The World Bank Group is engaged in a crucial effort to redefine our approach to development finance, address the rising aspirations of the poor, and achieve our goals of ending extreme poverty and boosting shared prosperity. Our approach, Maximizing Finance for Development (MFD), entails leveraging the private sector in ways that optimize the use of scarce public resources.
Our aim is to improve the lives of poor people while promoting good governance and helping ensure environmental and social sustainability. While estimates vary, analysts say it could cost up to $4.5 trillion a year in state spending, investment, and aid to meet the sustainable development goals (SDGs). Hence, it will be nearly impossible to meet the Sustainable Development Goals (SDGs) by relying on public funding alone. The private sector can play a much bigger role in socially and environmentally responsible investments in developing countries.
Our client countries will need a broad range of solutions to meet their development goals, to ensure inclusive and sustainable growth without pushing the public sector into unsustainable levels of debt and contingent liabilities. The Hamburg Principles, adopted at the G20 in July 2017, emphasize country ownership in defining investment priorities and the potential of the private sector in providing solutions.
Today, many governments acknowledge that the private sector can contribute to advancing development goals. Many businesses offer valuable skills, resources and access to markets. And companies increasingly see that promoting sustainable development is in their best interests.
Government leaders in several developing countries are asking for WBG assistance in crowding in private solutions for development. Nine of them—Cameroon, Cote d’Ivoire, Egypt, Indonesia, Iraq, Jordan, Kenya, Nepal, and Vietnam—have been identified for pilots of the MFD approach. The pilots will focus mainly on infrastructure, which underpins many other sectors that are critical to sustainable growth and poverty reduction. The efforts will build on existing WBG programs in these countries, with the aim to address binding constraints or unlock new opportunities.
We will closely monitor the impact, particularly how each country pilot benefits its citizens. Based on lessons learned, the aim is to scale up, geographically and by sector. Lessons will continue to be incorporated as the MFD approach is rolled out more generally.
HOW MFD WORKS
The Principles for Crowding-in Private Sector Finance for Growth and Sustainable Development provide a common framework for multilateral development banks (MDBs) to increase levels of private investment in support of development. With our counterpart MDBs, the WBG can promote private investments that are economically viable and cost-effective, fiscally and commercially sustainable, balanced from a risk-reward perspective, and transparent; they meet social and environmental safeguards and that align with commitments to address climate change.
The WBG and other MDBs will focus on three main areas:
- Strengthening investment capacity and policy frameworks at national and subnational levels
- Enhancing private sector involvement and prioritizing commercial sources of financing
- Enhancing the catalytic role of MDBs themselves
Sr. Communications Officer, World Bank
Nadine S. Ghannam
Sr. Communications Officer, IFC
Sr. Communications Officer, MIGA