Speech

Keynote Address at Secretary-General’s High-Level Meeting on Financing the 2030 Agenda for Sustainable Development

September 24, 2018

As prepared for delivery 

Thank you, Secretary-General Guterres, for convening this important meeting and for so kindly inviting me to address it.

Thank you for the great work you are doing in supporting the SDGs and in equipping the UN to respond effectively to 21^st century challenges. I promise you that you will always have a good friend in the IMF.

We have just heard some very inspiring words [from the video]. This young woman shows why we are here today—to make sure that all girls and all boys have a fair chance to thrive, to flourish, to develop their capacities, no matter who they are and where they are from.

This is the essence of the SDG agenda—a world free of poverty and deprivation; a fairer world; a world that respects the limits of nature.

We have witnessed important progress over the past few decades. In Indonesia, for example—where we will shortly hold our Annual Meetings—infant mortality has been halved, maternal mortality is less than a third of what it was, and the risk of falling into extreme poverty is only a tenth of what it used to be.

Achievements such as this reflect a combination of important structural reforms that led to robust economic growth, combined with the concerted efforts of the international community—embodied in the Millennium Development Goals.

The kind of progress we have seen in Indonesia shows clearly that when we put our minds to it, we can do it. The SDGs provide a clear destination, but without a roadmap for the next twelve years, it will be difficult to succeed.

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How can the IMF help with this? I would start by saying that, across key dimensions, the SDGs are aligned with the IMF’s mandate for sustainable and inclusive economic growth accompanied by financial stability.

Central to a successful journey to achieve the SDGs in low-income developing countries will be additional spending. Without basic knowledge about the spending requirements, however, we will not know how to get to the destination.

The IMF has done some analytical work to see what it would take for low-income developing countries to meet the SDGs. We looked at five areas that are critical for sustainable and inclusive growth—education, health, water and sanitation, roads, and electricity. Countries investing in these sectors will address deficits in human capital and physical infrastructure, which are a drag on their income and future prosperity.

Our main finding is that low-income developing countries need additional annual outlays of 14 percentage points of GDP on average. Across 49 low-income developing countries, additional spending needs amount to about US$520 billion a year—an estimate that is in the same ballpark as that of other institutions. Clearly, significant new spending is needed.

So how can we tackle this immense challenge—one that is essential to the well-being of whole generations?

As a necessary first step, low-income developing countries must own the responsibility for achieving the SDGs. Country efforts should focus on strengthening macroeconomic management, enhancing tax capacity, tackling spending inefficiencies, addressing the corruption that undermines inclusive growth, and fostering business environments where the private sector can thrive. The IMF will work closely with its member countries to actively support this reform agenda.

Countries have substantial scope to raise tax revenues. An ambitious but reasonable target for many countries is to increase their tax ratio by 5 percentage points of GDP. This will require strong administrative and policy reforms, where the IMF and other development partners can play a key supporting role.

Boosting tax revenues by this amount may be sufficient for emerging market economies to achieve the SDGs, but this is not the case for most low-income developing countries.

For these countries, in addition to using existing resources better, financial support will be needed from bilateral donors, international financial institutions, philanthropists—and from private investors. These investors can make an important contribution in sectors such as infrastructure and clean energy if the required reforms have been put in place to improve the business climate. Encouraging private investment that supports national development is precisely the goal of initiatives such as the Compact with Africa.

Extra financing can also be obtained from international financial markets and lenders—but borrowing on commercial terms is a double-edged sword if funding is not used for high-return projects. As the IMF has emphasized, debt burdens are rising—forty percent of low-income developing countries are now at high risk of debt distress or in debt distress.

Foreign aid, preferably in the form of grants, remains crucial. Advanced economies can do more, including by moving towards 0.7 percent of gross national income in aid—and they can also better target their aid budgets to support countries most in need of such assistance. Budget conditions are tight in many advanced economies, but the economic returns on well-targeted aid—in terms of poverty reduction, job creation, and improving security and stability—are very high.

The bottom line is that mobilizing financing on this scale will require a strong partnership among all stakeholders—and partnership is one of the key pillars of the SDGs. It will require a sense of co-responsibility for the common good.

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Yet, the challenge goes beyond spending needs.

An important aspect of the broader challenge is the environment in which countries seek to generate and sustain stable growth. This requires a variety of global public goods including geo-political stability, open trade, and climate initiatives, as well as good governance, which depends on tackling both the supply and demand elements of corruption. These important foundations for development underscore the need for joint action by all stakeholders for the SDGs to be realized.

Ultimately, this is about giving today’s young people wherever born a fair start. This is a common challenge linked to our common fate.

I hope that we can emerge from our meeting today with creative solutions, a clearer roadmap, and a renewed commitment to the global common good—which of course is why the IMF and the UN were founded in the first place.

Thank you very much.