INTERNATIONAL ECONOMIC DEVELOPMENT
However, the 1990s also exposed new challenges. Countries that had liberalized did not always move smoothly to high- income status. Instead they plunged into the so-called middle–income trap, a situation where a country gets stuck in its transition, because the strategies that fueled initial growth have been exhausted or become obsolete. In regions such as Sub-Saharan Africa growth remained weak, infrastructure gaps persisted and institutions remained fragile. The 2000s
2000 to nearly US$130 billion in 2010 for Organisation for Economic Co-operation and Development – Development Assistance Committee (OECD-DAC) donors. This was accompanied by the rise of donors such as China, India and other emerging economies, along with alternative development models, creating a more complex aid architecture. Policy thinking was turning toward inclusive growth, sustainable development, governance, private sector development and innovation. This highlighted the greater emphasis placed on the private sector and market–based solutions. Infrastructure investments in transport, energy and telecommunications also became more important. Greater attention was also being paid to fragile states, countries with weak state capacity or legitimacy, conflict and humanitarian emergencies, as well as the interplay between development, security and governance. However, alongside the rise of ODA came a challenge – an increase in debt stocks in many developing countries. The vulnerability of these countries was highlighted by global shocks, particularly the 2007-8 financial crisis, which underscored how interconnected the economy was and how developing countries were not insulated from international downturns. The 2010s Sustainable Development Goals, specialization, climate change and financing gaps In the 2010s, the international development paradigm shifted again in several important ways. The UN Sustainable Development Goals (SDGs) were adopted in 2015, replacing the MDGs and broadening the agenda from eight to 17 goals covering poverty, inequality, environment, climate change, peace, institutions and partnerships. Meanwhile, the role of climate change, environmental sustainability, resilience, adaptation and mitigation became central to development thinking. In addition, the concept of development
finance widened with an increased emphasis on private finance, blended finance, impact investing and – in developing countries – the role of domestic resource mobilization. However, the global macroeconomic environment remained challenging. This was reflected in low growth in advanced economies, rising inequality and increased recognition of middle–income traps. The decade was also bookended by two major shocks: the ongoing effects of the 2007–8 global financial crisis that carried over into the early part of the decade and the onset of the COVID-19 pandemic (which spilled over into the next decade). In terms of development challenges, while extreme poverty declined globally, it remained concentrated in fragile states, particularly in parts of Sub- Saharan Africa. Inequality – between and within countries – increased and governance issues remained pervasive. The structural transformation of many economies stalled, highlighting the difficulties of “escaping” the middle- income trap. Meanwhile, greater emphasis was placed on results, evaluations, targeted interventions and impact measurement.
Aid surge, the MDG framework and the rise of emerging donors
Moving into the 2000s the development agenda was shaped by several key features. The MDG framework gained traction while donors and multilateral agencies mobilized more resources toward poverty reduction, health (particularly HIV/AIDS and malaria), education and infrastructure. The concept of aid “effectiveness” and results also grew in prominence, underpinned by the Paris Declaration on Aid Effectiveness (2005) that stressed ownership, alignment, harmonization, results and mutual accountability. During this period, the level of development funding surged: Official Development Assistance (ODA) increased from about US$54 billion in
The 2020s (so far) and looking ahead
Crisis, multipolarity and financing innovation
Moving to the 2020s, the global development landscape is facing
new and intensified challenges, while continuing to tackle existing difficulties. The COVID-19 pandemic (March 2020 – May 2023) led to widespread loss of life and produced the worst global recession since the 1930s, causing major setbacks in many developing countries in health, education, poverty and growth. Development finance has also come under pressure even though ODA hit records in 2023 (US$223.7 billion), according to OECD-DAC data. Multilateral development banks (MDBs) have been tasked to do more following ongoing G7 discussions on MDBs’ capital adequacy – despite limited or no funding
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