IMF estimate: average Gini coefficient could increase by 2.6 percentage points for emerging market and developing economies following the pandemic, wiping out equity improvements since 2008.
- Education disruptions: World Bank estimate — globally more than 90 percent of all students had their education disrupted to some extent, with about 40 percent losing the majority of the school year.
- Labor market/human capital note: An additional year of schooling is associated with a 10 percent increase in wages.
- Lockdowns disproportionately affected women and younger cohorts by hitting service and education sectors.

### Policy implications and recommendations (domestic actions)
- Domestic reform priorities:
  - Pursue an ambitious reform agenda to raise long-term growth and macroeconomic stability.
  - Mobilize domestic revenue through progressive taxation and spending reforms.
  - Improve management of public sector assets and enhance spending efficiency, particularly public investment management.
  - Reinvigorate strategies to facilitate private investment in SDG-related projects; ensure macroeconomic stability and improve governance and the business climate.
  - Financial system reform and financial inclusion to improve capital allocation.
  - Promote digitalization, green technologies, and trade to improve resilience.
- Potential of domestic reforms:
  - Domestic reforms can generate enough resources to fill up to half of the case study countries’ SDG spending needs (average across case studies).
- Revenue mobilization specifics:
  - Updated estimates for 116 countries: tax capacity about 23 and 28 percent of GDP, respectively, for the average LIDC and emerging market economy.
  - Current actual tax and social security collections:
    - LIDCs: about 17½ percent of GDP.
    - Emerging market economies: about 20½ percent of GDP.
  - Increasing tax-to-GDP by about 3–7 percentage points over the medium term is an ambitious but achievable aspiration for many countries.
  - Case examples:
    - Pakistan: reforms could raise the tax revenue ratio by more than 3 percentage points of GDP over four years.
    - Rwanda: crafting a medium-term revenue strategy to raise revenue after the pandemic subsides.
- Public asset management:
  - 2018 Fiscal Monitor potential average revenue gain from improved management as high as 3 percent of GDP a year.
  - In LIDCs a large share of potential gains likely comes from improvements in management of state-owned enterprises.
- Public investment management and efficiency:
  - Average LIDC loses about 53 percent of returns on investment to inefficient public investment management.
  - Better public investment management and infrastructure governance can help countries close up to two-thirds of their efficiency gap.
  - Efficiency savings can be used to finance SDG shortfalls.

### Private finance mobilization
- Role of private sector:
  - In developing economies, private sector generates 90 percent of jobs and 60 percent of all investment and provides 80 percent of government revenues.
  - Much additional private finance for SDGs would come from abroad given limited domestic private saving in LIDCs.
- Institutional investor opportunity:
  - Institutional investors manage more than $100 trillion in assets globally; pension funds and insurance companies may find infrastructure financing attractive.
  - Only a small fraction of institutional investment is concentrated in LIDCs and emerging markets.
- Policy measures to catalyze private finance:
  - Strengthen institutional frameworks, clarity and transparency of regulatory/legal frameworks, contract and property-rights enforcement.
  - Use public support instruments (subsidies, guaranteed minimum returns, public risk sharing) to improve project bankability.
  - Build a solid pipeline of infrastructure projects with transparent and accessible information; sectors with stable usage fees (energy, airports, toll roads) are more “bankable.”
  - Recognize limits: private delivery in health and education is typically much smaller in LIDCs and emerging market economies; greenfield projects may be too risky for many institutional investors.
- Case evidence:
  - Rwanda increased World Bank–sponsored infrastructure projects with private sector participation to about 1½ percent of GDP annually during 2015–17.
  - Pakistan FDI inflows (2015–19): 0.7 percent of GDP a year.
  - Nigeria FDI inflows (2015–19): 0.5 percent of GDP a year.

### International support and multilateral roles
- Most LIDCs will not be able to achieve their SDGs by 2030 without international support; donor country support has been fairly constant as a percentage of GNI at about half the recommended UN target (0.7 percent of GNI).
- Role for multilaterals and development banks:
  - IMF and multilaterals should focus capacity development in LIDCs, particularly fragile and conflict-affected states, on critical SDG bottlenecks.
  - Development banks can leverage balance sheets to de-risk projects and transform them into tradable assets via securitization.
  - Example: International Finance Corporation issued bonds to help build an offshore yield curve in Indian rupees.
  - IMF should continue catalyzing support for countries hit by shocks, help maintain macroeconomic stability, and incorporate SDG-related expenditure targets.
- Global self-interest:
  - More than half of world population growth between now and 2050 will come from sub-Saharan Africa; supporting LIDCs reduces migration pressures and benefits donor countries.

### Pathways, reform impacts, and timelines
- Baseline average needs for four case studies: just over 14 percent of GDP every year between now and 2030 to meet selected SDGs.
- Reform impact estimates:
  - IMF (2019): comprehensive reforms could raise output by more than 7 percent over a six-year period on average in emerging market economies and LIDCs.
  - Gaspar and others (2019): doubling projected GDP per capita in 2030 would reduce additional spending needs by some 4½ percentage points.
- Comprehensive reform scenario (combined growth-boosting reforms, revenue mobilization, private investment attraction, SOE efficiency, resource-regime reforms):
  - Could on average generate about 40 percent of resources needed to achieve selected SDGs in the four case-study countries.
  - For Pakistan and Cambodia, such reforms could cover half the need.
  - Even with ambitious reforms, countries would still need to find additional resources amounting to almost 8½ percent of GDP a year.
- Timing to meet SDGs under ambitious domestic reforms (without extra international support):
  - Cambodia: meet SDGs by 2033.
  - Rwanda: meet SDGs by 2040.
  - Nigeria: meet SDGs by 2043.
  - Pakistan: meet SDGs by 2045.
- Role of additional donor support (illustrative ODA benchmark):
  - Gradually building donor support toward the UN recommended ODA target of 0.7 percent of GNI over the next decade would release some $200 billion (in 2020 US dollars) for development.
  - Based on case studies, that would fill more than two-thirds of LIDCs’ average SDG needs gap after pursuing reform.
  - Distribution scenarios:
    - If ODA increases from current 0.3 percent of GNI to 0.7 percent of GNI over 10 years and is distributed across LIDCs (plus Pakistan) in line with 2014–2018 LIDC ODA shares, combining domestic reforms with this support would allow Cambodia and Rwanda to largely fill remaining financing gaps and meet SDG agendas in the five sectors by 2030 and 2031, respectively; Nigeria and Pakistan would still take at least a decade longer.
    - If ODA is divided among all LIDCs (plus Pakistan) according to countries’ GDP, Pakistan would meet its SDG agenda by 2030, Nigeria by the middle of the next decade, Rwanda by 2036, and Cambodia by 2030.

### Country case studies — summary findings and key indicators

- Rwanda
  - SDG financing gap at onset of pandemic: 15.7 percent of GDP a year.
  - Pandemic-widened SDG financing gap: 21.3 percent of GDP a year (increase of 5½ percentage points of GDP).
  - Permanent output loss if returning to pre-pandemic potential growth: approximately 10 percent.
  - Policy yields: boosting domestic revenue by 7 percentage points of GDP a year between 2023 and 2029 reduces gap by some 4.2 percentage points; reallocating 1 percentage point of GDP and boosting efficiency covers another 1.5 percentage points; increasing FDI to top quartile peers reduces gap by 1.9 percentage points.
  - To meet SDG targets by 2030 Rwanda would still need additional resources of 13.7 percent of GDP each year until 2030.
  - Key baseline indicators (selected):
    - Real GDP growth (%): 2019 = 9.4; 2020 = -0.2; 2030 = 7.2; 2050 = 6.5
    - GDP per capita (2019 US dollars): 2019 = 801; 2020 = 781; 2030 = 1,089; 2050 = 2,893
    - Total revenues (% of GDP): 2019 = 23.6; 2020 = 23.1

- Nigeria
  - SDG additional resources needed to achieve SDGs by 2030: 18.3 percent of GDP each year.
  - 2020 real GDP contraction: 4.3 percent.
  - Projected permanent output loss: almost 9 percent.
  - Policy yields: medium-term revenue strategy increases tax revenues by 6.3 percent of GDP between 2021 and 2025; combined reforms could generate 35 percent of resources to meet SDG needs, leaving an SDG gap of 11.9 percent of GDP.
  - Key baseline indicators (selected):
    - Real GDP growth (%): 2019 = 2.2; 2020 = -4.3; 2030 = 3.5; 2050 = 4.5
    - GDP per capita (2019 US dollars): 2019 = 2,228; 2020 = 2,157
    - Total revenues (% of GDP): 2019 = 7.9; 2020 = 5.9

- Pakistan
  - SDG financing gap to achieve SDGs by 2030: 9.0 percent of GDP each year.
  - 2020 real GDP contraction (fiscal year 2020): 0.4 percent.
  - Projected permanent output loss: almost 6 percent.
  - Policy yields: baseline includes tax revenue increase of 3 percent of GDP during 2020–23; additional reforms could generate another 2 percent of GDP during 2024–26; energy/SOE reform could free up 1¼ percent of GDP; bringing FDI to peers’ median could add 3.4 percent of GDP in private investment. Combined reforms could finance some 57 percent of Pakistan’s SDG needs; remaining gap to meet SDGs by 2030 would be 3.9 percent of GDP.
  - Key baseline indicators (selected):
    - Real GDP growth (%): 2019 = 1.9; 2020 = -0.4; 2030 = 5.0; 2050 = 5.0
    - GDP per capita (2019 US dollars): 2019 = 1,275; 2020 = 1,134
    - Total revenues (% of GDP): 2019 = 13; 2020 = 15.2

- Cambodia
  - Pandemic increased resources needed to achieve SDGs to an estimated 8.1 percent of GDP a year between now and 2030.
  - 2020 economy shrinkage: 2.8 percent of GDP.
  - Permanent loss of output: about 6 percent.
  - Policy yields: medium-term revenue strategy to mobilize 3 percentage points of GDP in tax revenue over 2022–27; restrain nondevelopment current spending by 1 percent of GDP; reforms to facilitate private sector participation could enable an additional 2 percent of GDP in private participation. Combined policies would allow Cambodia to meet SDG targets by 2033; to meet by 2030 an additional 4.1 percent of GDP annually would be required (less than baseline 8.1 percent).
  - Key baseline indicators (selected):
    - Real GDP growth (%): 2019 = 7.0; 2020 = -2.8; 2030 = 5.8; 2050 = 4.5
    - GDP per capita (2019 US dollars): 2019 = 1,622; 2020 = 1,550
    - Total revenues (% of GDP): 2019 = 23.9; 2020 = 21.6

*Source: sdnea2021003 — "A Post-Pandemic Assessment of the Sustainable Development Goals."*

### EXECUTIVE SUMMARY __________________________________________________________________________________ 5

### EXECUTIVE SUMMARY

### Introduction and context
- The COVID-19 pandemic has pushed millions into extreme poverty, shrunk government resources for SDG spending, and put the SDGs firmly out of reach by 2030 in most countries.
- The note focuses on five SDG sectors: education, health, roads, electricity, and water and sanitation.
- Key pandemic-era statistics cited:
  - By mid-April 2021, the pandemic had infected 140 million people and killed over 3 million.
- Pre-pandemic trajectory:
  - Even following pre–COVID-19 trends, the world was not on track to meet the SDGs by 2030.

### A framework for assessing development strategies
- A novel long-term macroeconomic framework is used to analyze financing strategies for the SDGs:
  - Focuses on the real economy and the fiscal sector.
  - Is fully dynamic with a long time horizon (2050).
  - The first five years of the projection are aligned with the projections for individual countries in the IMF’s World Economic Outlook.
  - Imposes standard macroeconomic accounting identities and interlinkages throughout the real, fiscal, and external sectors.
  - Models the relationship between investment and growth (DIG model and its extension to include human capital).
  - Distinguishes three capital types: human capital, publicly financed public capital, and privately financed public capital ("bankable" projects).
  - Allows user-defined macroeconomic and financing scenarios (domestic revenue mobilization, private sector funding, donor contributions) and tests whether SDGs can be met by 2030 or when they would be achieved otherwise.

### The setback from the pandemic — empirical impacts and case studies
- General impacts:
  - The pandemic induced a deep recession and dramatically affected government deficits, debt, and debt service capacity.
  - Rapid emergency financing from international financial institutions and the G20 Debt Service Suspension Initiative mitigated what would otherwise have been a worse situation.
- Four illustrative case studies (each representing groups of countries with specific characteristics):
  - Rwanda (fast-growing sub-Saharan country with a sizable public sector):
    - Poverty fell from 60 to 38 percent between 2000 and 2019.
    - Human development score doubled to 0.52 between 1990 and 2019.
  - Cambodia (fast-growing East Asian economy):
    - By end-2018, extreme poverty was practically eradicated; three-quarters of the population had some access to electricity and decent roads; more than half had access to clean water.
    - Over the past decade spending on health and education doubled and tripled, respectively.
  - Nigeria (natural resource economy with a small public sector):
    - Healthy life expectancy at birth is 49 years.
    - Only 4 percent of the population is connected to a safe water supply.
    - Prior to COVID-19, growth had decelerated and was projected to remain lackluster.
  - Pakistan (emerging market economy with development gaps):
    - In education, water, and sanitation it is below the LIDC average.
    - Poverty (national poverty line) fell by 40 percentage points, to 24 percent, between 2000 and 2015.

### Key quantitative finding on financing needs
- Based on the four case studies (which may not be fully representative), the public and private sectors together will on average have to spend some 14 percent of GDP additionally every year between now and 2030 to meet the SDGs in the five sectors.
- This required additional spending is:
  - "some 2½ percentage points—or 21 percent more—than before the pandemic."

### Policy implications and recommendations (Improving the odds)
- Domestic policy actions needed:
  - Pursue an ambitious reform agenda to raise long-term growth.
  - Mobilize domestic revenue through progressive taxation and spending reforms.
  - Improve management of public sector assets and enhance spending efficiency, particularly public investment management.
  - Reinvigorate strategies to facilitate private investment in SDG-related projects; governments should ensure macroeconomic stability and improve governance and the business climate.
- Potential of domestic reforms:
  - The note estimates that domestic reforms can generate enough resources to fill up to half of the case study countries’ SDG spending needs.
- International support requirements:
  - Even with comprehensive domestic reforms, achieving the SDGs by 2030 would be significantly delayed—by a decade or more—without further international action.
  - As an illustrative benchmark, increasing official aid to the United Nations target of 0.7 percent of gross national income would largely cover the financing gap.

### Long-term outlook and broader rationale
- The framework highlights the long-term benefits of modest but sustained reforms:
  - Policies that invest in people improve living standards substantially and reduce inequality.
- Demographic opportunity:
  - More than half of world population growth between now and 2050 will come from sub-Saharan Africa, making it potentially the fastest-growing market in the world.
- Strategic conclusion:
  - Developing economies will not be able to achieve alone the developmental goals set in 2015; global solidarity and international support are in everyone’s interest.

*Source: sdnea2021003 - EXECUTIVE SUMMARY*

### 11.      The COVID-19 crisis has severely affected  all four economies. The Rwandan economy is

### sdnea2021003 - 11.      The COVID-19 crisis has severely affected  all four economies. The Rwandan economy is

### COVID-19 economic impact (case-study countries)
- Rwandan economy projected to contract in 2020, compared with growth of more than 9 percent in 2019.
- Government deficit in Rwanda will rise to almost 10 percent of GDP, mainly because of tax revenue losses and increased spending on social protection and economic support.
- Even under the baseline scenario in which the country returns to its previous growth path in five years, a long-term permanent output loss of some 10 percent is forecast.
- The COVID-19 crisis caused recessions in Nigeria, Pakistan, and Cambodia as well.
- LIDCs and emerging market economies were able to provide only a fraction of the support in advanced economies in the form of mitigating measures, in part because of limited fiscal space.
- Although all four countries experienced large declines in tax (and in the case of Nigeria oil) revenue, 2020 deficits are expected to have increased by a relatively modest 1¾ percentage points of GDP on average compared with pre-pandemic projections.

### Additional financing needs to achieve selected SDGs
- Under a relatively quick recovery (return to precrisis growth path in five years), average additional (public and private) spending of just over 14 percent of GDP is needed every year between now and 2030 to achieve the selected SDGs.
- Country-specific annual additional spending needs (on top of current spending on SDG sectors):
  - Cambodia: between 8 and 9 percent of GDP (main shortfalls in health and education).
  - Pakistan: 9 percent of GDP (main shortfalls in health and education).
  - Rwanda: 21¼ percent of GDP (mainly needs to build physical infrastructure).
- If recovery takes longer due to economic scarring, additional resources will be needed beyond these amounts.
- Without these additional resources, the four countries will meet their SDG goals much later than the target year of 2030.

### Pandemic-induced increase in financing needs and scarring
- The pandemic increased financing needs to reach the SDGs by 2½ percentage points of GDP on average in the four case-study countries, assuming no long-term damage to growth potential.
- Even before the pandemic, estimated annual additional resources needed ranged from 7 percent of GDP a year in Cambodia to some 16 percent of GDP in Nigeria and Rwanda.
- Extrapolated to all LIDCs, the pandemic resulted in an additional annual financing need of 2½ percent of GDP, or $59 billion a year.
- The additional financing needs arise directly from the recession through lower tax revenue and more resources devoted to fiscal consolidation.
- Timing delays to achieve SDGs without additional resources:
  - Cambodia: delayed by one year.
  - Rwanda, Pakistan, and Nigeria: delayed by four to six years.
- Long-term scarring scenario (growth returns to only three-quarters of pre-pandemic potential) implies:
  - Additional 1.7 percent of GDP in resources every year over and above the 14 percent estimated under no-scarring assumption.
  - Scarring effect more pronounced over the long term as full impact on human capital accumulation is assessed.

### Inequality and human capital effects
- The IMF estimates the average Gini coefficient could increase by 2.6 percentage points for emerging market and developing economies following the pandemic, wiping out equity improvements since 2008.
- Lockdowns disproportionately affected women and younger cohorts by hitting service and education sectors.
- The World Bank estimates that globally more than 90 percent of all students had their education disrupted to some extent last year, with about 40 percent losing the majority of the school year.
- An additional year of schooling is associated with a 10 percent increase in wages.

### Public policies and structural reforms (recommendations)
- Governments should focus on structural reforms to enhance macroeconomic stability, institutional quality, transparency, and governance to support stronger medium-term growth.
- Financial system reform and financial inclusion can boost inclusive growth by improving capital allocation.
- Promoting digitalization, green technologies, and trade can improve economic prospects and resilience.
- Public sector should enable and catalyze private investment by strengthening institutions and improving the business climate.

### Domestic revenue mobilization (tax capacity and reforms)
- Updated estimates for a panel of 116 countries show a tax capacity of about 23 and 28 percent of GDP, respectively, for the average LIDC and emerging market economy.
- Current actual tax and social security collections:
  - LIDCs: about 17½ percent of GDP.
  - Emerging market economies: about 20½ percent of GDP.
- Increasing the tax-to-GDP ratio by about 3–7 percentage points over the medium term through comprehensive policy and administration reform is an ambitious but achievable aspiration for many countries.
- Case-study reforms and potential gains:
  - Pakistan: reforms that could help raise the tax revenue ratio by more than 3 percentage points of GDP over four years.
  - Rwanda: crafting a medium-term revenue strategy (MTRS) to raise revenue after the pandemic subsides.
- Successful reform episodes focus on eliminating tax incentives and exemptions that undermine efficiency, equity, neutrality, and simplicity; enhancing revenue administration to increase compliance; and raising revenues from hard-to-tax sectors to reduce informality and the shadow economy.
- International focus should include eliminating opportunities for base erosion and profit shifting and possibly introducing carbon taxation.

### Other revenue sources and public asset management
- Governments can increase revenues by stronger management of government assets to earn returns on financial and nonfinancial assets.
- The 2018 Fiscal Monitor highlights a potential average revenue gain from improved management as high as 3 percent of GDP a year.
- In LIDCs a large share of potential gains likely comes from improvements in management of state-owned enterprises.
- Implementing better asset management takes considerable time and is not a short-term panacea.

### Public spending efficiency and public investment management
- Analysis suggests the average LIDC loses about 53 percent of the returns on its investment to inefficient public investment management.
- Better public investment management and infrastructure governance can help countries close up to two-thirds of their efficiency gap.
- Countries can use efficiency savings to finance shortfalls in SDG financing elsewhere.

### Efficiency and reallocation examples
- Brazil example: achieving SDGs in infrastructure areas requires about 3½ percent of GDP a year in additional investment between now and 2030.
- In education and health sectors Brazil may reallocate up to 1½ percent of GDP a year over the long term by improving outcomes while containing expenditure.

### Private sector policies and mobilizing private finance
- In developing economies, the private sector generates 90 percent of jobs and 60 percent of all investment and provides 80 percent of government revenues.
- Private investment boosts development by increasing labor productivity and wage growth and can enlarge the resource envelope, bring efficiency gains, and enhance risk sharing between public and private sectors.
- Much additional private finance to bridge SDG financing gaps would come from abroad given limited domestic private saving in LIDCs.
- Institutional investors manage more than $100 trillion in assets globally; pension funds and insurance companies may find infrastructure financing attractive due to long horizons and diversification.
- Only a small fraction of institutional investment is concentrated in LIDCs and emerging markets, despite strong yields in infrastructure investments.
- Positive example: Rwanda increased World Bank–sponsored infrastructure projects with private sector participation from virtually nothing in the early 2000s to about 1½ percent of GDP annually during 2015–17, concentrated in the energy sector.

*Source: sdnea2021003*

### Box 3. Doing More  with Less: Efficiency Savings in Brazil (cont.)

### Box 3. Doing More  with Less: Efficiency Savings in Brazil (cont.)

### Efficiency savings in Brazil
- Assessment (done in 2019) indicates scope to improve health outcomes while realizing efficiency savings.
- Even after allowing for an increase in the number of doctors to improve health outcomes in line with high-performing peer countries, potential cost reductions of up to 2½ percent of GDP in the medium term may be possible.
- Conclusion: Brazil could improve both human and physical capital by pursuing efficiency gains in its health and education sectors, but this will require substantial reforms.

### Policies to catalyze higher private finance
- Macroeconomic and sociopolitical conditions are key determinants of credit risk and foreign investment; weak institutions and high levels of corruption reduce risk-adjusted returns.
- Recommendations:
  - Strengthen institutional framework to enhance clarity and transparency of regulatory and legal frameworks and ensure consistent enforcement of contracts and property rights.
  - Use public sector support to improve project risk-return profiles where private investors find projects unattractive; options include subsidies, guaranteed minimum returns, or directly shouldering part of the risk.
  - Build a solid pipeline of infrastructure projects with transparent and accessible information; note that sectors with stable usage fees (energy, airports, toll roads) are more “bankable.”
  - Recognize limits: private delivery in health and education is typically much smaller in LIDCs and emerging market economies than in advanced economies; greenfield projects may be too risky for many institutional investors.

- Case study evidence on FDI:
  - Pakistan saw FDI inflows of just 0.7 percent of GDP a year during 2015–19.
  - Nigeria saw FDI inflows of just 0.5 percent of GDP a year during 2015–19.
  - Rwanda attracts more FDI and aims to increase it further to emulate the top quartile of its peers.

### International support
- Most LIDCs will not be able to achieve their SDGs by 2030 without international support; donor country support has been fairly constant as a percentage of GNI at about half the recommended UN target.
- Trend: As low-income countries have grown faster than donor countries, donor support translates to a declining share of LIDCs’ GDP.
- Roles for multilaterals and development banks:
  - IMF and multilateral institutions should focus capacity development in LIDCs, particularly fragile and conflict-affected states, on critical SDG bottlenecks.
  - Development banks can leverage balance sheets to de-risk projects and transform them into tradable assets through securitization, creating instruments better aligned with private investor mandates.
  - Example: International Finance Corporation issued bonds to help build an offshore yield curve in Indian rupees.
  - IMF should continue catalyzing support for countries hit by shocks, help maintain macroeconomic stability, and incorporate SDG-related expenditure targets.
- Global self-interest: More than half of world population growth between now and 2050 will come from sub-Saharan Africa; supporting LIDCs reduces migration pressures and is in the interest of all donor countries.

### A path for development — resource needs, reform impact, and timelines
- Baseline and needs:
  - Baseline scenario without further reform: the four case study countries on average need additional resources of just over 14 percent of GDP every year between now and 2030 to meet their development goals.
  - Without additional resources, some countries would not reach their SDGs even by 2050.

- Growth and reform potential:
  - Boosting economic growth through structural reforms is perhaps the most important channel.
  - IMF (2019) estimates that in emerging market economies and LIDCs comprehensive reforms could raise output by more than 7 percent over a six-year period on average.
  - Gaspar and others (2019) estimate that doubling projected GDP per capita in 2030 would reduce additional spending needs by some 4½ percentage points.

- Comprehensive reform scenario:
  - A full reform scenario combining growth-boosting reforms, revenue mobilization, reforms to attract private investment, efficiency gains in state-owned enterprises, and resource-regime reforms (where relevant) could on average generate about 40 percent of the resources needed to achieve the selected SDGs in the four case study countries.
  - For Pakistan and Cambodia, such comprehensive reforms could cover half the need.
  - Even with ambitious reforms, countries would still need to find additional resources amounting to almost 8½ percent of GDP a year.

- Country-specific conditions and tax revenue baselines:
  - Rwanda and Nigeria have much higher SDG needs than Pakistan and Cambodia; similar reforms thus pay for a smaller portion of their needs.
  - Tax revenue in 2020 (projected):
    - Rwanda and Cambodia: 15–18 percent of GDP.
    - Nigeria: 3 percent of GDP.
    - Pakistan: 11 percent of GDP.
  - implication: comprehensive tax reforms imply greater potential gains in Nigeria and Pakistan.

- Long-term benefits:
  - Sustained reforms produce large long-term increases in development indicators via cumulative buildup of physical and human capital.
  - Examples from case studies:
    - Pakistan: GDP per capita increases significantly by 2050 relative to a no-further-reform baseline.
    - Cambodia: investment in health and education substantially boosts the collective value of knowledge over the long term.

- Timing to meet SDGs under ambitious domestic reforms (without extra international support):
  - Cambodia would meet its SDGs by 2033.
  - Rwanda would meet its SDGs by 2040.
  - Nigeria would meet its SDGs by 2043.
  - Pakistan would meet its SDGs by 2045.

- Role of additional donor support:
  - Gradually building donor support toward the United Nations’ recommended ODA target of 0.7 percent of GNI over the next decade would release some $200 billion (in 2020 US dollars) for development.
  - Based on the case studies, that would fill more than two-thirds of LIDCs’ average SDG needs gap after pursuing reform.
  - Distribution scenarios and impacts:
    - If the difference between current 0.3 percent of GNI ODA and the target 0.7 percent of GNI becomes available gradually over 10 years and is distributed across LIDCs (plus Pakistan) in line with the share of LIDC ODA each country received between 2014 and 2018, then combining domestic reforms with this additional support would allow Cambodia and Rwanda to largely fill remaining financing gaps and meet SDG agendas in the five sectors considered by 2030 and 2031, respectively.
    - In that scenario, Nigeria and Pakistan would receive less support; funds would help but it would still take them at least a decade longer to achieve their SDG goals.
    - If ODA is divided among all LIDCs (plus Pakistan) in accordance with the size of their economies (distributing support based on countries’ GDP), Pakistan would meet its SDG agenda by 2030, while Nigeria would meet its SDG goals by the middle of the next decade. Under this GDP-based distribution, Rwanda would achieve its goals by 2036 and Cambodia would still meet its goals by 2030.

*Source: IMF staff calculations and analysis as presented in the PDF "A Post-Pandemic Assessment of the Sustainable Development Goals."*

### 2020. New York: Bertelsmann Stiftung and Sustainable Development.

### A POST-PANDEMIC ASSESSMENT OF THE SUSTAINABLE DEVELOPMENT GOALS — APPENDIX: COUNTRY CASE STUDIES

### Rwanda
- Context and outcomes
  - Since 1995, poverty levels have fallen fast, GDP per capita has more than tripled, and its human development score has doubled.
  - Rwanda has achieved all but one of its Millennium Development Goals (MDGs); current outcomes are above the median of peers in health, education, water and sanitation, and infrastructure.
  - Strong national and local ownership of the 2030 Sustainable Development Goals (SDGs).
- SDG financing gap (pre- and post-pandemic)
  - Estimated SDG financing gap at the onset of the pandemic: 15.7 percent of GDP a year.
  - Pandemic-widened SDG financing gap: 21.3 percent of GDP a year (increase of 5½ percentage points of GDP).
  - Permanent output loss as country returns to pre-pandemic potential growth: approximately 10 percent.
- Policy measures and estimated yields
  - Revenue mobilization and structural reform: boosting domestic revenue by 7 percentage points of GDP a year between 2023 and 2029 would reduce the annual SDG financing gap by some 4.2 percentage points of GDP.
  - Spending rationalization: reallocating 1 percentage point of GDP toward SDG projects and boosting spending efficiency would cover another 1.5 percentage points of GDP.
  - Private finance: bringing annual foreign direct investment in line with the top quartile of Rwanda’s peers could reduce the gap by a further 1.9 percentage points of GDP.
  - Combined effect: these policies would provide more than a third of Rwanda’s SDG financing needs and would enable the country to meet its SDGs by 2040; they would also raise per capita income and boost human capital.
  - To meet SDG targets by 2030 Rwanda would still need additional resources of 13.7 percent of GDP each year until 2030.
- Key indicators (Baseline table)
  - Real GDP growth (%): 2019 = 9.4; 2020 = -0.2; 2030 = 7.2; 2050 = 6.5
  - GDP per capita (2019 US dollars): 2019 = 801; 2020 = 781; 2030 = 1,089; 2050 = 2,893
  - Total revenues (% of GDP): 2019 = 23.6; 2020 = 23.1; 2030 = 22.4; 2050 = 23.6
  - Primary expenditures (% of GDP): 2019 = 27.5; 2020 = 27.5; 2030 = 23.1; 2050 = 25.4
  - of which: on SDGs (% of GDP): 2019 = 12.5; 2020 = 13.5; 2030 = 8.1; 2050 = 10.4
  - Overall fiscal balance (WEO definition, % of GDP): 2019 = -5.2; 2020 = -5.4; 2030 = -2.5; 2050 = -4.0
  - Public debt (excl gov. guarantees, % of GDP): 2019 = 49.7; 2020 = 61.0; 2030 = 59.2; 2050 = 58.6
- Scenario analysis (Table A2)
  - Baseline with SDG needs gap filled: Annual SDG financing = 21.3 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 4,451 (2019 US dollars)
  - Full reform: Yield from reforms = 7.6 percent of GDP; Annual SDG financing = 0 percent of GDP; SDGs met by 2040; Per capita income in 2050 = 4,601 (2019 US dollars)
  - Full reform with SDG needs gap filled: Yield from reforms = 7.6 percent of GDP; Annual SDG financing = 13.7 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 5,436 (2019 US dollars)

### Nigeria
- Context and outcomes
  - Africa’s most populous country and largest economy; development gaps driven by poor governance and weak institutions.
  - Public spending on physical and human capital has been inefficient and insufficient; outcomes are well below peers in critical SDG sectors.
- SDG financing need
  - Achieving SDGs by 2030 would require 18.3 percent of GDP in additional resources each year.
- Pandemic impact
  - Real GDP contracted by 4.3 percent in 2020.
  - Projected permanent output loss: almost 9 percent.
  - Higher government debt and reduced fiscal space for development spending.
- Policy measures and estimated yields
  - Revenue mobilization (medium-term revenue strategy): increases tax revenues by 6.3 percent of GDP between 2021 and 2025; a substantial part devoted to reducing fiscal risk by eliminating budget deficit by 2025, leaving about 2 percent of GDP available for SDG spending.
  - Longer-term revenue improvements: further unspecified improvements expected to yield additional revenue of 3 percent of GDP by 2050.
  - Oil sector and exchange rate reform:
    - Exchange rate flexibility and short-term depreciation: revenue gain of ½ percentage point of GDP from value-added tax on imports and 1 percentage point from oil exports.
    - Oil sector framework reform: could generate about 1 percentage point of GDP in additional revenue.
  - Structural reforms and public asset management: restructuring state-owned enterprises could yield 1 percent of GDP in nontax revenue by 2030.
  - Private investment: bringing foreign direct investment in line with the average of peers would generate an additional 3.4 percent of GDP in investment each year.
  - Combined effect: reforms could generate 35 percent of resources to meet SDG needs by 2030, leaving an SDG needs gap of 11.9 percent of GDP; without additional resources the reforms would allow SDGs to be met by 2043 and would boost long-term GDP per capita.
- Key indicators (Baseline table)
  - Real GDP growth (%): 2019 = 2.2; 2020 = -4.3; 2030 = 3.5; 2050 = 4.5
  - GDP per capita (2019 US dollars): 2019 = 2,228; 2020 = 2,157; 2030 = 2,218; 2050 = 3,440
  - Total revenues (% of GDP): 2019 = 7.9; 2020 = 5.9; 2030 = 8.5; 2050 = 9.7
  - Primary expenditures (% of GDP): 2019 = 10.9; 2020 = 10.7; 2030 = 9.8; 2050 = 10.4
  - of which: on SDGs (% of GDP): 2019 = 3.9; 2020 = 2.2; 2030 = 4.3; 2050 = 4.2
  - Overall fiscal balance (% of GDP): 2019 = -4.8; 2020 = -6.0; 2030 = -4.4; 2050 = -3.3
  - Gross public debt (% of GDP): 2019 = 29.1; 2020 = 35.0; 2030 = 56.0; 2050 = 46.0
- Scenario analysis (Table A4)
  - Baseline with SDG needs gap filled: Annual SDG financing = 18.3 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 3,733 (2019 US dollars)
  - Full reform: Yield from reforms = 6.4 percent of GDP; Annual SDG financing = 0 percent of GDP; SDGs met by 2043; Per capita income in 2050 = 5,074 (2019 US dollars)
  - Full reform with SDG needs gap filled: Yield from reforms = 6.4 percent of GDP; Annual SDG financing = 11.9 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 5,288 (2019 US dollars)

### Pakistan
- Context and outcomes
  - Mixed economic and social development over two decades with short episodes of fast growth followed by downturns.
  - Public spending insufficient for needs of a fast-growing young population; performance in critical SDG sectors lags peers.
- SDG financing gap
  - Achieving SDGs by 2030 would require 9.0 percent of GDP in additional financing each year.
- Pandemic impact and recovery
  - Real GDP contracted by 0.4 percent in fiscal year 2020 (July 1, 2019–June 30, 2020).
  - Recovery expected to be subdued; growth returns to pre-pandemic rate of 4½–5 percent only in the medium term.
  - Permanent output loss: almost 6 percent; fiscal space for SDGs has shrunk.
- Policy measures and estimated yields
  - Revenue mobilization:
    - Baseline scenario includes increase in tax revenues of 3 percent of GDP during 2020–23.
    - Additional reforms could generate additional tax revenue of 2 percent of GDP during 2024–26.
  - Energy sector and SOE reform:
    - Comprehensive reform (energy pricing reflective of costs, efficiency, transparency, governance legal framework, SOE triage/privatization) estimated to free up 1¼ percent of GDP in resources for development.
  - Attracting private investment:
    - Bringing foreign investment in line with peers’ median would result in an additional 3.4 percent of GDP in private investment for development.
  - Combined effect: these reforms could finance some 57 percent of Pakistan’s SDG needs and significantly boost per capita income; remaining gap to meet SDGs by 2030 would be 3.9 percent of GDP.
- Key indicators (Baseline table)
  - Real GDP growth (%): 2019 = 1.9; 2020 = -0.4; 2030 = 5.0; 2050 = 5.0
  - GDP per capita (2019 US dollars): 2019 = 1,275; 2020 = 1,134; 2030 = 2,041; 2050 = 7,207
  - Total revenues (% of GDP): 2019 = 13; 2020 = 15.2; 2030 = 17.8; 2050 = 18
  - Primary expenditures (% of GDP): 2019 = 16.5; 2020 = 17.7; 2030 = 17.3; 2050 = 18.3
  - of which: on SDGs (% of GDP): 2019 = 5.9; 2020 = 6.9; 2030 = 7.9
  - Overall fiscal balance (% of GDP): 2019 = -9.0; 2020 = -8.0; 2030 = -2.8; 2050 = -2.8
  - Gross public debt (% of GDP): 2019 = 85.6; 2020 = 88.3; 2030 = 58.5; 2050 = 43.5
- Scenario analysis (Table A6)
  - Baseline with SDG needs gap filled: Annual SDG financing = 9.0 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 7,479 (2019 US dollars)
  - Full reform: Yield from reforms = 5.1 percent of GDP; Annual SDG financing = 0 percent of GDP; SDGs met by 2045; Per capita income in 2050 = 9,591 (2019 US dollars)
  - Full reform with SDG needs gap filled: Yield from reforms = 5.1 percent of GDP; Annual SDG financing = 3.9 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 9,889 (2019 US dollars)

### Cambodia
- Context and outcomes
  - One of the fastest-growing economies in Southeast Asia, average real GDP growth of 7.3 percent over the past two decades.
  - Significant progress on SDG targets including eradication of extreme poverty; strong public and private infrastructure investment.
  - Public spending on health doubled and on education tripled over the past decade.
  - SDG framework incorporated into National Strategic Development Plan 2019–2023 with national targets and spending estimates.
- Pandemic impact
  - Economy expected to have shrunk by 2.8 percent of GDP in 2020.
  - Permanent loss of output: about 6 percent.
  - Total revenues projected to be 2.2 percent of GDP lower; budget deficit widened by 1.6 percentage points; public debt 3.1 percent of GDP higher than projected pre-pandemic.
  - Pandemic increased resources needed to achieve SDGs to an estimated 8.1 percent of GDP a year between now and 2030.
- Policy measures and estimated yields
  - Medium-term revenue strategy: mobilize an additional 3 percentage points of GDP in tax revenue over 2022–27 through base broadening, system effectiveness, and strengthened administration.
  - Fiscal stance: restrain nondevelopment current spending by 1 percent of GDP in favor of development spending.
  - Reforms to facilitate investment, address financial vulnerabilities, support SME development, and labor market reforms: enable an additional 2 percent of GDP in private sector participation in SDG sectors.
  - Combined effect: these policies would allow Cambodia to meet its SDG targets by 2033; securing additional grant-like donor funds could accelerate achievement; to meet SDGs by 2030 an additional 4.1 percent of GDP annually would be required (less than baseline 8.1 percent).
- Key indicators (Baseline table)
  - Real GDP growth (%): 2019 = 7.0; 2020 = -2.8; 2030 = 5.8; 2050 = 4.5
  - GDP per capita (2019 US dollars): 2019 = 1,622; 2020 = 1,550; 2030 = 2,468; 2050 = 4,607
  - Total revenues (% of GDP): 2019 = 23.9; 2020 = 21.6; 2030 = 24.6; 2050 = 29.7
  - Primary expenditures (% of GDP): 2019 = 24.6; 2020 = 24.0; 2030 = 26.6; 2050 = 31.1
  - of which: on SDGs (% of GDP): 2019 = 8.3; 2020 = 7.7; 2030 = 10.5; 2050 = 15.4
  - Overall fiscal balance (% of GDP): 2019 = -0.8; 2020 = -2.4; 2030 = -2.0; 2050 = -2.0
  - Gross public debt (% of GDP): 2019 = 28.6; 2020 = 31.5; 2030 = 34.2; 2050 = 38.0
- Scenario analysis (Table A8)
  - Baseline with SDG needs gap filled: Annual SDG financing = 8.1 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 5,118 (2019 US dollars)
  - Full reform: Yield from reforms = 4.0 percent of GDP; Annual SDG financing = 0 percent of GDP; SDGs met by 2033; Per capita income in 2050 = 5,353 (2019 US dollars)
  - Full reform with SDG needs gap filled: Yield from reforms = 4.0 percent of GDP; Annual SDG financing = 4.1 percent of GDP; SDGs met by 2030; Per capita income in 2050 = 5,644 (2019 US dollars)

*Source: IMF staff calculations and IMF, World Economic Outlook; figures and tables as presented in the Appendix: Country Case Studies.*

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_Source: https://www.imf.org/-/media/files/publications/sdn/2021/english/sdnea2021003.pdf_