from the International Monetary Fund

— this post authored by Chris Lane and Elliott Harris

In 2015, 193 countries adopted the 17 Sustainable Development Goals (SDGs) as an overarching policy roadmap through 2030. These goals are predicated on the idea that for a sustainable future, economic growth must go hand-in-hand with social inclusion and protection of the environment.

Our respective institutions, the United Nations Department of Economic and Social Affairs (UNDESA) and the International Monetary Fund (IMF), fully support these goals. From the UN perspective, they represent a down payment on a more peaceful, prosperous, and cooperative world, especially in increasingly perilous times. For the IMF, they help underpin economic stability and sustainable and inclusive economic growth.

In 2017, most types of development financing flows increased, helped by an upturn in the world economy, increased investment, and supportive financial market conditions. Yet less than three years after adoption, the implementation of the SDGs is running into a major hurdle – rising public debt in some developing countries. This is the sobering message of a new report on financing for development issued by the UN, in collaboration with the IMF and almost 60 other agencies.

Here’s the problem: as noted recently by IMF Deputy Managing Director Tao Zhang, 40 percent of low-income countries face high risk of debt distress or are unable to service their debt fully – this is up from 21 percent just five years ago. On top of this, several developing countries are also falling behind in terms of per capita income, induced by such factors as fragility and conflict – these include vulnerable countries like Haiti, D.R. Congo, and Chad.

Low tax revenue, weak international support

A key problem is that many of these countries are not able to raise enough public revenue. There are many reasons for this – narrow tax bases, continued over-reliance on extractive industries, and weak tax administration. But tax evasion is also part of the problem. The low tax take in low income developing countries – where the median tax revenue is just 13.3 percent of GDP – can be traced in part to informality and tax evasion.