29 July 2019: The Brookings Institution has published a blog that calls for targeted, specific resources and substantive reforms as part of efforts to achieve the SDGs. The blog highlights five findings from a forthcoming paper on financing the SDGs.
The forthcoming paper titled, ‘How Much Does the World Spend on the SDGs,’ authored by Homi Kharas and John McArthur, examines government spending on SDG-related issues, and analyzes how spending varies across income levels. The authors find a “clear relationship between public SDG spending and GDP per capita.” For every 10% higher level of average GDP per capita, the authors find average SDG spending is 13% higher.
The authors find that governments around the world are already spending approximately USD 21 trillion annually on the following SDG-related sectors: social protection (SDGs 1 and 10); agriculture (SDG 2); health (SDG 3); education (SDG 4); infrastructure (SDG 9); conservation (SDGs 14 and 15); and justice (SDG 16). If global economic trends continue under a business-as-usual (BAU) scenario, they predict that SDG spending will grow around USD 12 trillion annually, reaching USD 33 trillion or more by 2030. The authors caution, however, that measures of spending do not predict SDG outcomes. They further caution that most SDG spending growth will likely take place in fast-growing upper-middle-income countries (UMICs).
MDBs can contribute to financing gaps, particularly for sustainable infrastructure.
The paper suggests the minimum SDG spending needs are approximately USD 300 per capita. The authors argue that a minimum amount of appropriately targeted resources is necessary to deliver a universal package of basic services. For lower-income countries (LICs), they find average needs are around USD 270 to USD 350 per capita. The Gambia and Nepal have even lower per capita needs estimates, at around USD 235. As countries become richer, the cost of providing social services rises, and countries must invest in maintaining systems and networks and respond to demands for higher quality services, all of which drives increased spending levels.
The authors find varying financing gaps by income level and by country, as defined by the difference between minimum needs and spending. They find that the lowest-income countries have the most significant SDG financing gaps. Burundi and South Sudan, for instance, have estimated per capita spending gaps of USD 310 and USD 530, respectively, which is equivalent to over 100% of gross domestic product (GDP) in those countries. The authors emphasize that all countries with GDP per capita of USD 1,000 or less in 2025 have gaps equivalent to 10% of their GDP of higher. In contrast, the authors’ calculations find that other countries’ projected 2025 spending is sufficient to cover “at least minimum thresholds for basic SDG-related services.” Bhutan, Bolivia and Ethiopia all fall into this category.
They find overall SDG spending gaps are approximately USD 1 trillion annually, including USD 150 billion in LICs, USD 600 billion in lower-middle-income countries (LMICs) and USD 250 billion in UMICs. Despite this gap, the authors argue that there are three “substantial opportunities” to fill SDG financing gaps. First, they recommend increasing domestic resource mobilization, particularly for LMICs with sizable funding gaps. Second, they urge donors to “make good on aid commitments,” beginning with full replenishments to international agencies, and building the level of ambition towards the level of financing necessary to achieve the SDGs. Third, the authors highlight the potential of multilateral development banks (MDBs) to contribute to financing gaps, particularly for sustainable infrastructure. [Brookings Blog Post]