Tuesday, 17 July 2012

What would it cost to meet the Millennium Development Goals (MDGs)…USD 120 billion?

The 2015 deadline to reach the Millennium Development Goals (MDGs) raises the question of what it will cost and who will fund meeting the MDGs. Analysis reveals that achieving the MDGs is at least as much about policies as about financing.

About a 100 of us, mainly OECD staff turned up to listen to the discussion on What would it take to achieve the Millennium Development Goals (#MDGs) by 2015?” on 11 July 2012 in Paris. This was the 4th DAC Development debate, a joint venture between The Development Assistance Committee (DAC) and DevelopmentCo-operation Directorate (DCD). For the first hour we were presented with the main findings of the Development Centres’ study Canwe still achieve the Millennium Development Goals? From cost to policies.” OECD, April 2012.  

The aim of the study was to:

a) revisit the cost estimations of the Millennium Development Goals to which development agencies contributed during the early 2000s and

b) provide an assessment of developing countries’ own capacity to fund additional development investment through domestic resources (taxes in particular) and external resources such as FDI, remittances, private donations and aid.
This means moving away from a donor-centric approach and focusing more on each country’s individual resources and capacities to achieve the MDGs.

The study highlighted the following policy implications:

1. The financial cost of meeting the MDGs related to poverty, education and health is in the order of USD 120 billion. This would imply a tripling of the current level of country programmable aid, i.e. the portion of aid that actually goes from OECD countries to partner countries.

2. As Aid is unlikely to rise to meet this funding gap by 2015, countries will need to find new sources of funding and make better use of existing ones. Therefore, the quality of public policies and institutions are important to meet the MDGs. Tax collection, public expenditure and the investment climate must continue to improve in developing countries. But to succeed, we need the political will and also we need policy coherence and aid effectiveness.

3. One size does not fit all to fund the MDGs. The challenges countries face, and their capacity to meet them, vary considerably. In upper middle-income countries with annual income above USD 4 000 per person, tax potential estimates show that there is enough room to stimulate tax collection to achieve the MDGs.

4. Middle-income countries have to look more at inequality than the lack of resources. The goals are affordable domestically using targeted cash transfers and spending on poverty, education and health.

5. In other developing countries, as institutional reforms take years to bear fruit, tax revenue mobilisation is not a short-term solution.

6. Official Development Assistance is expected to remain at current levels for the future. And that is the best-case scenario. More than ever, aid will need to be complemented by private capital, development cooperation among countries of the South, remittances from migrants and private donations.

7. The main challenge is to ensure that all these resources contribute to sustainable, inclusive growth and to social development.

I assume that many, like myself wondered what had happened over the last 12 years… In 2000, the international community came together to agree upon the MDGs and in so doing committed itself to working together to put an end to poverty, hunger, disease and lack of adequate shelter by 2015. The initial determination and drive had gone, and it somehow felt like this last stretch was going to be a challenge, as if there just wasn't much momentum left.

Also, can and should one really put a price tag on such things…what’s the cost of resolving climate change, conflicts in fragile countries? The MDGs were conceived to be met at a global level, but the last 12 years have shown the limitations of this approach, such as the difficulty in adopting the right time-frame, determining costs and official development assistance (ODA).

Now twelve years later, hundreds of millions of people have moved out of extreme poverty mainly thanks to high growth in large countries such as Brazil, China and India. However, the challenges of fighting extreme poverty in all countries and of achieving the MDGs remain.

The Bottom Line
So, USD 120 billion is needed to achieve six of the key MDGs but that’s more than the size of the official development assistance that can be raised in the foreseeable future. Yet, it is not insurmountable if the whole range of development resources is fully mobilised.

David McNair of Save the Children (content partner on Wikiprogress) in his Guardian Blog, “Who's going to pay for the MDGs?” argues that “Aid alone is not enough, but transparency and accountability are essential if tax revenues are to be used to plug the financing gap”

Well, sitting in that room I felt like we would need far more than what both the study above and McNair propose, the international community will have to find some of that initial passion and motivation if we are to have any chance of achieving the MDGs in the final home run. 

Finally there are important lessons that must be drawn from experiences so far for the designers of the framework that follows on from the MDGs – it must be a framework that tackles inequality as well as poverty and factors in how different components of well-being (income, health, etc.) contribute to people's  personal sense of how their lives are and what they value in their lives.

Salema Gulbahar 
Wikiprogress Co-ordinator

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