10-07-2025
Fourth International Conference on Financing for Development (FfD4): A must-know for UPSC exam
Take a look at the essential concepts, terms, quotes, or phenomena every day and brush up your knowledge. Here's your knowledge nugget on major outcomes of FfD4.
(Relevance: Important conferences and summits are important from both the Prelims and Mains perspective of the UPSC exam.)
Recently, the 4th International Conference on Financing for Development (FfD4) was held from 30 June – 3 July in Seville, Spain. A Sevilla Commitment was adopted ahead of the start of the Conference, which laid down a path to close the $4 trillion annual SDG financing gap in developing countries. However, the USA, one of the largest economies, skipped the Conference.
This Conference was supported by the UN Department of Economic and Social Affairs (DESA), through its Financing for Sustainable Development Office, and the UN Economic and Social Council (ECOSOC).
1. Financing for development (FfD) is an ongoing process to align financial flows and policies with economic, social, and environmental priorities. In 1997, the Agenda for Development was adopted by the UN General Assembly (UNGA), which called for consideration of holding an international conference on FfD.
2. According to the Earth Negotiations Bulletin, a division of the International Institute for Sustainable Development (IISD), 'the first International Conference on Financing for Development took place in 2002 in Monterrey, Mexico. The resulting Monterrey Consensus 'resolved to address the challenges of financing for development' and 'to eradicate poverty, achieve sustained economic growth and promote sustainable development.'
3. In 2008, a follow-up conference was held in Doha, Qatar. Building on this, the third Conference on Financing for Development adopted the Addis Ababa Action Agenda in 2015. It included a policy framework to realign financial flows to implement the 2030 Agenda for Sustainable Agenda and its 17 Sustainable Development Goals (SDGs). Ten years after Addis Ababa, the FfD conference was held in Spain.
Financing is the engine of development. And right now, this engine is sputtering. – United Nations Secretary-General Antonio Guterres statement at opening of 4th FfD4
4. Many countries face escalating debt burdens, declining investments, decreasing international aid, and increasing trade barriers. The Conference is seen as an opportunity to close the staggering $4 trillion annual financing gap, promoting development, bringing millions of people out of poverty, and helping achieve the UN's Sustainable Development Goals, which are currently lagging.
5. Last year, 3.3 billion people were living in countries that pay more interest on their debts than they spend on health or education, and the number will increase to 3.4 billion people this year, according to Grynspan. And developing countries will pay $947 billion to service debts this year, up from $847 billion last year.
1. Building on the 2015 Addis Ababa Action Agenda, the Sevilla Commitment reaffirms adherence to realizing sustainable development, including effectively implementing the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals and upholding all principles enshrined in it.
2. With the approaching deadline of SDGs, the Sevilla Commitment charts a path on three fronts: catalyzing investment at scale for sustainable development, addressing the debt and development crisis, and reforming the international financial architecture.
3. Under the Sevilla Platform for Action, 'new financing mechanisms were announced to tackle unsustainable debt burdens, and additional initiatives aimed to enhance crisis response and climate resilience, expand access to social protection and support local and digital economies, among others,' according to the UN press release.
4. A Debt Swaps for Development Hub initiative led by Spain and the World Bank was launched. It aims to strengthen capacity and enhance collaboration to scale up debt swaps and lower debt service burdens.
5. Along with this, a Debt-for-Development Swap Programme by Italy that will convert 230 million Euros of debt obligations of African countries into investments in development projects and a Sevilla Forum on Debt to help countries learn from one another and coordinate their approaches in debt management and restructuring were announced.
6. Led by Brazil and Spain, an Effective Taxation of High-Net-Worth Individuals initiative was launched to ensure high-net-worth individuals pay their fair share.
India had made an uncharacteristically strong criticism of the Baku agreement, calling the final agreed amount 'abysmally poor' and 'paltry'. It has been said that the lack of adequate finance was not just an abdication of responsibility by the developed countries, but also a major setback to global climate action.
1. A few days before the start of the FfD4, the World Bank published a Report titled 'Foreign Direct Investment in Retreat', pointing out that the Foreign Direct Investment (FDI) into developing countries had fallen to $435 billion in 2023, the lowest in nearly 20 years. It warns that rising trade and investment barriers pose a 'significant threat to global efforts to mobilise financing for development.
2. According to M. Ayhan Kose, the World Bank Group's Deputy Chief Economist, the sharp drop in FDI for developing countries 'should sound alarm bells'. Reversing the trend, Kose said, was not just an 'economic imperative' but also 'essential for job creation, sustained growth, and achieving broader development goals'.
3. According to the Report, the prolonged and widespread investment weakness in emerging market and developing economies (EMDEs) has contributed to a large backlog of unmet infrastructure needs.
4. Weak investment growth is undermining efforts to achieve key development goals, including tackling climate change and accelerating the energy transition, and reducing poverty and inequality. By some estimates, EMDEs need to invest at least an additional 1.4 percent of GDP through 2030 just to address climate change and the energy transition.
5. Among EMDEs, China has been the biggest receiver of FDI from 2012 to 2023, accounting for nearly one-third of these inflows. Brazil was second at 10 per cent and India third at 6 per cent, the World Bank said.
6. While data for the 2023 calendar year is the latest available at a global level, FDI into India as per Reserve Bank of India (RBI) data increased to $81.04 billion in 2024-25 from $71.28 billion in 2023-24. However, net FDI into India – which adjusts the gross FDI number by deducting the funds repatriated by foreign investors and the investments made by Indian entities abroad – fell to just $353 million in the last fiscal from $10.13 billion in 2023-24.
Consider the following statements about the International Conference on Financing for Development:
1. The first International Conference on Financing for Development took place in Doha, Qatar.
2. The Sevilla Commitment was signed by the USA, UK, France, Germany, and Italy.
3. The Effective Taxation of High-Net-Worth Individuals initiative was launched by Brazil and Spain.
Which of the following statements is/are incorrect?
(a) 2 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2, and 3
(Source: US skips global UN meeting aimed at raising trillions of dollars to combat poverty, 'Alarm bells' for developing nations as 2023 FDI lowest since 2005 – World Bank)
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