Meeting the SDGs requires moving beyond aid—toward an ‘Aid Plus’ model that blends investment, tax reform, and systemic financial change.
Image Source: un.org
Global development in the contemporary epoch hinges on a delicate balance of financial flows. For developing countries, ensuring that more resources flow in than out is critical to sustaining growth and reducing poverty. Nonetheless, debt burdens, tax evasion and avoidance, and declining investment continue to challenge progress. The recent United Nations (UN) International Conference on Financing for Development (FfD4) in Seville – the largest in a decade – underscored that meeting the Sustainable Development Goals (SDGs) requires moving beyond aid toward an integrated financial strategy.
Over the past two decades, the development finance agenda has shifted from a primary focus on aid to a broader mix of public, private, and domestic resources. At the 2002 Monterrey Consensus, official development assistance (ODA) was seen as the key driver of development. Today, development finance increasingly depends on mobilising private investment, expanding domestic tax revenue, and addressing systemic fiscal leakages. Aid continues to be essential, especially for fragile states, but it should be part of an 'Aid Plus' model that utilises broader financial flows.
Aid continues to be essential, especially for fragile states, but it should be part of an 'Aid Plus' model that utilises broader financial flows.
FfD4 highlighted this transition. If a country consistently has more money flowing out than in, it is nearly impossible to achieve sustainable development. Financial flows into developing countries include overseas investors injecting money into public or private projects (foreign direct investment), tax revenue from international firms (domestic resource mobilisation), money sent home by overseas workers (remittances), and international aid (official development assistance). Flows out of countries include interest payments on money that has been borrowed (servicing debt) and money that leaks out through crime and corruption (illicit financial flows).
The Seville FfD4 shows that aid alone is insufficient. A comprehensive approach requires attention to all parts of this equation. Mobilising investment and tax revenue while minimising losses from debt repayment and illicit flows enables countries to deliver essential services—such as health, education, and infrastructure—without constant dependence on aid.
A key focus of the UN conference was facilitating private investment in developing countries. Spanish Prime Minister (PM) Pedro Sánchez underscored this imperative at the opening of the International Business Forum: “Sustainable development isn’t possible without greater involvement by the private sector.”
UN Secretary-General António Guterres noted that foreign direct investment has declined for two consecutive years, largely bypassing developing countries altogether. The conference aimed to ‘get the engine running again’. Government can help create a conducive investment environment by identifying bankable projects and reducing investor risks through instruments such as political risk insurance or guarantees.
Climate finance was a major focus. Financial instruments such as green bonds offer both environmental and financial returns, while debt-for-nature swaps facilitate debt restructuring in exchange for environmental commitments. These are innovative pathways to attract private capital.
Excessive debt can quickly reverse development progress by turning scarce resources into an outward flow. For instance, South Africa has been spending more on debt repayment than on its entire health budget.
As Secretary-General of the International Chamber of Commerce, John Denton put it, “It’s not through any fault of their own that some countries can’t get finance.”
This was highlighted at the Civil Society Forum, where civil society groups called for debt relief, reforms to credit ratings processes, and cheaper lending instruments to prevent developing countries from being locked out of capital markets. As Secretary-General of the International Chamber of Commerce, John Denton put it, “It’s not through any fault of their own that some countries can’t get finance.”
Currently, only two African countries hold an ‘investment-grade’ rating, forcing most to borrow at high interest rates. Reducing debt costs would free resources for core domestic development priorities.
Another inward flow – tax – was also a focus, with tax revenue being the most sustainable form of development finance. Yet, current global tax rules allow multinational companies to shift profits to low-tax or no-tax jurisdictions, depriving countries of much-needed revenue.
This dynamic often results in a ‘race to the bottom’, as developing countries offer generous tax incentives to attract investment, sometimes leading to resource extraction rather than gains.
Current global tax rules allow multinational companies to shift profits to low-tax or no-tax jurisdictions, depriving countries of much-needed revenue.
At FfD4, several ancillary events focused on the ongoing negotiations for an international tax convention, the implementation of the recent agreement on a global minimum tax, and the need for technical assistance to strengthen tax systems in developing countries. Without reforms, developing countries will continue to lose billions that could finance/sponsor infrastructure and essential services.
Illicit financial flows continue to drain resources through corruption, money laundering, and tax evasion. Given the role of professional enablers, conference participants emphasised that addressing this challenge requires action not only by developing countries but also by developed countries.
Measures such as the introduction of beneficial ownership registers, stricter enforcement of anti-money laundering rules and closing regulatory loopholes were identified as essential steps to prevent the loss of development finance and to help trace assets lost to corruption.
Despite diversification, aid is far from obsolete. Over the decades, ODA has evolved from direct project funding toward leveraging broader financial flows, supporting fragile states, and addressing global public goods such as health security and climate change.
A multistakeholder roundtable in Seville reaffirmed that ‘development assistance is not charity but a strategic necessity vital to security.’ Some framed aid as reparations for the colonial period, while others emphasised its role in enabling collective action against transboundary challenges – pandemic preparedness and climate mitigation – that no single country can tackle in silos.
A multistakeholder roundtable in Seville reaffirmed that ‘development assistance is not charity but a strategic necessity vital to security.’
Even commentators who believe that the world is entering a “post-aid world” recognise that development assistance will continue to play an essential role in addressing gaps, supporting fragile states, and ensuring that no one is left behind.
Carsten Staur, Chair of the Organization for Economic Co-operation and Development’s (OECD) Development Assistance Committee, captured this dual purpose: aid is “a vital tool for reducing extreme poverty and leveraging additional resources.” Even with improvements in debt relief, tax collection, investment, and anti-corruption measures, the poorest countries will continue to depend on international assistance to meet basic needs.
FfD4 points toward an ‘Aid Plus’ approach: one that combines traditional assistance with systemic reforms in debt, tax, investment, and anti-corruption.
For high-income countries, the challenge goes beyond writing annual aid cheques to reshaping the financial architecture itself – influencing capital flows, global tax norms, and anti-corruption frameworks. Without such comprehensive action, achieving the SDGs will remain out of reach.
Emilie Hung-Ling is a PhD candidate at the University of Queensland and an Intern at the Asia-Pacific Development, Diplomacy & Defence Dialogue (AP4D).
Melissa Conley Tyler is Executive Director of AP4D, an initiative funded by the Australian departments of foreign affairs and defence and hosted by the Australian Council for International Development. Melissa is also a member of the SUFIP Scientific Committee.
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Emilie Hung-Ling is a PhD candidate at the University of Queensland and an Intern at the Asia-Pacific Development, Diplomacy & Defence Dialogue (AP4D). ...
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Melissa Conley Tyler is Executive Director of AP4D, an initiative funded by the Australian departments of foreign affairs and defence and hosted by the Australian ...
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