31 January 2019: The International Monetary Fund (IMF) has estimated the additional amount that governments need to spend in order to make “meaningful progress” on the SDGs. The study’s authors recommend that countries increase tax collection as the first step, while acknowledging that, for low-income countries, this will not be sufficient to fill the financing gap.

Countries’ ability to achieve the SDGs will depend on their ability to increase spending on health, education and infrastructure.

The study was published in the Fund’s “staff discussion note” series. Titled, ‘Fiscal Policy and Development: Human, Social and Physical Investments for the SDGs,’ the 45-page report argues that countries’ ability to achieve the SDGs will depend on their ability to increase spending on health, education and infrastructure.

Based on a 155-country study of countries at various stages of economic development, the authors estimate that low-income countries will need to spend a far greater percentage of GDP for this purpose than other countries. They find that low-income countries will need to increase their annual spending in these areas by 15 percentage points of GDP, whereas emerging market economies will only need to increase their spending by four percentage points. They recommend that developing countries aim to increase their tax-to-GDP ratio by five percentage points of GDP in the next ten years.

The research indicates that this revenue could completely fund the necessary increase for emerging market economies. Low-income countries, however, will only be able to cover one-third of SDG-related investments.

In a blog post announcing the release of the report, the IMF calls for closing the financing gap through increasing the efficiency of public spending, building effective public institutions, and promoting transparency and accountability. The IMF calls on international donors and supporters to accelerate these efforts and to undertake joint action, noting the enabling role of global public goods such as geopolitical stability, open trade, climate initiatives and anti-corruption measures.

The IMF study covers 49 low-income developing countries, 72 emerging market economies and 34 advanced economies. It focuses in depth on the situation of five countries: Benin, Guatemala, Indonesia, Rwanda and Vietnam. [IMF Blog Post] [Report Webpage] [Publication: Fiscal Policy and Development: Human, Social, and Physical Investments for the SDGs]