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Moving support to developing countries from billions to trillions cannot be done through official grants and lending alone. The bulk of the additional money must come from the private sector. While relatively high yields on projects in developing countries should attract international capital flows, the trends are not positive, and amounts are not at the magnitude needed. MDBs and DFIs are the key intermediaries in accelerating the flow of these funds as they offer to the private sector substantial expertise in finding, framing, financing and evaluating projects in developing countries.
CGD is working with both the private sector financiers and MDB/DFI officials to gather information, formal and informal, to 1) uncover the blockages to increased international capital flows for development; 2) propose concrete changes to MDB/DFI policies and procedures that could facilitate these flows; and 3) open new pathways for the public and private sectors to interact so that private investment in developing countries accelerates.
A key element of the scaling up is how DFIs will use blended finance—traditional market-term financing combined with concessional finance—to speed up investment in riskier projects with more development impact. In this area, the primary questions are:
The world, as they say, is moving “beyond aid.” As true as that may be in aggregate, however, the trend doesn’t apply evenly across groups of countries. While fairly significant data gaps prevent a complete and unbiased picture, the available data show that ODA remains a comparatively prominent source of external financing for fragile states.