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Global Outlook on Financing for Sustainable Development 2023

No Sustainability Without Equity

image of Global Outlook on Financing for Sustainable Development 2023

Successive crises including COVID-19, Russia’s war of aggression against Ukraine and the climate emergency are exacerbating inequalities between and within countries and stifling progress to achieve the Sustainable Development Goals (SDGs) and the Paris Agreement. While developed countries deployed historic stimulus packages to build back better, developing countries lacked fiscal and monetary buffers to respond. Countries with the fewest resources face challenging trade-offs between short-term rescue and long-term financing for a sustainable recovery. The SDG financing gap in developing countries grew due to a drop in available resources called upon in the Addis Ababa Action Agenda coupled with rising financing needs. Official Development Assistance (ODA), or aid, played an important role to help narrow the gap, but could not do so on its own. Global crises open a window of opportunity for SDG alignment of broader resources to narrow the gap. Growing trillions in developed countries aim to reduce risks, including environmental, social, and governance (ESG) criteria. However, resources are not reaching the countries most in need. Urgent action is needed to remove bottlenecks for a more equitable and needs-based allocation of sustainable finance.

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Overview

Following the pandemic, a K-shaped recovery emerged across countries (). Output losses in developing countries sank to 5% of their pre-pandemic gross domestic product (GDP) projections, while high-income countries (HICs) dipped only by 3%. Among the countries most in need, the GDP of small island developing states (SIDS) dropped the furthest, by -8.6%, in large part because the tourism sector was directly affected by travel restrictions and lockdowns. Altogether, developing countries lost USD 1.4 trillion in GDP annually due to the COVID-19 crisis, more than half of the pre-COVID-19 annual SDG financing gap (IMF, 2020[3]; Intergovernmental Panel on Climate Change, 2022[4]).

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