The release of the joint statement “From Billions to Trillions: Transforming Development Finance” at the World Bank-IMF Spring Meetings is one of the most satisfying moments during my two-year tenure as Managing Director and World Bank Group CFO.
My one regret is that the title should have been Billions for Trillions.
Water security is a major challenge for many countries, especially developing ones. The numbers tell a story of water resources under stress while competition for their use is increasing – by 2025, about 1.8 billion people will be living in regions or countries with absolute water scarcity. Clean water and adequate sanitation is still far from reach for many of the world’s poorest. At the same time, more water is needed to produce food and energy to satisfy the rising needs of the earth’s growing population.
(In observance of the International Migrants Day)
We have just received the good news that IDA17 has received a record $52 billion in financing over the next three years. Securing these donor commitments has not been easy because of the weak and uncertain economic environment in many donor countries.
Considering the difficulties of increasing aid commitments in the future, there is a need to look for alternative or innovative sources of financing for development. Can migration provide some help?
As estimates of the financing gap in developing countries range from $350 to $635 billion, there are increasing efforts to find new sources and innovative ways to mobilize external financing. In the latest issue of Finance & Development, Suhas Ketkar and I contributed an article, “New Paths to Funding," which discusses diaspora bonds, performance-indexed bonds and securitization of future remittances and export earnings as possible means for restoring, or starting, access of poor country borrowers to international capital markets.
New sources of financing include potential savings from reducing remittance fees. The G8 Global Remittances Working Group has set a 5X5 target - reduce remittance fees by 5 percentage points within 5 years - which could raise more than $15 billion additional, annual resource flows to developing countries. This objective got welcome support from the G8 Development Ministers Meeting in Italy last week. The Leading Group - a group of 55 countries that have come together to explore innovative financing for development - also discussed remittances and diaspora bonds in a meeting two weeks ago in Paris.
The UN Conference on Financing for Development (FfD) took place in Doha, Quatar from November 30th through December 2nd.
Perhaps one of the earliest utilitarians was Charvak (his name literally means "sweet talker" in Sanskrit) who a few centuries ago said, "live happily as long as you live/drink a lot of ghee, and borrow if need be!" Now in the thick of a financial crisis marked by excessive borrowing and lending, one might argue against the Charvak Doctrine. It's true that debt, like fire, can be dangerous ("Don't borrow, because you will get into debt"), but if managed prudently, it can also fuel new projects, new products, and growth and employment in many poor countries.