Executive summary
In September 2015, international leaders agreed on a new global development agenda comprising 17 Sustainable Development Goals (SDGs) and 169 targets to be achieved by 2030: “Transforming our World: The 2030 Agenda for Sustainable Development”.
Providers of development co-operation face a new challenge as they embark on this agenda with growing financial commitments. They primarily design and implement their interventions in developing countries as inputs by sector (e.g. health, education, energy or agriculture). However, the SDGs have multisector expected outcomes (e.g. no poverty, reduced inequalities or sustainable cities and communities). Shifting their focus to the latter thus requires assessing the impact of the resources they invest in each sector against specific SDGs.
Yet doing so is extremely complex. First, because comprehensive, detailed and comparable information from development co-operation providers on their sector activities, including detailed project descriptions, is sometimes missing. Second, because the links between sectors and the SDGs, and, indeed, between the SDGs themselves, are intricate. To use SDG 4, on quality education, as an example: providers can support the achievement of this SDG by investing in the education sector (e.g. building schools and training teachers). They can also do that by investing in the energy sector (e.g. increasing access to electricity in rural areas), which will enable children to study in the evening, and might also support SDG 7, on affordable and clean energy. And third, because this new focus on outcomes requires that providers engage with partner countries to identify their respective SDG priorities, align country programmes with the indicators identified at country level, and target resources appropriately.
This report aims to help development co-operation providers better grasp the implications of the 2030 Agenda for their sector strategies, so that they can effectively support the SDGs by choosing the right instruments, channels and financing approaches. It provides them with an unprecedented, comprehensive picture of official development finance (ODF) allocations by sector by bringing together data for the period 2012-16 on sector financing by country, type of instrument and delivery channel. The analysis includes not only official development assistance, but also other official flows and resources mobilised from the private sector by official development interventions. The report looks into potential data gaps and the challenge of matching the traditional typologies of donors’ investments by sector with the expected multisector outcomes framed by the SDGs. It also reviews the sector composition of financial flows to specific income groups and countries most in need, such as least developed countries and small island developing states. Finally, the report takes stock of the use of specific approaches, such as sector budget support or pooled funding.
The report’s main conclusions are the following:
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Overall, ODF increased by 35% in real terms between 2012 and 2016, benefiting all sectors in developing countries. In 2016, ODF by bilateral and multilateral providers of development co-operation amounted to USD 293.6 billion.
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Development co-operation providers mobilise private finance only in a handful of sectors. An estimated USD 22.7 billion of private finance was mobilised every year by official development interventions during the period 2012-16, but, unexpectedly, private finance is hardly mobilised by official interventions in sectors such as water, agriculture, or transport and storage.
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All providers of development co-operation should make their sector financing information more detailed, more comprehensive and more comparable to respond to the new, multifaceted SDG framework. In that regard, the total official support for sustainable development measurement framework (TOSSD) is an opportunity for them to make official development finance more transparent.
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Providers of development co-operation have to map the impact of each sector intervention against each goal, align with the SDG targets defined by each partner country, and appropriately target their interventions. Support for global public goods will also help, as these are enablers for achieving development gains in multiple sectors.
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Providers of development co-operation need to look more closely at the specific challenges in each country, especially for countries most in need. For example, in LLDCs, providers do not sufficiently prioritise infrastructure.
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Adopting a smart, sector approach to transition finance is essential, but demands new research. This publication takes an initial look at the benefits of analysing transition finance gaps from a sector perspective.
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The use of debt instruments to support the commercial and infrastructure sectors is growing, calling for increased attention to fiscal sustainability in countries most in need. While grants by development co-operation providers are increasing moderately, loans have increased three times faster than grants in recent years. Debt vulnerability is becoming a concern in the most vulnerable economies. The number of developing countries in debt distress or at high risk of debt distress doubled from 12 to 24 between 2013 and 2017.
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While channels of delivery may vary, depending on sector priorities and strategies, development effectiveness and good donorship need to guide development partners’ efforts. For example, in the social and humanitarian sectors, bilateral providers need to implement good funding practices with civil society organisations and multilaterals implementing projects in the most challenging contexts. This is particularly true for those highly dependent on bilateral resources.