Making international public finance more effective

Building understanding of how to maximise the impact of international public finance and to reform its architecture.
Fish market in the Maldives. Photo: Asian Development Bank, CC BY-NC 2.0

Progress towards financing the Sustainable Development Goals (SDGs) has been uneven across countries and sectors. Financing gaps persist, calling for more effective prioritisation and sequencing of donor interventions. Some financing instruments are not as effective as they should be, and fragmentation and limited cooperation among development actors could weaken the potential reach of their interventions. While still unfolding, the crisis brought by the response to the Covid-19 pandemic is expected to exacerbate all these challenges.

In the recovery phase, budgets for international cooperation could be the first items cut as a result of competing government priorities. Concurrently, partner countries dealing with the emergency and planning their recovery are very likely to increase their demand for external assistance as other financing options – such as government revenues and borrowing from international capital markets – might dry up. Falling supply and growing demand for external assistance will raise a series of challenges to ensure those with fewer resources become more effective, as well as identifying creative and overlooked solutions to expand the resource envelope.

The objective of our work is to offer analytical evidence and provide recommendations to help revert such trends and address these challenges. We inform the policy decisions of bilateral and multilateral agencies when it comes to the allocation of their scarce financial and human resources. We do so by bringing in and analysing the perspective and the demands from partner country governments in particular.

Key aims:

  • Recommend how development agencies can increase the effectiveness and efficiency of their (smaller) budgets by rethinking the allocation, prioritisation and sequencing of their interventions, as well as by redefining the division of labour across development actors to maximise their respective ‘comparative advantage’.
  • Analyse why bilateral development agencies should work with the multilateral development finance system and recommend how they should partner up to improve the effectiveness of their budgets and operations.
  • Identify interventions that could help stretch the resource envelope for international cooperation in more creative and efficient ways.
  • Support the design of instruments and approaches for international cooperation that could be adapted to country circumstances to maximise their reach, especially when new partnerships between countries are forged as aid flows fall or programmes are phased out.