Two years ago, world leaders convened in Addis Ababa for a remarkable first—the global community met to agree on ways to finance the ambitious Sustainable Development Goals (SDGs), with the objective of virtually eliminating extreme poverty.
The development needs of today, and through the year 2030, are enormous. With that recognition, we are no longer talking about the billions of dollars needed to support our renewed development goals—we are talking about the trillions.
We know developing countries have the capacity to mobilize much of this money, through improved investment climates, public financial management and tax collection, with support from the World Bank. At the same time, official development assistance (ODA) from donor governments will also help fill the gap. But this is still not enough.
Rather, the bulk of financing needed to make the SDGs a reality will need to come from the private sector—the engine of job growth for the millions of unemployed African youth. This is a critical shift, as there are not enough jobs to absorb labor force entrants. Just to keep employment rates stable, there is a need to create 600 million new jobs over the next 15 years.
What can be done? Everyone—from government to multilateral agencies to the private sector—will need to step up efforts to help generate jobs.
Here’s what we at the World Bank Group have been doing. First, we are stimulating private investment in challenging environments through the World Bank Group’s concessional financing arm, the International Development Association (IDA). A new $2.5 billion Private Sector Window, or PSW, seeks to mobilize private capital, particularly in fragile situations, by offering a range of solutions—such as risk mitigation, blended finance and local currency lending—to encourage investments that have failed to materialize due to perceived risks. The PSW is set to launch in July 2017.
The Private Sector Window is part of a $75 billion package of support for low-income countries eligible for IDA financing over the next three years. $45 billion of this amount is expected to go to Africa. Through the PSW, the World Bank Group (IDA, IFC and MIGA) will work jointly with private sector entities and governments to help projects with a strong development impact get off the ground.
Our call to action is for the private sector to scale up its investments with a strong development impact. Based on the groundswell of interest and creativity displayed at the Development Finance Forum convened a few weeks ago in Accra, the interest is there.
The 3rd Development Finance Forum convened more than 300 public and private sector leaders from Ghana and around the world to explore innovative ways to bring more private finance into Africa’s priority sectors. Hosted jointly by the World Bank Group and the African Center for Economic Transformation (ACET), the forum created a critical marketplace for the exchange of ideas. Attendees displayed a genuine eagerness for dialogue to address concerns that inhibit investment and a hunger to make connections that lead to productive investment.
The Bank Group stands ready for this new type of relationship. The forum is a sign of our collective hope and commitment to unleash the financing needed to create jobs and opportunities for the people of Ghana and beyond.
By Axel van Trotsenburg, Vice President, Development Finance, World Bank Group