There's Something Rotten in the State of Development Funding

Monday, November 16, 2015

This Insights piece originally appeared on The Rockefeller Foundation blog.  It is reposted here with the permission of The Rockefeller Foundation.

There's Something Rotten in the State of Development Funding

by Saadia Madsbjerg, Managing Director, The Rockefeller Foundation

What comes to mind when you think about Denmark? LEGO? The Little Mermaid? Delicious pastries?

All good answers. But what you may not know is that Denmark has historically been one of the most progressive countries in supporting international development. It has been one of five countries in the world that actually meets (and exceeds) the United Nation‘s target of granting 0.7 percent of Gross National Income (GNI) to Overseas Development Aid (ODA).

With this in mind, it seems only fitting that a Dane, Mogens Lykketoft, president of the United Nations General Assembly, presided over the 70th session of the UN General Assembly as 193 world leaders launched the Sustainable Development Goals (SDGs) in September. Setting the global development agenda for the next fifteen years, the seventeen SDGs—ranging from eliminating poverty and hunger to promoting peace and justice—aim higher than ever. In his opening remarks the Danish prime minister, Lars Løkke Rasmussen, described them as “a vision of the way the world should be in 2030. History will judge us and hold us accountable to achieving results.”

Achieving the SDGs will require more than just good intentions—with an estimated price tag of $5-7 trillion annually, it will also require exceptionally high levels of funding. So it’s bewildering that a week after the adoption of the SDGs, the Danish government put forward a plan to cut the Danish ODA budget by approximately $400 million annually. The plan will reduce Denmark’s overall ODA spend from 0.85 percent to 0.70 percent of GNI and effective this year, will also end support for development programs to which Denmark had already made commitments. Examples include reducing funding for the G7 $100 billion pledge to fund climate change adaptation in developing countries and the Global Fund to Fight AIDS, Tuberculosis and Malaria.


It was widely expected that the developed world countries would not provide any additional ODA resources to fund the SDGs, however, few had anticipated a proactive cut to existing spending. For the people that depend on the Global Fund for tuberculosis testing and treatment in countries such as Myanmar, the reduction in funding is detrimental. And for development health professionals trying to connect the dots, it’s hard to reconcile the Danish reduction in ODA with the lofty SDG launch at the UN. At a time when the budgets of the developed world countries are fiscally constrained and there’s little political support to focus on poverty, health, and justice issues in faraway and exotic countries, such disconnects are perhaps to be expected—but they definitely have real consequences.

Regardless of lofty visions and global summits, what the world of international development needs is a source of funding that is predictable and sustainable, not one that appears and disappears on political whims. Innovative finance, though still in its infancy, is working hard to do just that. Operating at the intersection of philanthropy, civil society, the private sector, global capital markets, and the public sector, it is focused on shaping financial mechanisms that secure development programs access to financing from the private sector with models that provide efficiency, predictability, and sustainability.

Of course, innovative finance alone can’t solve every problem. But given today’s political realities, the future of successful development lies with financing and not with giving. Without this kind of thinking, we will be hard pressed to solve any global development problem.