29 April 2017: April was a busy month for financing for development (FfD), with several meetings and reports addressing the leverage of such financing, as well as corruption and global growth projections.

The UN Economic and Social Commission for Asia and the Pacific (ESCAP) and the Government of Sri Lanka co-hosted the Fourth High-Level Follow-up Dialogue on FfD in Asia and the Pacific. The International Monetary Fund (IMF) published the latest World Economic Outlook estimating that the global growth will increase, while the IMF International Monetary and Financial Committee (IMFC) and the Intergovernmental Group on International Monetary Affairs and Development (G-24) tackled FfD-related issues in their Communiqués at the IMF-World Bank Spring Meetings. The Organisation for Economic Co-operation and Development (OECD) launched publications on financing small and medium-sized enterprises (SMEs) and international anti-corruption efforts.

The IMF World Economic Outlook 2017 notes that global growth is projected to increase from an estimated 3.1% in 2016, to 3.5% in 2017, and 3.6% in 2018. The report explains that activity is projected to pick up markedly in emerging market and developing economies because conditions in commodity exporters experiencing macroeconomic strains are gradually expected to improve, supported by the partial recovery in commodity prices, while growth is projected to remain strong in China and many other commodity importers.

Compared to the October 2016 Outlook, for advanced economies projected growth has been revised upward: in the US, reflecting the assumed fiscal policy easing and an uptick in confidence after the November elections, which, if it persists, will reinforce the cyclical momentum; and in Europe and Japan, based on a cyclical recovery in global manufacturing and trade that started in the second half of 2016. For developing economies the projected growth has been revised downward, as a result from a weaker outlook in several large economies especially in Latin America and the Middle East, reflecting continued adjustment to the decline in their terms of trade in recent years, oil production cuts, and idiosyncratic factors. The 2017 and 2018 growth forecasts have been marked up for China, reflecting stronger-than-expected policy support, and for the Russian Federation, where activity appears to have bottomed out and higher oil prices bolster the recovery.

Noting the prolonged period of low growth, the IMF International Monetary and Financial Committee members stressed the importance of ensuring that everyone has the opportunity to benefit from global economic integration and technological progress.

The IMF notes that economic policies have an important role to play in staving off downside risks and securing the recovery. At the domestic level, the report says policies should aim to: support demand and repair balance sheets where necessary and feasible; boost productivity, labor supply, and investment through structural reforms and supply-friendly fiscal measures; upgrade the public infrastructure; support those displaced by structural transformations such as technological change and globalization; and advance credible strategies to place public debt on a sustainable path. At the global level, the publication notes the need for a renewed multilateral effort in order to tackle common challenges in an integrated economy. The publication further underlines that adjusting to lower commodity revenues and addressing financial vulnerabilities remain key challenges for many emerging market and developing economies.

Shortly after publishing the World Economic Outlook in April, the IMF International Monetary and Financial Committee (IMFC) issued a Communiqué at the IMF/ World Bank Spring meetings. Noting that the prolonged period of low growth has brought to the fore the concerns of those who have been left behind, the IMFC members stress the importance of ensuring that everyone has the opportunity to benefit from global economic integration and technological progress. They reinforce their commitment to achieve strong, sustainable, balanced, inclusive, and job-rich growth, including through: communicating policy stances clearly; avoid inward-looking policies; and preserve global financial stability. They also express their commitment to conclude the 15th General Review of Quotas and agree on a new quota formula as a basis for a realignment of quota shares to result in increased shares for dynamic economies. They further call on the IMF Executive Board to “work expeditiously” toward the completion of the 15th General Review of Quotas in line with these goals by the Spring Meetings of 2019.

The IMFC Communiqué also welcomes IMF’s continued support of the Sustainable Development Goals (SDGs), including the Addis Ababa Action Agenda (AAAA), by helping fragile States and supporting low-income countries (LICs) and small States to strengthen domestic revenue mobilization and public financial management systems, as well as to deepen financial markets. It notes that IMFC will inter alia: support countries dealing with the consequences of conflicts, refugee and humanitarian crises, or natural disasters; promote a level playing field in international trade and taxation; tackle the sources and channels of terrorist financing, corruption, and other illicit financial flows (IFFs); address correspondent banking relationship withdrawal; and work on the measurement challenges of the digital economy.

In the G-24 Communiqué, adopted during the IMF/ World Bank Spring meetings, the G-24 calls for a strengthened Global Financial Safety Net, with an adequately-resourced, quota-based IMF at its center, and, in that regard, for an enhanced IMF toolkit that responds effectively to liquidity and precautionary needs of all countries and provides the right incentives for policymakers. The Group also encourages multilateral support to upgrade the UN Tax Committee to an intergovernmental body to enhance the voice of emerging markets and developing countries on international tax policy matters.

Noting the successful 18th replenishment of World Bank’s International Development Association (IDA), the G-24 further welcomes the creation of the Private Sector Window, the enhancement of the Crisis Response Window, and the doubling of allocation to countries affected by fragility. However, expressing concern with the International Bank for Reconstruction and Development (IBRD)’s and International Financial Corporation (IFC)’s “strained financial capacity and the consequent expected decrease in annual lending over the coming years,” the Group calls for exploring all options for strengthening their financial capacity including capital increases, further balance sheet optimization, and review of financial transfers from IBRD and IFC to IDA.

Also on the margins of the IMF/World Bank Spring meetings, the OECD launched the ‘Financing SMEs and Entrepreneurs 2017 – an OECD Scoreboard,’ which highlights developments in SME financing over the 2013-15 period. According to the report, overall: lending to SMEs increased by 6.4% in 2015 in the median value of new lending to SMEs; SMEs interest rates are at record lows; and declines in business to business payment delays and bankruptcies could be observed in a majority of participating countries by 11% and 9% respectively in 2015. The report further indicates that credit conditions generally remained accommodative, although the difference in interest rates paid by SMEs and larger firms has continued to widen, reaching a spread of 1.4% points in 2015.

In a number of countries, the report notes, demand for credit dropped in recent years, especially among micro-enterprises, with venture capital investments going down in most countries, while equity crowdfunding and peer-to-peer lending increased in 2015 but often from a low base. The Scoreboard dedicates a special chapter to challenges: on the demand side, many entrepreneurs lack financial knowledge, strategic vision, and the resources to attract alternative finance instruments; and on the supply side, potential investors are often dissuaded by the opacity of the SMEs finance market, a lack of investor-ready projects and limited exit options, along with regulatory impediments.

In another report released by OECD in April, on ways the OECD can strengthen its work in combating bribery and promoting integrity, an independent group of anti-corruption and integrity experts recommends the Organisation to do more to enforce and develop anti-corruption standards and enhance collaboration with other international organizations.

In the report, the High-Level Advisory Group to the OECD Secretary-General makes a wide range of recommendations for: promoting the implementation and enforcement of existing OECD standards, in particular the Anti-Bribery Convention; updating or developing new OECD standards or guidance in key areas, concerning most notably corruption risks connected with public governance, local governance, state-owned enterprises, political financing, public procurement and foreign bribery; and fostering greater co-ordination within the OECD.

Also in April, Asia-Pacific finance ministers, central bank chiefs, senior government officials and experts from 37 countries gathered for the Fourth High-Level Follow-up Dialogue on FfD in Asia and the Pacific. Participants concluded that tax policy and public expenditure management will play a central role in effectively implementing the 2030 Agenda for Sustainable Development. The Dialogue took place from 28 -29 April, in Bangkok, Thailand.

Participants identified as key priorities for Asia-Pacific countries moving forward: strengthening tax systems and administration; increasing the effectiveness and efficiency of public expenditure; deploying tax policies to mitigate inequalities and promote environmental sustainability; strengthening municipal finance to cope with growing urbanization challenges, including those related to environment, and tackling harmful tax competition, base erosion, profit shifting and other tax avoidance by building broad international and regional partnerships. The Chair ‘s summary of the Dialogue will be presented at a high-level side event during the FfD Forum, scheduled to take place from 22-25 May 2017, in New York, US. [IMF – World Economic Outlook 2017] [Communiqué of the Thirty-Fifth Meeting of the IMFC] [G-24 Communiqué] [‘Financing SMEs and Entrepreneurs 2017 – an OECD Scoreboard’ – Press Release] [‘Financing SMEs and Entrepreneurs 2017 – an OECD Scoreboard’ – Publication] [OECD Press Release on the Report of the High-Level Advisory Group on Anti-Corruption and Integrity] [OECD Report of High-Level Advisory Group on Anti-Corruption and Integrity] [Fourth High-Level Follow-up Dialogue on FfD in Asia and the Pacific – ESCAP Press Release]