## Financing for Sustainable Development: Money and the Right Policies

_IMF Blog, June 11, 2015_

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## Bibliographic details
- Authors: Min Zhu, Sarwat Jahan
- Published: June 11, 2015

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### New goals, new world
- The United Nation’s Sustainable Development Goals replace the Millennium Development Goals and broaden development to embrace economic, social, and environmental issues.
- The world has become increasingly interconnected since the early 2000s; global trade flows have increased steadily in the past two decades (Chart 1).
- Many frontier economies are rapidly integrating with global financial markets:
  - In 2014, Côte d’Ivoire, Ghana, Kenya, Senegal, Vietnam and Zambia issued government bonds totaling about US$7 billion.
- Official development assistance has declined as the main source of capital flows to developing countries:
  - Official development assistance dropped from 1.6 percent of developing countries’ collective GDP in 1990 to 0.7 percent of GDP in 2012 (Chart 2).
- Increased integration raises exposure to external shocks such as swings in global commodity prices, capital flows, and changes in exchange rates.

### Mobilize domestic revenues
- To fund development needs and build resilience against shocks, many developing countries need both higher revenues and better-managed tax collection and administration.
- Country experiences show domestic policy can yield large results (Chart 3):
  - Peru increased its domestic tax ratio from 6 to 13 percent of GDP over the 1990s, and stabilized it at about 17 percent since 2010.
  - Other examples of important strides include Tanzania and Vietnam.
- There is substantial scope to strengthen domestic resources while addressing environmental concerns through:
  - Energy price reform.
  - Carbon pricing.
- The IMF supports countries to:
  - Strengthen capacity to raise money at the national level.
  - Reform energy taxation and subsidies, among other measures.
- Major advanced and emerging market economies can assist via collective action:
  - Fulfilling foreign aid commitments to support the most vulnerable.
  - Enhancing international tax cooperation.
  - Reviving the global trade liberalization agenda.
  - Agreeing national targets for reducing CO2 emissions at the climate change summit in Paris in December 2015.

### Resilience through the right policies
- Money alone is insufficient; countries need policies tailored to their circumstances to translate and implement the Sustainable Development Goals.
- Needed policy objectives include:
  - Maintaining an attractive environment for investment.
  - Making effective use of available resources on priority areas such as health and education.
  - Helping countries recover and rebound from severe external shocks.
- Policy measures should:
  - Raise the contribution from domestic resources to fund goals.
  - Ensure borrowed funds and tax revenues are used effectively to address infrastructure gaps and promote inclusion.
  - Support growth that is strong, sustained, and broadly shared, while keeping debt levels sustainable.
- Roles and responsibilities:
  - Countries are in the driver’s seat for their development goals.
  - More advanced economy partners should adopt measures to foster stable global economic and financial conditions.
  - International institutions act as technical advisors and support teams working with countries.

### IMF support and reforms
- The IMF is working with developing countries to strengthen resilience in a more connected world.
- The IMF is exploring options to:
  - Refine financing facilities to boost access to IMF concessional resources for the poorest and most vulnerable countries.
  - Provide stronger safety nets for countries that have access to foreign capital markets and are exposed to capital flow shocks.
- These reforms aim to enable developing countries to be better prepared to handle economic shocks while pursuing their development objectives.

*Source: Financing for Sustainable Development: Money and the Right Policies — Min Zhu, Sarwat Jahan, June 11, 2015*

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## References

- [عربي](http://blog-montada.imf.org/?p=3666)
- [frontier economies](http://blogs.imf.org/2014/12/16/moving-on-up-the-growth-story-of-frontier-economies/)
- [energy price reform and carbon pricing](http://blogs.imf.org/2015/05/18/global-energy-subsidies-are-big-about-us5-trillion-big/)

_Source: https://www.imf.org/en/blogs/articles/2015/06/11/financing-for-sustainable-development-money-and-the-right-policies_