The new 2015 Government Spending Watch report (“Financing the Sustainable Development Goals: Lessons from Government Spending on the MDGs”) is launched April 13th. The report uses new and unique data-sets from 67 countries on MDG spending over 2012-14 period, new data-sets on debt and defence spending, combined with in-depth analysis of the latest financing trends in developing countries, to draw lessons and implications for the FfD agenda of the SDGs.

It finds that government spending is falling one third short of MDG needs. While the SDGs will require at least US$1.5 trillion extra in public financing annually – meaning a total of US$22.5 trillion in additional finance will need to be mobilised over the lifetime of the SDGs.

The report recommends that this US$1.5 trillion can be financing through a three-pronged approach:

An evening reception launched the ODI report on Financing the Future, advocating mobilisation of public finance for the SDGs, especially for low- and lower-middle income countries and social protection. Oxfam Executive Director Winnie Byanyima and Ulrika Modéer Swedish Secretary of State for International Development Cooperation made remarks supporting the report’s conclusions.  

DFI Director Matthew Martin participated as a resource person in several Financing for Development related events in a UN Development Cooperation Forum symposium in Incheon, Korea. He presented the case for closer monitoring of how private sector and blended private-public financing will contribute to reaching the SDGs, discussed lessons from DCF mutual accountability surveys for future assessment of MA, and presented a DCF policy briefing on which modalities of development cooperation can best reach the SDGs.  

The UN Development Cooperation Forum has commissioned DFI to prepare two policy briefs on effectiveness and impact standards for private and blended (joint public and private) development cooperation. The first brief, due in June, will define the potential content of such standards and will be presented at a side event at the Addis Ababa Financing for Development conference. The second, in August, will define how the standards might be monitored, and will be discussed at the DCF symposium in Uganda on 4-6 November 2015.

DFI has been commissioned by the UK Department for International Development to prepare a position paper on debt policy in the context of preparing the Financing for Development conference. It has also been asked to provide inputs on the 2016 review of the BWI Debt Sustainability Framework. 

A joint World Bank, DFI and MEFMI mission visited Dar es Salaam, Tanzania to conduct a DeMPA assessment of debt management. The mission met with officials from various Ministries and Central Bank and prepared a report that will be submitted for peer review and then to the Tanzanian authorities for comments. It is anticipated that the final report be completed by June/July 2015. 

DFI helped convene an international conference in Accra, Ghana, looking at how development finance can meet the challenges of the new era given its changing nature and the proliferation of new sources. Opened by H.E. Seth Terkper, Ghana’s Minister of Finance, and organised by the Overseas Development Institute (ODI) and a coalition of global partners, the event aimed at updating participants on key debates and policy processes related to financing the SDGs, providing an overview of recent and likely future trends in the purpose, use and impact of international public finance, and at providing alternative perspectives on international public finance and its use.

DFI participated in the Global Campaign for Education General Assembly in Johannesburg, following which GCE commissioned DFI to coordinate and be lead author on the preparation of two key tools for their future advocacy. The Education Aid Watch report 2015 will assess the performance of donors in providing education-related aid, and their readiness to fund the post-2015 Sustainable Development Goals. A Domestic Finance Toolkit will help GCE members worldwide to analyse national budget revenue and education spending, and design national advocacy programmes to increase progressive revenue and spending. 

In response to the 2014 Ebola epidemic, the IMF announced it is cancelling almost USD 100 million of debt payments from Guinea, Liberia and Sierra Leone who will use the funds to cover the cost of servicing their debt. The IMF is therefore establishing a new Catastrophe Containment and Relief Window (CCRW), a relief trust which will provide grants to countries suffering epidemics and other natural disasters. It urges other lenders to Guinea, Liberia and Sierra Leone to take similar action to ease financial burden.

While this move has been largely welcomed, concerns were raised about the announcement by the Fund to also offer the West African states $160 million of new loans, which will seemingly increase debt payments in the 2020s. According to Jubilee Debt Campaign, “the debt of Guinea, Liberia and Sierra Leone to the IMF will increase from $410m to $620m over the next three years, because of the $415m of new loans granted before the announcement”.

Details of this new mechanism can be found in the IMF’s press release and an analysis by Jubilee Debt Campaign is available here.  

New research by ODI claims that the irresponsible use of sovereign bonds is jeopardizing sub-Saharan African economies by creating boom and bust cycles, a situation echoing the 1990s’ Asian financial crisis.

Highlighting the popularity of sovereign bonds in many low and middle-income countries, the study claims that using US Dollar as transaction currency threatens the countries’ ability to honour their repayments to investors because their own local currency has significantly depreciated in 2014. According to the research, this exchange rate risk of sovereign bonds issued by governments in sub-Saharan Africa in 2013 and 2014 is threatening losses of USD 10.8 billion.

The paper is split in two parts: Part I gives an overview of the current situation of sovereign bonds issued in sub-Saharan Africa. Part II considers the risks associated with sovereign bonds and their prevalence today.