Developing countries today are navigating a deep and interconnected polycrisis. From the lingering aftershocks of COVID-19 and escalating conflicts to rising debt burdens, food insecurity, and intensifying climate disasters, progress on development has not just stalled, it is backsliding. As of 2024, only 17 per cent of the Sustainable Development Goals (SDGs) remain on track (UN, 2024), and hard-won gains in poverty reduction, healthcare, and education are being rapidly eroded in many parts of the Global South.
At the heart of this reversal lies a deepening crisis in development finance. The global SDG financing gap has widened dramatically and is now estimated between USD 3.9 and 4.2 trillion annually, up from USD 2.5 trillion before the pandemic (UN, 2024). The fiscal space in low- and middle-income countries has shrunk, forcing governments to make impossible trade-offs between basic services, debt servicing, and climate resilience.
Traditional finance from the Global North is faltering. The OECD projects a 9 to 17 percent drop in ODA in 2025, after a 9 per cent cut in 2024. For the first time, France, Germany, the UK, and the US have all slashed ODA for two consecutive years. By 2027, ODA is expected to fall back to 2020 levels, deepening the development financing gap (OECD, 2025). This retreat further widens the financing gap, leaving many low- and middle-income countries without predictable external support to meet basic development and climate needs.
The Indo-Pacific faces a unique and urgent challenge. Home to a majority of the world’s poor and most climate-vulnerable populations, including Least Developed Countries (LDCs) and Small Island Developing States (SIDS), it will drive most of the world’s new energy demand by 2050. Yet, clean energy investment remains far below with only USD 82 billion mobilised in 2022 against an annual requirement of USD 155 billion (OCED, 2024). Compounding these pressures are recent trade upheavals and an increasingly uncertain global environment, which threaten to further strain supply chains and slow investment flows critical to the region’s transition. Adaptation finance is even more constrained. International public adaptation finance to developing countries rose to USD 28 billion in 2022, covering only 5 percent of the USD 187 to 387 billion required annually (UNEP, 2024). Asia’s developing countries alone need between USD 102 and 431 billion each year for adaptation, but only USD 34 billion was committed in 2021 and 2022 (ADB, 2024). These financing gaps are worsening the region’s climate-health crisis, as intensifying heat, water and food stress, and disease outbreaks place growing pressure on already overstretched health systems.
In this context, South-South Cooperation (SSC) presents a critical and transformative pathway forward. By enabling countries of the Indo-Pacific to share resources, knowledge, and technologies on equitable terms, SSC offers regionally grounded and peer-driven models complementing traditional development finance. It can help co-create new financing models, scale locally adapted solutions, and build joint institutions that are responsive to the realities of climate-vulnerable regions.
To explore these opportunities, the Sustainable Financing in the Indo-Pacific Development Network (SUFIP DN) is convening a webinar on the occasion of UN South-South Cooperation Day. This panel will explore how South-South Cooperation can help unlock new sources of capital, knowledge, and technology to tackle interconnected crises in health, climate, and energy. Drawing from regional experiences and emerging SSC models, the discussion will focus on practical strategies to co-create financing mechanisms that reflect the needs and priorities of the Global South.
