'The clock is ticking, the future won’t wait'

By EBRD  Press Office

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Delivered by: 

EBRD President Sir Suma Chakrabarti


Financing the SDGs - can the world avoid failure?

In 2015 the world set itself a truly remarkable, comprehensive and universal agenda in the form of the Sustainable Development Goals. 

And I am delighted to be sharing a virtual stage with UN Deputy Secretary General Amina Mohamed who played an instrumental part in that agreement.

But we were collectively falling short on the delivery of the SDGs before the Covid-19 crisis.

 That is why the UN Secretary General had already called for a decade of action at the start of this year.  The world will be even further off track once the crisis is over. 

And although they are further away, the achievement of the SDGs has never been more important or necessary.  The stark reality is that:

  • the climate emergency is frightening and urgent.  A year of lower emissions will not make a difference without a decisive turn to a low carbon future;
  • acute inequality between and amongst nations has been growing for a generation.  Failure to address the multiple systemic causes now will undermine confidence in democracy and politics, not to mention stifle and squander human potential; and
  • redressing the historic imbalances in power between genders and between races is fundamental to creating a global society that supports and nurtures the talents of each for the benefit of all.

All this was known before the crisis.  But we were doing – at best - too little, too late.  This must change. 

Crises create chaos, but they also galvanise.  They remind people what they value and jolt citizens, institutions and leaders out of complacency. 

The theme of my talk today is that diagnosing the problem is not enough. Nor is being an armchair critic.  The response must also be ACTION.

My proposition is that we already know – for the most part - the answer: the Addis Adaba Agenda agreed by the international community in 2015. 

This gives us a roadmap.  We just need to know how to read it. 

And once read, drive forward with determination and purpose. 

Some might think the Addis Agenda has been tried and failed. 

The truth is it has never been fully tried.

That is why it is the centrepiece of the Secretary General’s follow up action to the High Level Event on Financing for Development in the Era of Coronavirus and Beyond.

Today, I would like to share three reflections drawn from my experience in development, in government and as a head of an MDB.

First, a universal agenda needs to be owned universally.

The SDGs are universal in their application and comprehensive in their coverage.  I want to highlight three implications:

  1. Development is not something that happens to other people.  The need for decent jobs, effective infrastructure, consistent and constant access to energy, and good education is relevant across the globe whether in Accra, Ankara or Annapolis.
  2. The often touted tension between self-interest and global interest is a red herring.  Covid-19 has signalled clearly the interconnectedness of the world and mutual dependence of the human race.  One strong lesson from this is that global society is only as strong as its weakest link.  Another is that the weakest link can be anywhere.
  3. That collective will and cohesive leadership are essential to achieving progress.  Without solidarity, trust and widespread commitment to the common good, the SDGs cannot be achieved.

The world needs vibrant multilateral cooperation and shared vision.  This is not an optional extra.  Achievement of the SDGs is existential.

My second reflection is that there is no silver bullet.

Achieving the SDGs is not easy.  The spirit of Addis was first captured in a World Bank paper which called – catchily – for the transformation of ‘billions to trillions’. 

The slogan suggests simplicity – the substitution of two letters. 

But multiplying anything – especially money – by a thousand is not straightforward and certainly cannot be delivered by one actor alone.

This is the true message of Addis.

Addis recognised that countries want and need to be the prime drivers of their own destiny. 

It is only through supporting an economy that creates the conditions for self-sustaining growth that the resources for the SDGs can be generated. 

This means putting in place the right policies in all its aspects – rule of law, transparent and predictable governance, efficient and fair taxation systems, probity and effectiveness in public administration. 

It is action by countries themselves that will unlock financing from multiple sources – private financing, official development assistance and countries’ own resources, thus paving the way to progress towards the SDGs.

But governments do not act in a vacuum:

  1. The private sector is key.  Within countries, financial systems need to be nurtured to support productive investment.  Internationally, the private sector needs to respond when the conditions are in place.  Too often, countries do the right thing only to find that financiers prefer the comfort of familiarity to the potentially greater rewards of learning about new markets and experimentation. Private capital needs to recognise – and be encouraged to recognise – the opportunities which exist.  Reform is not its own reward.  
  2. International development assistance is needed whether for supporting the poorest, providing the global public goods on which all people rely or to address systemic market failures.
  3. And the system of international economic governance has to be designed to operate for the benefit all countries:
  • Trade has been the engine of prosperity since the first stone age groups exchanged goods.  In the modern world, its huge potential for raising incomes and increasing resilience can only be fully realised if trade is rules based and fundamentally fair.
  • Better and stronger rules are needed to fully realise the potential opportunities created by new digital technology to support innovation and promote competition while addressing the challenges such as those posed by the divorce between profit generation and taxation.  These new challenges are exacerbated by the old challenges of tax secrecy and arcane accounting.
  • A universal agenda needs global institutions in which the voice of all is both heard and influential.  No country; no region; no continent has a monopoly on wisdom nor is beyond critique.

This, in a nutshell, is the Addis agenda – domestic reform catalysing private flows generating the tax revenue to support public investment of all kinds in an international system where institutions are designed to foster global cooperation and international fairness. 

And beyond the economic and political, Addis had the prescience to recognise that prosperity is rooted in practically seeing the vital importance of data collection to drive better decision making.  It had the prescience to understand the systemic need to skill nations and populations to realise the potential of science, technology and innovation. 

Which brings me to my third reflection: the Multilateral Development Banks must form a system that is more than the sum of the parts.

On the face of it, MDBs are a small part of the solution –our annual lending is only fraction of a single trillion, although it is many billions.

It is – of course – more complicated than that.  Using the EBRD as an example:-

  • Our investments are strategic, designed to support systemic change.  Like throwing a stone into a pool, the ripples spread wide and far.
  • Our work is focussed on the key objectives of the SDG agenda.  In the EBRD, nearly half of our investment supports the Green agenda, most of it, unusually, through the private sector and the vast majority is truly climate finance.  Our private sector, practical approach to increasing the inclusion of underserved groups and reducing inequality is growing all the time.
  • Our activity reaches parts others do not.  For the EBRD, work at the municipal level and in local currency lending and local capital markets is ground breaking.  Both – incidentally – are highlighted in the Addis Agenda.  
  • Our policy work directly supports the conditions which should lead to private sector development.  With EBRD colleagues working in 50 offices – virtually today of course - across the 38 economies where we operate, we have a deep understanding of the challenges in private sector development and we have credibility with government.  Our policy advice is rooted in practicality and will have real impact.  It is supported by a thorough knowledge of the political economy of our countries – a consequence of our unique mandate that demands that the Bank takes into account the political aspects of its work. The result is impact beyond finance.
  • Our coverage straddles the income spectrum addressing needs in low and middle income countries and ignoring the false assumption of a zero sum game between them.

But there are key ways in which the power of the MDBs is underexploited

MDBs as complements, not substitutes

MDBs have different and complementary skills.  This has been the lesson of successive EBRD expansions where our entry has uncovered new unmet demands and – in fact – the universe of possible projects has increased for all.

Some shareholders, and indeed the G20 Eminent Persons Group, have called on the MDBs to act as a system, but a key restriction is the inherited rigidity of a system organised by geography. 

The world cannot afford for scarce skills to be artificially confined to one part of the world or another.

I have long advocated a skills based approach to organising the system. Now is the time for a bold approach to optimise the impact of the system. This approach would better mirror the myriad of technical expertise and competencies needed to deliver on the rightfully broad and all-encompassing areas covered by the SDGs.

The need for this joined up thinking is clearest in Africa.  On the one hand, the continent sees the greatest needs and has the greatest distance to the SDGs.  On the other, Africa is a vibrant, youthful continent which stands on the cusp of real and lasting progress. 

A fully effective MDB system would support the private sector development essential to realising this opportunity by deploying the skills of all its component parts to seize the moment.  

MDBs as risk takers

Shareholders provide public money to MDBs both as capital and grant resources.  Those resources are scarce and politically sensitive.  A natural result is that shareholders want safeguards of multiple sorts in place – environmental, integrity, tax responsibility, open procurement.

These are laudable and necessary things.  But, put together, they can make the system risk averse and they raise the cost of doing business with MDBs. 

Both reduce the impact of the MDBs.  In the face of the scale of the challenges the world faces, it is worth exploring whether the balance is right between safeguard and risk.

This is not a call for a race to the bottom in standards.  It is to see them implemented intelligently to support countries and clients in raising their own standards.  Things will go wrong. 

When they do, lessons need to be learned.  But it should not be that heads of MDBs or politicians are deterred from action by the tyranny of bad newspaper headlines.

Perfection is – at best - rare.  If the bar is zero tolerance for mistakes, it will be hard work even to stand still.

We must be both brave and accountable.

Releasing MDB capacity

Finally, for all the other things we bring to the system finance remains a central part of what the MDBs can bring to support the achievement of the SDGs.  I

believe we need far more imagination to increase and enhance the potential of the MDBs to do more with what they have. There are a range of possibilities:

  • We should remove the artificial constraints: The MDBs have excessively conservative capital policies by statute.  Further, shareholders demand that this conservatism is reinforced. The imperative of avoiding the risk of a call for additional capital resources inhibits what the MDBs can do.  At a minimum, we could move to modern capital management and base our approaches on risk weighted capital, rather than nominal.  For the EBRD that would free up another €2 billion in lending a year.
  • We should move to smart leverage:  Our greatest impact comes through the capital we provide to our partner banks which they on-lend multiple times.  When we loosen the capital constraints of partner banks through either the provision of capital or capital relief through guarantees, impact would be enhanced many times over.  Further, there is scope to enhance this through blending  with additional resources from donors, leading to more and better impact in countries.
  • We should become serious about mobilisation.  This was already on top of our agenda and is a key part of what the EBRD does.  But we should challenge ourselves to do more with new investors looking for impact, with new instruments such as thematic funds, and with new uses of old instruments like guarantees.
  • And we should not reject our oldest friend in scaling up MDB financing: the capital increase: It is easy to overlook the obvious. The MDBs deliver tremendous value for money.  Increasing capital across the system would increase that impact in a cost effective manner.  Now is the time for looking for real impact on the ground, not worrying about putting a national flag on it.

In conclusion, the message is simple.  The SDGs must be achieved. Addis gave us the tools. 

Five years on from Addis, we are in serious danger of failing to get the job done.  If we want to ensure that Addis 2015 is not a tombstone for effective multilateralism, then we need to take its logic to the next level, especially now in the era of COVID-19. 

We have the tools in our financing for development toolbox.  We need decisive leadership to use them.  And we need to act now.  The clock is ticking.  The future won’t wait.

Thank you very much.

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