Debunking the Myth of the Financing Gap Jayati Ghosh

The upcoming Paris Summit on a New Financing Pact once again shines a spotlight on the so-called financing gap. According to an early concept note for the Summit: “Developing countries have large developmental needs and face huge financing gaps due to limited access to international markets, as well as inadequate financing mechanisms including limited concessional finance, hampering their ability to achieve the 2030 Agenda for Sustainable Development and its goals as well as the climate goals.” Such a declaration aligns with the mainstream narrative that – given the insufficiency of official development assistance (ODA), climate finance and public finance more broadly – there is a large financing gap to be bridged if the SDGs are to be achieved while also financing climate change adaptation, mitigation and Loss and Damage.

What this narrative ignores, however, is that it is political will that prevents donors from upholding their 0.7% and US$100 billion commitments to development and climate finance respectively. It also disregards the extent to which south-north flows of resources outstrip flows in the other direction due to illicit financial flow and tax dodging by large corporations and wealthy individuals; and the servicing and repayment of debt that, in many cases, could be considered illegitimate.

This narrative also undermines the Financing for Development consensus forged more than 20 years ago at the International Conference on Financing for Development in Monterrey in 2002 to reverse south-north flows of finance, including through debt servicing, repayments, illicit financial flows and corporate tax avoidance and tackle development obstacles in trade and broader financial systemic issues.

Barbados’ Prime Minister Mia Mottley and the Bridgetown Initiative provided the impetus for the Paris Summit and played an important role in highlighting the need for action on debt, liquidity and concessional lending, including for vulnerable middle-income countries. Unfortunately Mottley’s argument that the global south has for too long been the place from which wealth has been extracted, and are price takers rather than price makers, has disappeared from the rationale behind calls for a ‘new financing pact.’ Instead, numerous discussions at the Summit will centre the need for project pipelines to attract private investment and finding ‘innovative’ sources of finance. Ultimately, financial markets dominated by market players and investors of the global north will be the best served and Mottley’s call for justice will have been completely forgotten.

This panel will discuss the risks and opportunities for our advocacy that the Summit and other political opportunities this year (FfD, G20, WB-IMF Annual meetings…) provide to promote an alternative to the ‘financing gap’ narrative.

Panellists:

• Jayati Ghosh — Development Economist and Co-Chair of ICRICT (online)

• Lison Rehbinder — Coordinator French Tax Justice Platform, CCFD-Terre Solidaire

• Glenis Balangue — Coordinator, IBON International (Europe)

• Stefano Prato — Managing Director of Society for International Development, CSO FfD Mechanism