Risk-informed development cooperation and global cooperation will be vital in efforts to "build back better" after COVID-19, according to Mr. Navid Hanif, Director of the Financing for Sustainable Development Office, UN DESA.  As part of a series on Global Public Investment and the future of foreign aid appearing on the Development Initiatives blog, Mr. Hanif's article describes how COVID-19 has reinforced the need for global cooperation and collaboration.

The international monetary system remains vulnerable to volatility and contagion, such as the recent financial volatility as a result of COVID-19, as well as risks from increased leverage (see chapters I and III.E). Whether these have systemic stability implications depends on the nature of international financial linkages and the timeliness and effectiveness of policy responses.

The debt of developing countries continued to rise in 2019—albeit at a slower pace—and, with it, the risks to debt sustainability. Forty-four per cent of low-income and least developed countries (LDCs) are currently assessed as being at high risk of external debt distress or already in debt distress. COVID-19 and related global economic and commodity price shocks could significantly increase this number. For example, several African countries reliant on oil exports could find themselves in debt distress.

International trade has contributed to economic growth, poverty reduction and private financial flows across countries supported by strong international cooperation, embodied in the multilateral trading system. Recent trade tensions have challenged the way international trade works. Additionally, the COVID-19 crisis will have a significant impact on trade, particularly trade in services. Any response to the crisis that would further advance protectionism will contribute to slow down post-crisis recovery.

The 2030 Agenda for Sustainable Development will place significant demands on public budgets and capacities that require scaled-up and more effective international support, including both concessional and non-concessional financing. Yet, in 2018, official development assistance (ODA) declined by 4.3 per cent and remains well below the 0.7 per cent commitment in the Addis Agenda. The decline was due in large part to a decrease in financing for refugees in donor countries; however, gross ODA to least developed countries (LDCs) also fell by 2.2 per cent in real terms.

Domestic public resources have a unique role to play in financing for sustainable development. The link between revenue collection and effective expenditures for quality public goods and services forms the basis of the social contract between citizens and the state. Member States of the United Nations also recognized that significant additional domestic public resources are necessary to realize sustainable development and committed to enhancing revenue mobilization.