Multilateralism might be broken, but it is not dead yet. Or so we should conclude from the multilateral negotiations ahead of the fourth edition of the UN Financing for Development conference, about to begin in Seville. A once in a decade meeting, the last FfD was hosted by Ethiopia in 2015; this year it will be hosted by Spain over four days from June 30\u2014without the participation of the US, which officially withdrew from the conference two weeks ago. As is the case with all UN processes, FfD4 will involve extensive intergovernmental negotiations to reach a consensus on a final outcome document, with civil society organizations, international development institutions, and corporations all lobbying to contribute.<\/p>\n
The four co-facilitators\u2014Mexico, Nepal, Norway, and Zambia\u2014tasked with the \u201cwriting pen,\u201d released an \u201celements paper\u201d in November and a \u201czero draft\u201d in January. UN Members then negotiated the wording in several PrepCom meetings in New York, until with unusual punctuality the final draft was agreed on June 16 ahead of the Seville meeting\u2014an easier task without the participation of Washington.<\/p>\n
I have followed the process closely as a member of the UN\u2019s International Commission of Experts<\/a> convened by the Spanish government and will attend the meetings in Seville. In a series of dispatches published at Phenomenal World, I will report on the meetings as they occur and explore what they mean for the future of development finance going forward. In this first dispatch, I explore the context and negotiations leading up to Seville. <\/p>\n The Billions to Trillions hijacking of FfD3 in Addis Ababa<\/p>\n From the turbulent perch of the present, 2015 seems like a lifetime ago. That year, a trifecta of UN agreements announced transformative global ambitions on climate and development. In July 2015, 193 UN Member States agreed to the Addis Ababa Action Plan of the Third International Conference on Financing for Development (FfD3). Solving the financing question, the UN Secretary-General Ban Ki-moon stressed, provided \u201cthe foundation of a revitalized global partnership for sustainable development that will leave no one behind.\u201d In September of that year, UN members signed the Agenda 2030 for Sustainable Development, a \u201cbroad and universal policy agenda\u201d aiming to \u201ctransform our world\u201d through a new set of Sustainable Development Goals. Then, the Paris Agreement in December marked a new direction in climate politics. Climate action was no longer synonymous with carbon pricing, but instead a long-term project of economic transformation.<\/p>\n The FfD3, the World Bank reported<\/a>, was marked by \u201cone stark difference from previous gatherings in Doha and Monterrey: unequivocal acceptance that the financing will have to come from private as well as public resources.\u201d The change was inaugurated in part by the sheer force of a new Bank-created motto for financing development: \u201cFrom Billions to Trillions.\u201d Public, concessional funding in the billions could unlock trillions in private investment. To meet the aims of the social development goals, the Bank claimed, required trillions in financing, which could only materialize through \u201ca paradigm shift<\/a>\u2026 a financing framework capable of channelling resources and investments of all kinds\u2014public and private, national, and global.\u201d It was music to many ears, eager to hear that trillions of investment only required small amounts of public expenditure.<\/p>\n What had been the catalyst for change? Like its sister Bretton Woods institution, the IMF, the Bank had been suffering a crisis of legitimacy as the vehicle of the Washington Consensus. External critique and internal rebellion had multiplied against the global economic liberalization paradigm. In one famous episode, US Treasury Secretary Larry Summers demanded that the Bank\u2019s Chief Economist, Joseph Stiglitz, be forced out. Stiglitz had been a vocal IMF critic after the 1997 East Asian crisis, even once advising Ethiopia against the IMF and US Treasury demands for financial liberalization. Summers was furious to see an insider echo the progressive voices that blamed the Bretton Woods institutions for lost decades across the global South. Stiglitz left the Bank.<\/p>\n The World Bank eventually revised the Washington Consensus with a new emphasis on market-failure and social sustainability. But geopolitical and ideological shifts were underway. The tide was turning back towards state involvement in the economy, as countries across the global South wondered how to emulate China\u2019s success story. At the same time, China\u2019s Belt and Road Initiative preoccupied Washington with the concern that geopolitically strategic infrastructure investment might build a credible alternative to US-dominated global order and its Bretton Woods institutions.<\/p>\n The Bank needed a new development paradigm\u2014albeit without radical change.\u00a0 The world of illicit financial flows, ever lessening corporate tax, committed fiscal restraint, and neoliberal constraints on public money creation would remain intact. What the \u201cbillions to trillions\u201d slogan captured was a desire to get public money to activate the power of private cash\u2014billions for investible trillions, would be a more accurate description of the new paradigm.\u00a0<\/p>\n I have termed this new paradigm the Wall Street Consensus<\/a>, to capture the new vision of SDG development as an asset class. The investible development paradigm involves new development partners in institutional investors seeking the right risk-adjusted returns. This means, for example, a new hospital becomes investible once private investors can count on concessional funding from the World Bank or local fiscal resources. The principle is to shield private investors from certain risks. For such investors, the trillion dollar question became \u201cjust how much derisking can I get from the state and international development institutions?\u201d<\/p>\n According to this logic, rich countries could agree to \u201cmobilize\u201d USD100 billion a year by 2020 for developing countries, since the language of mobilization did not require them to specify how much they would fork up in concessional funds. Financiers found their preferred solution to the USD 1.5 trillion infrastructure financing gap in the FfD3 document. As articulated<\/a> by BlackRock CEO Larry Fink, a year earlier, it proposed \u201ca natural partnership.\u201d \u201cMost governments,\u201d he said, \u201csimply don\u2019t have enough cash for the projects they need, and investors are looking for new sources of return in increasingly difficult and correlated financial markets.\u201d Public money, via an infrastructure bank, would constitute \u201cthis sort of big and bold initiative\u2014an act of confidence by the government\u2014that investors want and need, and which can help unleash the power of private dollars.\u201d<\/p>\n Closely echoing Fink, the FfD3 document pleaded with \u201clong-term institutional investors, such as pension funds and sovereign wealth funds, which manage large pools of capital\u2026 to allocate a greater percentage to infrastructure, particularly in developing countries.\u201d<\/p>\n The derisking development model, and its Billions to Trillions shorthand, brought together financiers looking for stable returns in a world of low interest rates, politicians animated by transformative ambitions but too timid to challenge the ideological and institutional restrictions on fiscal space, development activists and officials that saw an opportunity in the new SDGs, and geopolitical hawks in the US seeking to counteract China\u2019s BRI. The implication was that\u00a0 transformative ambitions could be funded by inviting Wall Street to invest in infrastructure without the need for institutional and political change.<\/p>\n From Addis to Seville<\/p>\n As preparations for the meeting in Seville began in 2024, participants agreed on one thing: the Billions to Trillions promise was, in the words of Charles Kenny of the Centre for Global Development, a \u201cfiction<\/a>.\u201d Even the World Bank had ceased its talk of the trillions of dollars to be poured into development. This was not for lack of trying. In 2017, its president<\/a> had declared that \u201cto get to the trillions, we needed to change the way we do our work.\u201d\u00a0 With the approval of the first Trump Administration, the Bank had to shift from being a lender to being an investor that \u201csystematically de-risks both projects and countries to enable private sector financing.\u201d The Bank would extend guarantees or take first loss tranches in private investments across health, education, housing, energy, nature, biodiversity, and water, helping these new SDG asset classes yield reliable cash flows for institutional investors.<\/p>\n The Bank also announced a new Maximising Finance for Development (MFD) initiative that same year. The plan was to hardwire the imperative of mobilising private trillions into staff incentives and programs, including the Strategic Country Diagnostics and Country Partnership Frameworks, the new InfraSAP (Infrastructure Sector Assessment) and Country Private Sector Diagnostics. This was an initiative that was explicitly about raising money, the question of actually using that money for development had completely disappeared from view.<\/p>\n But by 2023, in a quiet admission of failure, references to both the Trillions agenda and the MFD disappeared from the Bank\u2019s public documents. An OECD assessment delivered a particularly unpleasant arithmetic. Every dollar of multilateral investment mobilized just 30 cents of private investment. The trillions were simply not there.<\/p>\n Progressive critics had an explanation: the model was fundamentally flawed. Investors demanded returns on their infrastructure assets that were simply incompatible with developmental goals of universal access to high quality social infrastructure, and governments could not find the fiscal resources to subsidize such returns<\/p>\n But the \u201cinvestible development\u201d model had still bigger problems. The new development partners, the Bank\u2019s chief economist Indermit Gill pointed out<\/a> in 2024, were in fact taking more money out of the global South than they were putting in. \u201cThe financing landscape for development has been upended,\u201d he wrote. \u201cSince 2022, foreign private creditors have extracted nearly USD141 billion more in debt-service payments from public-sector borrowers in developing economies than they have disbursed in new financing.\u201d The Covid-19 pandemic and the interest rate hikes of the US Federal Reserve had produced new fiscal pressures, once again revealing\u00a0 the faultlines of the global financial architecture. External debt distress loomed large across the global South, with total debt-servicing costs (principal plus interest payments) reaching an all-time high of USD1.4 trillion in 2023. Global North-led debt relief and restructuring initiatives, like the Debt Service Suspension Initiative and the Common Framework for Debt Treatments, made little progress in forcing the involvement of private creditors. Countries that were promised trillions in private investment were instead paying trillions in debt service, often redirected from public spending on health and education. Reform of the debt architecture would thus become a pressing priority, and a sticking point in the Seville negotiations.<\/p>\n But while the rhetoric shifted away from \u201cTrillions,\u201d the general model retained its dominance. In the run up to Seville, both rich countries and financiers continued to push it. The Biden Administration had embraced it enthusiastically. National Economic Council head Brian Deese had come to the Administration from BlackRock, where, in 2018 he oversaw<\/a> a new Climate Finance Partnership between BlackRock, the governments of France and Germany, the Hewlett Foundation and the Grantham Environmental Trust. The CFP Fund was a blended finance vehicle, in which governments and philanthropies gave BlackRock USD 100 million, to mobilize climate investment in the global South. It notably purchased the controlling stake in the Lake Turkana Wind Power project in Kenya. The Kenyan state\u2019s generosity towards Wall Street ultimately became so controversial that the government was forced to impose a moratorium on power purchasing agreements, while local manufacturing groups complained that high energy costs were undermining industrialization efforts.<\/p>\n Rather than drawing the lessons from this (and numerous other) episodes of \u201cinvestible development,\u201d the Biden Administration instead promoted another derisking effort, the G7 Partnership for Global Infrastructure and Investment (PGII). Launched in 2022, PGII would \u201cinvest and mobilize up to USD 600 billion by 2027 to narrow the infrastructure investment gap in partner countries,\u201d a \u201cstrategic opportunity for developing countries to accelerate progress towards achieving the Sustainable Development Goals (SDGs) and the targets of the Agenda 2030.\u201d At the June 2024 G7 meeting in Italy, the panel on PGII saw heads of state listen to Larry Fink stress that global infrastructure investment could not be shouldered by taxpayers. Rather, he argued, \u201cwe should look at the growing pool of private investment.\u201d While the Billions to Trillions slogan had fallen out of favor, desriking remained the model for global development policy.<\/p>\n The Seville commitment <\/p>\n The outcome document<\/a> of the FfD4 process offers some signs of where the consensus is headed next. Saliently, it is clear that the Seville process has remained a prisoner of the Trillions model. The section of the document on domestic resource mobilization notwithstanding, commitments to derisking run throughout. Parties emphasize the need to \u201cdevelop an enabling policy environment which facilitates private investment in agriculture and food systems, and the role that public investments can play in incentivizing and derisking private investments.\u201d There is strong language on working to \u201cstrategically attract foreign development investment, including from institutional investors, into developing countries building on national planning frameworks.\u201d<\/p>\n There is even stronger language in the section on \u201cPrivate Capital Mobilization\u201d: \u201cWe will work to increase the mobilization ratio of private finance from public sources by 2030 by strengthening the use of risk-sharing and blended finance instruments, such as first-loss capital, guarantees, local currency financing, and foreign exchange risk instruments, taking into account national circumstances. We invite MDBs and DFIs to harmonize and strengthen impact metrics to support mobilization targets, building on ongoing work, and to align incentives with maximizing sustainable development impact tailored to national needs.\u201d Point 33.o expresses support for extending the WB Guarantee Platform, a new \u201cone-stop shop\u201d to mobilize private finance. It calls on MDBs to introduce \u201cinnovative financial instruments such as portfolio guarantee platforms.\u201d Indeed, that Section includes only a single point on aligning derisking with development outcomes, and twelve points on initiatives to scale up derisking. The climate commitments call for \u201cassessing and improving the mobilization of finance from all sources to address the global biodiversity finance gap by 2030.\u201d<\/p>\n The consensus diagnosis emerging from FfD4 for why trillions of investment have not appeared is that more carrots are needed. There is an acknowledgement of tension between the goals of increasing returns to investors and development goals of nations. The outcome document notes that blended finance may skew benefits towards private investors, that governments and MDBs have allowed investors to cherry-pick revenue-generating assets in middle-income countries (80 percent of blended finance still flows there), that there is little transparency which in turn may generate significant fiscal burdens and debt sustainability problems. These are significant concessions to the critics of the investible development model.<\/p>\n