According to a new UNCTAD report, developing countries actually face a staggering four trillion dollar gap in sustainable development investments.

The UNCTAD Secretary-General, Rebeca Grynspan, said that a significant increase in material support for renewable energy in developing countries was crucial for the world to reach its climate goals by 2030.

While investment in renewables has nearly trippled since the adoption of the Paris Agreement almost eight years ago, poorer nations have been largely left out.

Grynspan said more than 30 developing countries had not registered a single international investment in utility-size renewable energy generation since the landmark climate change treaty was adopted in 2015.

According to UNCTAD, the amount of foreign direct investment in clean energy attracted by developing countries in 2022 stood at 544 billion dollars — well below needs.

Some good news from the report is that energy companies among the top 100 multinationals have been increasingly turning toward renewables and divesting fossil fuel assets at about 15 billion dollars per year.

However, the report shows an overall slower pace of investment in renewable energy in 2022, “as international project finance deals declined”.

In developing countries, the largest gaps in Sustainable Development Goal, SDGs,-related investments were in energy, water and transport infrastructure, UNCTAD said.

Foreign direct investment, FDI, is also on the decline, according to UNCTAD, as global flows fell by 22 per cent in 2022, to 1.3 trillion dollars, while in Least Developed Countries, the vast majority of which are in Africa, FDI inflows dropped by as much as 16 per cent.

UNCTAD’s report says that the slowdown was driven by “overlapping crises”: the war in Ukraine, high food and energy prices and debt pressures.

With these factors still in play during 2023, the agency said that it expects “downward pressure on global FDI” to continue this year.

The report calls for series of policies and financing mechanisms to be put in place to help developing countries attract necessary investments.

UNCTAD stressed the importance of debt relief for developing economies, to provide them with the fiscal space needed for clean energy spending and to help lower country risk ratings, a prerequisite for attracting private investment.

The agency also recommended reducing the cost of capital for clean energy investment through partnerships between international investors, the public sector and multilateral financial institutions – a measure that can reduce the spread on borrowing costs for energy investment projects in developing countries by up to 40 per cent.

Grynspan insisted that investment played a “huge part” in achieving the SDGs.

She said they were simply “too big to fail”, calling them “the only game in town” which requires collective action and global solidarity.

Source: NAN

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It, therefore, called for the adoption of the right policies to guard against recession.

In a report released on Monday, UNCTAD observed that the world would see global recession and prolonged stagnation if fiscal and monetary policies holding sway in some advanced economies were not quickly changed.

“There is still time to step back from the edge of recession.

“This is a matter of policy choices and political will,’’ UNCTAD chief, Rebeca Grynspan, said.

According to her, the current course of action is hurting the most vulnerable.

UNCTAD is warning that the policy-induced global recession could be worse than the global financial crisis of 2007 to 2009.

The agency also warned that excessive monetary tightening and inadequate financial support could expose developing world economies further to cascading crises.

The development prospects in a fractured world report points out that supply-side shocks, waning consumer and investor confidence, and the war in Ukraine have provoked a global slowdown and triggered inflationary pressures.

It further warned that while all regions will be affected, alarm bells are ringing most for developing countries, many of which are edging closer to debt default.

The report said that as climate stress intensified, so would losses and damage inside vulnerable economies that lacked the fiscal space to deal with disasters.

The report projected that world economic growth would slow to 2.5 per cent in 2022 and drop to 2.2 per cent in 2023 – a global slowdown that could leave GDP below its pre-COVID-19 pandemic trend and cost the world more than 17 trillion dollars in lost productivity.

Amid this, it stressed, leading central banks are sharply raising interest rates, threatening to cut off growth, and making life much harder for the heavily indebted.

UNCTAD forecast that global slowdown would further expose developing countries to a cascade of debt, health, and climate crises.

The report projected that middle-income countries in Latin America and low-income countries in Africa could suffer some of the sharpest slowdowns in 2022.

UNCTAD warned of a possible global debt crisis with 60 per cent of low-income countries and 30 per cent of emerging market economies in or near debt distress.

“Countries that were showing signs of debt distress before the pandemic are being hit especially hard by the global slowdown.

“And climate shocks are heightening the risk of economic instability in indebted developing countries seemingly under-appreciated by the G20 major economies and other international financial bodies.

“Developing countries have already spent an estimated 379 billion dollars of reserves to defend their currencies this year,” UNCTAD said.

It explained that the expenditure is almost double the amount of the International Monetary Fund’s (IMF) recently allocated Special Drawing Rights to supplement their official reserves.

The UN body is, therefore, calling on international financial institutions to urgently provide increased liquidity and extend debt relief to developing countries.

It is also calling on the IMF to allow fairer use of Special Drawing Rights; and for countries to prioritise a multilateral legal framework on debt restructuring.

Meanwhile, interest rate hikes in advanced economies are hitting the most vulnerable hardest.

Some 90 developing countries have seen their currencies weaken against the dollar this year – over a third of them by more than 10 per cent.

And as the prices of necessities like food and energy have soared in the wake of the Ukraine war, a stronger dollar worsens the situation by raising import prices in developing countries.

Moving forward, UNCTAD is calling for advanced economies to avoid austerity measures and international organiations to reform the multilateral architecture to give developing countries a fairer say.

For much of the last two years, rising commodity prices – particularly food and energy – have posed significant challenges for households everywhere.

And while upward pressure on fertiliser prices threatens lasting damage to many small farmers around the world, commodity markets have been in a turbulent state for a decade.

Although the UN-brokered Black Sea Grain Initiative has significantly helped to lower global food prices, insufficient attention has been paid to the role of speculators and betting frenzies in futures contracts, commodity swaps and exchange traded funds (ETFs) the report said.

Also, large multinational corporations with considerable market power appear to have taken undue advantage of the current context to boost profits on the backs of some of the world’s poorest.

UNCTAD has, therefore, urged governments to increase public spending and use price controls on energy, food and other vital areas, investors to channel more money into renewables, and the international community to extend more support to the UN-brokered Grain Initiative.

Source: NAN

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