To achieve the SDGs, countries are looking for cheaper financing that can enable accelerated policy reforms – is this enough?

Almost two-thirds of the way to 2030, when the Sustainable Development Goals (SDGs) will be set, the issues that threaten their achievement are of major concern worldwide. In my visits to countries across the Asia-Pacific region, conversations with governments, partners, the private sector, councils and communities often point to a few factors that can have the greatest impact on progress – affordable financing for policy investments and infrastructure investments in the required scale; and the reach and ability of public and private institutions to provide essential services.

We now have more evidence than in 2015 that the policy and factor mix required for SDG acceleration has a multiplier effect across many development dimensions – such as: better access to digital public services; Providing health and disaster insurance; ensuring social protection for the most vulnerable; and the protection and regeneration of land, water, forests and oceans – these are examples of what is needed for longer-term policies with longer-term financing and at affordable conditions.

Given the massive $3 trillion gap to bridge the SDG targets for developing countries, vulnerability-based pricing of climate and development finance is urgently needed. It is clear that a significant part of this financing must come from the capital markets and the private sector, both domestically and internationally. And therein lies a crucial role for UNDP – to promote a win-win connection between national policies and financial markets to channel financial flows into SDG-aligned policies and investments; and strengthen the capacity of national and local institutions to shape, manage and account for the resulting value. In UNDP terms, value is measured by human development outcomes and sustainability impacts on the planet.

To attract this type of capital, ODA and other grant-based financing play an important role – from leverage and technical assistance to the design of financial and policy instruments; to mitigate early risks by taking the “first loss” in demonstration spaces; Providing guarantees and blended financing instruments for significant results; and build capacity and systems where these remain thin. And more importantly, staying the course in times of crisis to stay one step ahead of investors seeking stability and security in unpredictable contexts and times.

For many middle-income countries in the Asia-Pacific region, lending rates from commercial sources can be well over 10%. Central bank short-term lending to commercial banks may be even higher. While IFIs offer access to financing at more favorable terms (typically around 5 to 7% and at 1% to 4% for countries eligible for the International Development Association (IDA), the volume of funds available through these mechanisms is not sufficient to enable rapid fulfillment Growing needs are pushing these countries, both governments and the private sector, to much higher commercial interest rates And for these countries, caught in cycles of weak governance and poor economic policies, they are driving sustained levels unsustainable public and private debts lead to insolvency.

As I advocate for better lending conditions to developing countries based on climate and development vulnerability, I am always reminded that this is only part of the equation. The other part is that the same developing countries take responsibility for the growth of the revenue side. This conversation often revolves around a mix of tools as the centerpieces of change – from tax reform and trade policy to attracting more remittances and optimizing revenue from tourism and services; From valuing and wisely managing natural assets to investing in infrastructure and human development that pays dividends over time, they all strengthen the balance sheet of the economy. Revenue is also saved by curbing out-of-control corruption and waste and striking the good balance between stability and risk-taking to motivate funds to come in and stay there to avoid capital flight.

All of this is true. However, it is the countries in the region that have weathered the multitude of shocks and continue to show some resilience or faster recovery that continue to invest in people’s choice and skills. Without this, the rest fails.