Domestic resource mobilization has taken on added urgency with the fiscal pressures generated by the pandemic. Progressive taxation is one part of the equation. Financing safety nets through regressive tax systems that weigh heavily on the poor can compound rather than alleviate poverty.122 Despite the downturn, there is scope for increasing tax revenues through the development of property-related taxes and curtailment of tax deductions and exemptions (which can exceed 5 percent of GDP in much of Africa and Latin America).123 The other side of the equation is efficiency and equity in public spending. International benchmarking demonstrates that countries at similar levels of GNI and public spending can achieve widely divergent SDG outcomes. Better budget execution and public finance management systems can make more resources available.124 Budgets that skew resources towards, for example, tertiary health care and universities in countries marked by extreme inequality in access to primary health care and basic education, can reinforce social disparities and act as a brake on progress. Conversely, investing more income per capita on services that expand opportunities for social groups who have been left behind can act as a driver for the SDGs. In the current context, policymakers with a concern for equity should focus their efforts on budgets that maintain or expand the safety nets and health and education services threatened by the pandemic. Many of the policies needed to reduce inequality and expand opportunity are the same now as they were pre-pandemic,125 but the pandemic has given an added urgency to equity.
4.5 International public finance – aid and multilateral institutions Successful implementation of the UNDP Strategic Plan will require an enabling environment supported by international public finance. One of the central roles of IFIs, multilateral development banks, debt relief and aid is to expand the fiscal space available to Governments in low-income and middle-income countries. The record of delivery during the pandemic is more limited than demanded by the scale of the crisis threatening the achievement of the SDGs. In contrast to the domestic policy stance of OECD countries, the international aid response to the pandemic crisis was muted. As developing country Governments grappled with a public health crisis, economic recession and rising poverty, ODA grew by 3.5 percent in 2020, from $151.7 billion in 2019 to $157 billion in 2020, an increase of more than $5 billion.126 That figure is dwarfed by the $56 billion increase in SDG financing which the IMF estimates has been incurred by sub-Saharan Africa alone. Expressed differently, 2020 aid levels represented well under 1 percent of the pandemic stimulus packages mobilized by advanced economies. Much of the estimated $12 billion in 2020 aid financing directed towards COVID-19 may have been diverted from other activities.127 ODA increased by just 1.8 percent for the least developed countries, a group for which it represents three quarters of external finance.
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Lustig, Nora, The Sustainable Development Goals (SDGs), Domestic Resource Mobilization and the Poor, Policy brief, G20 Insights, 24 July 2018. Mullins, Gupta, and Liu, 2020. “Domestic Revenue Mobilization in Low Income Countries: Where to From Here?” CGD Policy Paper 195. Washington, DC: Center for Global Development. https://www.cgdev.org/publication/domestic-revenuemobilization-lowincome-countries-where-here Hélène Barroy and Sanjeev Gupta. 2020. “From Overall Fiscal Space to Budgetary Space for Health: Connecting Public Financial Management to Resource Mobilization in the Era of COVID-19.”CGD Policy Paper 185. Washington, DC: Center for Global Development. https://www.cgdev.org/sites/default/files/overall-fiscal-space-budgetary-space-health-connecting-publicfinancial-management.pdf Lustig, Nora, The Sustainable Development Goals (SDGs), Domestic Resource Mobilization and the Poor, Policy brief, G20 Insights, 24 July 2018. OECD, ‘COVID-19 spending helped to lift foreign aid to an all-time high in 2020 but more effort needed’, Press release, OECD, 13 April 2021, Development Assistance Committee countries disbursed total ODA of $157 billion in 2020 and $152 billion in 2019. Ibid.
CHAPTER 4. FINANCING FOR AN SDG RECOVERY: BRIDGING THE GAP
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