TWN Info Service on UN Sustainable Development (Jul25/06)
16 July 2025
Third World Network

Financing for whom?
Trials and tribulations from the Fourth International Financing for Development Conference 

Bhumika Muchhala

The Fourth International Conference on Financing for Development (FFD4) took place in Sevilla, Spain, from 30 June to 3 July amidst intensifying attacks on multilateralism, deep cuts to global aid and development financing, and regression of decades of progress in the fight against poverty.

Participants at the once-a-decade United Nations conference included some 70 heads of state or government, over 1,000 civil society leaders, and over 400 policymakers from governments around the world, who engaged in over 100 panel events and 50 protest actions. However, civil society actors experienced a range of restrictions to their participation and lack of access to the conference, from difficulties obtaining accreditation and profiling by security to exclusion from key negotiations. This left many advocates, including those who had followed the FFD4 negotiations closely, to organize a protest at the conference’s venue on its final day where resounding demands for debt and tax justice, and economic reparations writ large, were articulated.

The outcome document of FFD4, the Sevilla Commitment or Compromiso de Sevilla, had been adopted by consensus of UN member states on 17 June in New York, making this the first FFD conference where the outcome document was agreed before the meeting began. This was lamented by many participants as removing the conference’s ability to shape the outcome.

The adoption of the text was marked by the official withdrawal of the US delegation, which waited until almost a year of intergovernmental negotiations had concluded to withdraw and refused to participate in Sevilla. The role of the US in the negotiations has been publicly reported, and was marked by its request for deletions across entire paragraphs of the document. Also driving the race to the bottom during the negotiations were the European Union and other developed-country delegations such as Australia, New Zealand, Canada, Japan and the UK. The aggregate effect inflicted dilutions, distortions, and erasure of global economic governance milestones and actionable commitments into a reaffirmation of the status quo. Many critics argued that the Compromiso de Sevilla shows little shift, or even backsliding, from the outcomes of the previous three FFD conferences in 2015 (Addis Ababa Action Agenda), 2008 (Doha Declaration) and 2002 (Monterrey Consensus).

In fact, lost in the sweeping tide of attention that private financing received at the Sevilla conference (see below) was the political genealogy and systemic origins of FFD. Its roots lie in the collective initiative of the Non-Aligned Movement (NAM) in the late 1990s to address the asymmetries that characterize the international financial architecture, which had resulted in the boom-bust financial crises experienced by the Global South through the 1980s and 1990s. The nations of NAM called for a multilateral process that would generate reforms that expand policy and fiscal space for structural transformation towards economic, monetary and financial sovereignty in the South.

The 2002 Monterrey Consensus argued that the systemic drivers of inequalities between nations and regions cannot be resolved on the national terrain alone – international cooperation and democratic global economic governance is indispensable. Specifically, these drivers refer to key pillars of the international financial architecture: the international currency hierarchy marked by US dollar hegemony – or the scaffolding of unequal economic exchange, deregulated capital flows, market-based exchange rates, financial speculation and dependency, debt crises, and a trade architecture defined by extractive, value-chain-dependent and low-value-added production structures that are the legacy of colonialism. 

Debt battleground

With debt-servicing costs across the Global South reaching a historic high [$1.4 trillion in 2023 (principal plus interest)], public budgets are being eviscerated, the Sustainable Development Goals (SDGs) derailed, and climate action rendered into a fiscal impossibility. In this looming context, FFD4 fell far short on delivering meaningful reform of the outdated and imbalanced global debt architecture.

The first iteration of the FFD4 outcome document, an ‘elements paper’ issued in November 2024, included mention of a new multilateral sovereign debt restructuring mechanism. Calls have also been made for binding responsible lending and borrowing principles, an automatic suspension of debt servicing in the wake of catastrophic external shocks, the establishment of a global debt registry, as well as domestic legislation in creditor countries to enforce private creditor participation in debt restructuring.

At the heart of the debacle of sovereign debt is the absence of a sovereign debt crisis resolution mechanism. Meanwhile, the creditor profile has shifted over the decades from predominantly official creditors to a five-fold increase in private creditors, who not only refuse to participate in equitable debt restructuring but also impose high and variable interest rates, creating a crisis in the cost of capital for sovereign borrowers. The global financial regime conditions continued market access and international financial legitimacy on uniformity and continuity of debt servicing. In turn, the means of debt repayment are enforced through austerity measures which have for decades eroded social equity, economic resilience and the delivery of public services across the Global South. Such austerity often has a gendered dimension, with women playing the role of ‘shock absorbers’ of austerity’s pernicious effects.

During the FFD4 negotiations, the Alliance of Small Island States, the Africa Group, and countries like Cuba, Brazil and Pakistan called for the creation of a UN Framework Convention on Debt. Indeed, external debt payments by many countries far exceed aid and other financial transfers, or public expenditures on essential services like health and education, generating a net outflow of financial resources from South to North while simultaneously eroding economic development, social equity and well-being. Supported and campaigned for by global civil society, the Convention would encompass a global consensus on the rules, principles and structures of the various stages of the debt cycle. By locating deliberations in the UN General Assembly’s one-state-one-vote system, the Convention would facilitate fairness and transparency of debt resolution mechanisms. Civil society advocates clarified that it would democratize the global debt architecture, shifting the discussions from exclusive and creditor-dominated Group of 20 (G20) and International Monetary Fund (IMF) forums.

However, the staunch opposition of most creditor countries, in particular the US and the EU, led to the deletion of language on the Convention and an insistence on relegating debt issues to the G20 Common Framework. Critics in civil society and academia have consistently argued that the G20 status quo has failed to resolve debt distress and create fiscal space, is unable to ensure equitable participation of private creditors (e.g., comparability of treatment), enables a lack of transparency in debt contracts, and blocks rules on responsible lending and borrowing. Unsurprisingly, debt crises are reproduced while any resulting fiscal space is devoted to paying off private creditors, generating a ‘kicking the can down the road’ scenario that simply extends debt purgatory.

The final text in paragraph 50(f) of the Compromiso de Sevilla states that member states “will initiate an intergovernmental process at the UN, with a view to making recommendations for closing gaps in the debt architecture and exploring options to address debt sustainability…”.   While an intergovernmental process is included, its function is limited to “making recommendations,” fundamentally weakening the mandate of member states to take meaningful action on debt.

Furthermore, initial language on the development of binding responsible lending and borrowing rules was diluted to a working group led by the UN Secretary-General, the IMF and the World Bank to propose voluntary guiding principles. The establishment of an independent, open and binding debt registry was weakened to the consolidation of existing debt databases at the World Bank. Perhaps most importantly, the drive to pursue debt swaps received a turbo-charged boost, with the Compromiso presenting them as a win-win solution to address debt within the context of fiscal constraints. But as policy analysts have demonstrated for years, debt swaps are no panacea for systemic debt distress. They fail to create sufficient fiscal space, nor can they adequately address long-term debt sustainability, even as they generate new problems in the policy space and economic governance within borrower nations.

On the other hand, a potentially constructive initiative of the Compromiso is an agreement to establish a platform for borrower countries with support from existing institutions, and a UN entity serving as its secretariat. The platform is to focus on discussing technical issues, sharing information and experiences in addressing debt challenges, increasing access to technical assistance and capacity-building in debt management, coordinating restructuring approaches, and strengthening borrower countries’ voices in the global debt architecture. This can help to meaningfully rebalance an international financial architecture long dominated by consolidated and coordinated creditors in the Paris Club and G20.  Hopefully, the platform will be adequately funded and operationalized.

Reign of private finance

In the dozens of speeches made and hundreds of events held in Sevilla, it was impossible not to notice the aggressive promotion – and normative consensus – of private financing, proffered as a monolithic answer to narrow the estimated $4.3 trillion financing gap in the South. The model of derisking development, replete with its constellation of mechanisms such as blended finance and guarantees, dominated FFD4 with a laser focus on how private capital can be incentivized by the Global South through the use of securitization, or the bundling of individual project loans into vehicles that can be bought by financial funds.

Buttressed by over a decade of the ‘billions to trillions’ narrative authored by the World Bank and the UN ecosystem, the idea asserts, with brazen decisiveness, that scarce public resources in the Global South will always fall short of ever-growing development and climate financing needs, and that private (and profit-seeking) capital is thus indispensable. The seemingly logical resolution to this depoliticized reality becomes a quid pro quo: fiscal gaps can be closed only by attracting Wall Street (investment banks, asset managers, insurers, pension and private equity funds, among others) to invest in development, infrastructure and green projects.

Commitments to private capital mobilization run rife across the Compromiso de Sevilla text. For example, the mobilization of private finance from public sources is sought to be increased by 2030 “by strengthening the use of risk-sharing and blended finance instruments, such as first-loss capital, guarantees, local currency financing, and foreign exchange risk instruments, taking into account national circumstances”. Member states are encouraged to “strategically attract foreign development investment, including from institutional investors”. 

Over the last decade, multilateral development banks like the World Bank Group have adopted blended financial structures as a core part of their programmatic paradigm. Critical analysis demonstrates how the logic of private finance requires the state to absorb investment risks, financial costs as well as debt liabilities, towards the purpose of creating an enabling environment for private investment. In other words, a public socialization of losses and private capture of profits occurs through the financialization of public goods and services, which effectively hands over the reins of governance to the private sector.

However, the ‘billions to trillions’ aim of activating the supposed spigot of private cash has been recently exposed by multiple sources as a myth. A Financial Times article titled “The magic pony of private finance fails to fund the global green transition” revealed that only 10 per cent of private financing went to Global South nations. The ratio of private to public capital has struggled to rise above 1:1, and institutional investors like pension funds are notable by their almost-total absence. Furthermore, number-crunching from the Organisation for Economic Cooperation and Development (OECD) shows that every dollar of multilateral investment activated merely 30 cents of private investment. Simply put, the trillions are not manifesting. One explanation is that the scale of profits expected by financiers cannot be delivered with public goods and services investments; the two are inherently contradictory in nature.

But two deeper issues persist. Firstly, rather than galvanizing new heights of financing, private creditors are in reality responsible for net outflows of financial resources from developing countries and into their own coffers. Indeed, the World Bank discloses that since 2022, “foreign private creditors have extracted nearly US$141 billion more in debt service payments from public sector borrowers in developing economies than they disbursed in new financing … this withdrawal has upended the financing landscape for development.” And secondly, structural, institutional and political changes to address fiscal space, such as redressing tax evasion and avoidance, fiscal restraint rules, and constraints on public money creation, economic diversification and technology transfer, are conveniently elided.

Survival of the systemic?

The integral focus of the Monterrey Consensus on international monetary cooperation, recurrent financial crises, vulnerabilities to exogenous shocks, and adverse spillovers of rich-country policies across the Global South has essentially evaporated from the Compromiso de Sevilla. In a text that supposedly addresses the international financial architecture, it is shocking that there is no meaningful reference to the international monetary system, nor to central banks, the core institution of national money creation. Indeed, the text presents the sharpest regression of systemic issues across the four FFD outcome documents produced over 23 years, despite the recent experience of the COVID pandemic and the current debt crisis exposing the systemic faultlines of a global financial architecture designed to extract rather than provide.

As the Declaration from the FFD4 Civil Society Forum states, “It is distressing that the FFD4 outcome reduces systemic issues – a fundamental pillar of the Monterrey Consensus – to a narrow focus on the IMF and World Bank. By agreeing to work through the governance structures of international financial institutions, developing countries remain locked into governance systems that structurally exclude and marginalize them. FFD4 could have been a rare opportunity to rethink and overhaul the international financial architecture as a cohesive, democratic system of global governance. Rather than treating the Bretton Woods institutions (IMF, World Bank, and multilateral development banks) as independent, technocratic bodies, civil society continues to call for them to be brought fully into the UN system – accountable to the UN General Assembly, governed democratically, and guided by universal participation that respects human rights, gender equity, and ecological integrity.”

Yet, one key deliverable is offered in the FFD4 outcome document – addressing the inordinate power of credit rating agencies (CRAs) in determining the cost of capital in the Global South and the central role they play in both the debt and climate crises. Paragraph 55 states a decision to “establish a recurring special high-level meeting on credit ratings under the auspices of the [UN] Economic and Social Council for dialogue among Member States, credit rating agencies, regulators, standard setters, long-term investors and public institutions that publish independent debt sustainability analysis.” While this falls short of proposals to establish an intergovernmental commission to regulate CRAs for the objective of producing accurate, objective and long-term-oriented credit ratings, it is a potential step forward in bringing CRAs into global economic governance.

There is widespread agreement by UN member states on the urgency of multilateral oversight on the oligopoly of three CRAs – Moody’s, S&P and Fitch – with attention to their multiple dysfunctionalities. The COVID pandemic and the debt crisis have exposed challenges, from a developing-country perspective, in terms of bias and pro-cyclicality in ratings, conflicts of interest, and penalization of debt, climate and social vulnerabilities. The inadequacy of CRAs’ rating methodologies and bias in implementation undermine developing countries’ access to capital markets and increase their borrowing costs by inflating risk premiums. Advocates for financial regulation have asserted that CRA regulation must include the establishment of multilateral, public and independent rating agencies, promoting competition to avoid quasi-monopolistic market dynamics. The spotlight on CRAs has the potential to hold financial power to account; however, it will depend on the ability of member state voices and proposals to push the agenda forward.

That said, there is a long history of UN resolutions that address the systemic dynamics of the international financial architecture, from commodity price speculation to regulating financial speculation and reforming the global reserve system. However, since the global financial crisis of 2007–08, many of these efforts have been thwarted by opposition from developed countries. Can the focus on systemic dimensions of the international financial architecture be salvaged in the FFD process? Given the colossal challenges in development financing in a time of rising authoritarianism and conflict, and the spectre of ‘post-aid international development,’ what are the possibilities of democratizing global economic governance?

Attaining development, inclusive dignity and equity will require grappling with old and new forms of power. One thing is certain. The way forward must hold steadfast to the aspiration and vision of a fair, equitable and effective financial architecture that works for the majority.