India’s G20 Leadership: Elevating Capacity Building for Sustainable Development Financing

India’s G20 Presidency has identified the mandate for the Finance Ministers and Central Bank Governors (FMCBG) as thus: “capacity building of the ecosystem for financing sustainable development.” The aim is to scale up efforts in mobilising large pools of global capital for sustainable projects, particularly in emerging and developing economies. Under the aegis of the Sustainable Finance Working Group (SFWG), the G20 proposes the development of the first Technical Assistance Action Plan (TAAP) that will create an ecosystem of capacity-building initiatives encompassing a series of advisory, operational, and technical programs. While the TAAP succeeds in proposing actionable recommendations for capacity-building providers, it does not incorporate a delivery mechanism nor an outcome-based approach to realise these priorities and ambitions. This paper recommends a deliverable-oriented framework for capacity building as identified by the SFWG under India’s G20 presidency. Attribution: Mannat Jaspal, “India's G20 Leadership: Elevating Capacity Building for Sustainable Development Financing,” ORF Occasional Paper No. 410 , September 2023, Observer Research Foundation. Financing gap funding challenges G20 presidency International funds pandemic impact SDG financing Ukraine invasion Setting the Context Mobilising large-scale public and private capital is critical for developing countries to accelerate sustainable solutions to their development challenges and realise the Sustainable Development Goals (SDGs) in the Decade of Action. In 2019, the UN Secretary-General estimated the gap in financing for SDGs in developing countries to be between US$2.5 and US$3 trillion per year. [1] The COVID-19 pandemic increased this gap by US$1 trillion, with the SDG financing gap going up to US$17.9 trillion for the 2020–2025 period, as estimated by the United Nations Conference on Trade and Development (UNCTAD). [2] The invasion of Ukraine in February 2022 widened this financing gap, and the polycrises are expected to result in cascading credit downgrades, rising cost of capital, and debt distress in developing countries. [3] The widening financing divide, if unaddressed, will translate to a lasting sustainable development divide and further exacerbate financial challenges in the long run. [4] The problem with financing the SDGs is that most of the onus falls on national governments. While Domestic Revenue Mobilization (DRM) for SDG financing is a priority for public finance authorities in emerging economies, underdeveloped capital and financial markets as well as limited opportunities for enhancing tax administration have impeded progress. [5] The fiscal budgets have been even more constrained since the pandemic and successive debt-sustainability considerations.