financing for development office · 2018-12-05 · islamic finance through sukuk •eradication of...

Financing for Development Office Economic Development & Integration Division

The rising debt crisis

FINANCING SUSTAINABLE DEVELOPMENT ~ CURBING ILLICIT FINANCIAL FLOWS (UN ESCWA – WEDNESDAY 28 NOVEMBER, LEBANON)

Debt

payments

are

increasing

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Per

cen

tage

of

gove

rnm

ent

reve

nu

e

Developing country government average (unweighted) external debt payments, as a proportion of revenue, 2000 - 2017

The risk of

default is increasing

1.8

1.9

2

2.1

2.2

2.3

2.4

2.5

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Mea

n a

vera

ge r

atin

g

Nu

mb

er o

f co

un

trie

s w

ith

eac

h r

isk

rati

ng

IMF debt distress rating (Number of countries in each group and average rating, 2007-2018)

Low risk Moderate risk High risk

In debt distress Average rating

Shocks

Commodity

price crash

(mid-2014)

US dollar

interest rates

and value

increasing

Sources & Interest Payments

0%

20%

40%

60%

80%

100%

Debt owed Interest payments

Who low income government external debt is owed to, and relative size of interest payments, 2016

Multilateral institutions Other governments Private sector

Jordan’s

Debt

0

5

10

15

20

25

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

% o

f go

vern

men

t re

ven

ue

Jordan government external debt service (2018 - 2020 projection)

Multilateral Bilateral Private

PPPs: The global debt iceberg

PPPs: The UK’s Experience

PPPs: Who pays?

Proposals

Increase transparency of loans

01

Stop bailing out lenders

02

Prevent holdout creditors blocking debt restructurings

03

Pursue an international debt workout mechanism

04

Tackle tax avoidance and evasion

05

The rising debt crisis

FINANCING SUSTAINABLE DEVELOPMENT ~ CURBING ILLICIT FINANCIAL FLOWS (UN ESCWA – WEDNESDAY 28 NOVEMBER, LEBANON)

CONCLUSIONS

AND RECOMMENDATIONS

Dr. IBRAHIM ABDEL GELIL

Senior Advisor and Report Co-Author, AFED

OBSERVATIONS

• Major shift in policy design and implementation, vast investments,innovative financing mechanisms.

• Financing sources not at the level of the trillions needed for SDGs.

• Mobilize national & regional resources, re-allocate funds.

• Foreign financing: ODA, FDI, international funds, Development banks, MEAs.

AT A GLANCE

• Needed annually for achievement of SDGs in Arab countries

USD 230 billion

• Annual financing gap in the Arab countries

USD 100 billion

• Losses in economic activity due to wars and conflicts in the region since 2011

USD 900 billion

• Development assistance by Arab development institutions (1970-2016), 54 percent to Arab countries

USD 204 billion

• Estimated annual losses from lFFs in Arab countriesUSD 100 Billion

HETEROGENEOUS REGION

• Oil-rich countries

• Oil-poor middle-income countries

• Low-income countries

• Conflict-torn countries

OFFICIAL DEVELOPMENT ASSISTACE

• USD 22.3 billion ( 2016).

• 15% to refugees and humanitarian assistance.

• Share of ODA to education declined.

• Health, water supply and Sanitation, inadequate at 2-4%.

PRIVATE FINANCE

• Volatile FDI inflows, fluctuate with oil prices and political instability.

• FDI inflows limited to certain countries and sectors.

• FDI inflows decreased to USD 32.4 billion in 2016, from USD 88.5 billion in 2008.

• Net exporter of capital

• Poor performance PPP

INNOVATIVE FINANCE

• Results-based, debt-for-development swap, climate finance.

• Green bonds market marginal

• Big potential for Islamic financing through sukuk.

POLICY AND REGULATORY FRAMEWORK

• Clarity and stability, coherent public policies are essentials.

• Regulatory and market-based measures.

• Illicit finance flows are major challenge.

• Proceeds from fighting corruption USD 100 billion annually.

RECOMMENDATIONS

• Financing strategies geared to SDGs.

• Redirect existing funds to sustainable development.

• Incentives to promote SDGs. Cut market distorting subsidies.

• Economic diversification.

• Reform taxation system.

• Regional cooperation, especially infrastructure projects.

• Sound business environment, good governance, rule of law, political stability.

• Efficient fiscal policies.

• Develop the green bond market and tap on the potential of Islamic finance through Sukuk

• Eradication of corruption. Sign and ratify the convention against Corruption.

• Risk-sharing by Governments.

• Private finance tapped. Savings mobilized. FDI attracted.

• Reverse the direction of FDI towards the region.

• International commitments to agreed development assistance levels (0.7% of GNP).

• Scale up efforts to obtain accreditation to access the Green Climate Fund (GCF)

RECOMMENDATIONS

Thank you

www.afedonline.org

Roula Majdalani,

Acting Deputy Executive Secretary for

Programme Support

28 November 2018

Accessing Climate Finance in the Arab Region

© Copyright ESCWA. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without written permission

Introduction

• Financing climate change requires large investments in

mitigation and adaptation projects in the Arab region. Costs are

significant and domestic resources are constraints.

• The priority for the Arab region is to access climate funds to

finance adaptation projects

• Resources mobilized by climate-funds are difficult to access and

are still insufficient to respond to climate change.

• The Arab region is particularly vulnerable to climate change. The

region suffers from increasing temperatures, severe water

scarcity, increasing frequency and intensity of extreme events.

Evolution of climate finance

“Noting that the largest share of

historical and current global

emissions of greenhouse gases

has originated in developed

countries” (UNFCCC, chapeau)

“…developed countries commit

to a goal of mobilizing jointly

USD 100 billion dollars a year

by 2020 to address the needs of

developing countries.”

(Copenhagen Accord )

Paris Agreement adopted the

financial mechanisms of the

Convention and its operating

entities.

Climate-dedicated funds

$3

billion

(2010-

2018)

$1.2

billion

(2002-

2017)

$350

million

(2002-

2017)

$541

million

(2009-

2016)

$10.3

billion

(2015-

2018)

Accessing the Funds: accredited entities

• Developing countries (public and private) can access international funds only

through an accredited entity.

• Accreditation process is complex and lengthy: it takes on average between 17 and

27 months to get accredited for the Adaptation Fund and 9.9 months for GCF (WRI

2017).

• Number of accredited entities:

✓ GEF: 18 accredited entities none from the Arab region;

✓ Adaptation Fund: 46 entities including 2 Arab national entities (Jordan &

Morocco) and 1 Arab regional entity (Tunisia)

✓ GCF: 75 entities including 2 Arab national entities (Morocco) and 1 Arab

regional entity (Tunisia)

• Time from submitting a proposal to getting the approval takes on average 18 to 22

months for GEF, 8 and 12 months for Adaptation Fund. Disbursement is delayed for

GCF due to many requirements imposed on projects after the approval (WRI 2017)

Financing instruments

• Mainly grants

• Non-grant instruments available

GEF

• Grants

LDCF

• Grants

SCCF

• Grants

AF

• Grants

• Concessional Loans

• Equity

• Guarantee

GCF

Type of GCF Financing, 2015-2018

Grant, 47%

Concessional

Loan, 42%

Equity, 9%

Guarantee, 2%

Distribution of GCF financing, 2015-2018

Adaptation,

25%

Mitigation, 38%

Mitigation-

Adaptation,

37%

Adaptation is the

priority for

developing countries

0

5

10

15

20

25

30

35

40

45

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Adaptation Mitigation Mitigation-Adaptation

Grant Loan Equity Guarantee Number of projects

Geographical distribution of climate financing

• GCF goal: achieving a geographical balance that favours countries

most vulnerable to climate change, including LDCs, Small Island

Developing States (SIDS), and African States.

• Some developing countries have never received any support from

these funds, among which are 6 Arab countries, namely Kuwait,

Palestine, Qatar, Saudi Arabia, the Syrian Arab Republic, and the United

Arab Emirates.

• Only two Arab LDCs (Djibouti and Mauritania) have also accessed

the Adaptation Fund and only Comoros and Djibouti (in a multiple

countries project) have accessed GCF financing.

GCF Readiness Programme

• Up to $1 million per year per country to support national

authorities in project proposals and accreditation process.

• GCF has approved 200 readiness requests in 114 countries with a

total commitment of $114 million, around 35 per cent only were

disbursed by end of October 2018 (only $40 million).

• In terms of readiness support, 15 requests from 12 Arab countries

were approved covering Nationally Designated Authority

Strengthening and Country Programming: Algeria, Comoros, Djibouti,

Egypt, Iraq, Jordan, Libya, Mauritania, Morocco, Oman, Sudan and

Tunisia.

GCF Financing to Arab countries, 2016-

2018

Five multiple country projects covered more Arab countries: Djibouti,

Egypt and Tunisia (in two projects), Jordan and Morocco (in three projects)

422 36

99

150

0

20

40

60

80

100

120

140

160

180

200

Comoros (1) Bahrain (1) Egypt (2) Morocco (3)

Grant Loan

GCF pipeline projects from Arab countries

CountryAccredited

EntityProject Date

Algeria AfDB Renewable energy for agricultural entrepreneurs in Southern AlgeriaJune

2018

Djibouti UNDPReducing flood impacts on transport corridors by mobilizing upstream surface water for the

most vulnerable agro-pastoralists in Djibouti

March

2018

Egypt WFP Enhancing Climate Resilience of Smallholders in Middle EgyptAugust

2017

Jordan FAO, UNDPBuilding Resilience to Cope with Climate Change in Jordan Using the Water-Agriculture-

Energy Nexus Approach

May

2018

Mauritania AfDBProject to Support the Transition to a Resilient, Low-carbon Agriculture in Mauritania (P-

STRALAM)

June

2018

MoroccoADA_Moro

ccoProject of energy recovery from olive waste in Fez-Meknès Region

April

2017

MoroccoADA_Moro

ccoIntegrated flood management to enhance climate resilience of Tata and Tetouan

March

2017

Somalia UNDPImproving the climate-risk preparedness and adaptive capacities of pastoralists throughout

Somalia

July

2017

Sudan UNDPStrengthening Capacity of Rural Primary Health Care Services to Address Adverse Impacts

of Climate Change on Health

April

2018

Sudan UNDPBuilding resilience in the face of climate change within traditional rain fed agricultural and

pastoral systems in Sudan

April

2016

Multiple countries

including

Mauritania

World BankWest Africa Coastal Areas Resilience Investment Project for Climate Change Adaptation

(WACA ResIP-CCA)

July

2018

Multiple countries

including Egypt,

Jordan, Lebanon

and Morocco

EBRD Green Cities ProgrammeMarch

2016

ESCWA’s work on Climate Change

Arab Centre for Climate

Change Policies

Assessment

Adaptation

MitigationNegotiations

Meteorology

Endorsed by

ESCWA’s 30th

Ministerial Session

(June 2018)

Pillars of work: Arab Centre for Climate

Change Policies

• In the areas of development planning, climate change assessment, adaptation and mitigation, disaster risk reduction and Nationally Determined Contributions (NDCs)

1- Providing technical assistance and policy advisory services

•Through training workshops on models and tools that support climate change negotiations and assessments (RICCAR), and on access to finance and technology transfer

2- Building the capacity through institutional strengthening and policy making

•By strengthening regional dialogues to support Arab positioning for global climate change negotiations through the Arab Group;

•Through the Arab Climate Outlook Forum (ArabCOF) by delivering regional consensus outputs on climate trends, seasonal forecasts and providing tailored climate services at national and local levels

3- Strengthening and supporting regional platforms for policy exchange, coordination and consensus building

•By examining and assessing challenges affecting water, energy and food security and the livelihoods of vulnerable groups, and advancing the means of implementation

4- Developing integrated responses to and management of climate-related challenges

•By expanding the RICCAR Regional Knowledge Hub (www.riccar.org)

•By developing geospatial information tools and applications to assist Arab States and stakeholders to better understand the implication of climate change across national and subnational boundaries.

5- Providing access to regional knowledge products, data and information

Innovative sources of climate finance

• To complement and not to substitute resources from climate

funds:

✓ Increased private sector’s participation in mitigation and

adaptation projects: GCF allocated 40% of its pledges to private

sector entities;

✓ Guarantees, one of the financing instruments at the GCF,

protect investors against the risks of expropriation, non-

honoring of financial obligations and transfer restriction;

✓ Green bonds are financial debt instruments whose proceeds

are allocated to “green” projects; Green sukuk are shariah-

compliant green bonds.

Conclusion

• Arab Countries face a number of constraints to access climate funds, among

which complex and lengthy processes and preference to fund mitigation over

adaptation projects.

• Accessing financial resources from climate funds remains the priority for

Arab countries. Innovative resources cannot substitute climate funds, but

may help Arab countries in positioning themselves in climate change

negotiations.

Thank you

THE STATE OF FINANCING FOR DEVELOPMENTInternational Conference on Financing Sustainable Development

Naoko UedaDeputy Director, OECD Development Centre

Beirut, November 2018

Several sources of financing can be

mobilised for productive investment

20.0

27.1

18.516.8

15.117.7

8.8

3.8 5.2

0

5

10

15

20

25

30

Africa Asia LAC

% of GDP

Gross private saving General government taxes

Domestic savings in Africa represented USD 422 billion annually over the period 2009-16

Source: Africa’s Development Dynamics 2018

oe.cd/afdd2018

Countries can push further on domestic

resource mobilisation

Source: OECD’s Global Revenue Statistics Database

05

10152025303540

Ta

x a

s %

GD

P

Tax as % of GDP

http://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm

THANK YOU!

financing for development office · 2018-12-05 · islamic finance through sukuk •eradication of...

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