$4 Trillion Financing Gap Must Be Addressed Urgently for Sustainable Development, Warns FM Nirmala Sitharaman

On Saturday, Union Finance Minister Nirmala Sitharaman emphasised the urgent need for nearly $4 trillion to advance the Sustainable Development Goals (SDGs). Speaking at the 3rd Voice of Global South Summit, she stated, “To make significant progress on the SDGs, addressing the $4 trillion financing gap is crucial.”

Sitharaman highlighted a recent UNCTAD report indicating that developing countries face a $4 trillion shortfall in sustainable development investments. The report also noted that foreign direct investment in clean energy for these countries totalled $544 billion in 2022, falling significantly short of what is needed. Furthermore, the finance minister emphasised that developing economies' high debt levels, particularly in low-income countries, have hampered investment in development.

She stated that the implementation of many SDGs in developing economies is "stagnating" and "even regressing" as global uncertainty "affected the Global South disproportionately." UNCTAD emphasised the importance of providing debt relief to developing countries, allowing economies more fiscal space. This fiscal space will fund clean energy projects, ultimately helping to lower country risk ratings required to attract private investment.

According to the finance minister, responding quickly and efficiently to financing requests made to Multilateral Development Banks (MDBs) is critical. "To achieve this goal, reforms will be necessary at both operational levels and to identify new additional sources of income," stated Sitharaman.

Sitharaman raised the issue of sustainable financing at a time when MDBs such as the World Bank and IMF face pressure to enable debt and sustainable financing for developing economies. In a press release on June 4, UN Secretary-General António Guterres emphasised the importance of focussing on the SDGs and the crisis that developing economies face. "We urgently require a surge in action to achieve the SDGs. "Developing countries—and billions of people—are facing the worst economic outlook in over a generation," he stated.

According to FM, economies must also emphasise growth to focus on the SDGs. "Growth remains the best solution to many economic and social problems. Growth generates positive feedback... improved economic performance leads to more financial opportunities, and vice versa," Sitharaman stated.

"Our priority should be a people-centric growth path that empowers the most vulnerable and marginalised to participate in the development journey," she remarked.