By Bodo Ellmers

On 10 March 2025, the UN circulated the new version of the draft global financing framework that the international community is due to adopt at the Fourth International Conference on Financing for Development (FfD4) in Sevilla in early July. The new version reflects interventions by Member States and other stakeholders made at the third session of the Preparatory Committee (PrepCom3) at UN headquarters in February. It is the basis for the actual line-by-line text negotiations that are due to start at the end of March. 

Compared to the zero draft (which we have analysed in detail in a previous blog), the first draft contains many amendments and remarkably few cuts, many watered down elements and – despite everyone’s desire to have a more actionable outcome of FfD4 – few concrete actions. Calls to abridge the text were reflected in the sense that the co-facilitators reduced the number of paragraphs in the introductory narrative chapter from 27 to 20, and deleted most of the problem analysis in the following chapters on the action areas. More relevant are naturally the modifications in the chapters on actual Action Areas. But what are the major changes in the new negotiation text?  

International Development Cooperation needed a boost

Most remarkable are probably the changes in the chapter on International Development Cooperation (IDC), where the preamble has been completely rewritten. This reflects real-world developments since the release of the zero draft in January. The world’s largest (USA), fifth-largest (UK) and eight-largest (Netherlands) providers of official development assistance (until recently) all announced very significant ODA cuts. This was sufficient reason for the FfD4 co-facilitators to request the upcoming conference to endorse at least a politically binding agreement: “We decide to undertake every effort to reverse reductions in ODA and scale up and achieve our respective commitments.”  

At the same time, the new version reflects the search for alternatives to bilateral ODA. The parts on South-South Cooperation, climate finance and Multilateral Development Banks (MDBs) saw major changes. In the context of declining ODA, South-South Cooperation (SSC) is becoming an ever more relevant complement. The text now calls on new development partners to “scale up their contributions and support”, also to “enhance triangular cooperation” between old and new development partners and recipient countries. Regional financing mechanisms should be strengthened to support sustainability and the alignment of SSC.

Another Plan B seems to go through MDB finance. The new version includes the quantitative target to triple the MDBs’ lending capacity. It commits “to establish sustainable pathways to further replenish concessional windows at the MDBs”, and refers to an “ambitious replenishment of the African Development Fund”. A new deliverable added is the “center of excellence for local currency and capital market development”, an institutional innovation to drive local currency lending, which eliminates the currency risk for the borrower. On top of that, a number of rather vague commitments have been added to the MDB part: i.e. the establishment of a framework to incentivize and monitor the quality of cooperation between MDBs and other Public Development Banks, support to Least Developed Countries (LDCs) that graduate from this category and lose access to concessional funding, and enhanced cooperation across the humanitarian-development-peace nexus (including adequate funding). More concrete is the call to reduce tax exemptions on government-to-government aid.  

One of the main disputes in the FfD4 negotiations so far was whether a decision on MDB reforms should be made at FfD4, i.e. under the auspices of the United Nations, or if it should be left to their own governance bodies. The negotiation text circumvents the issue by addressing the nation states convened at FfD4 as members of both UN and MDBs. The political agreements are therefore introduced by the phrase: “We, as shareholders of the MDBs, will work through executive boards of MDBs.” 

On climate finance, the negotiation text indicates that reaffirmation of the UN’s climate process is needed in dire times, also at FfD4. The international community is requested to “recommit to the objectives of the UNFCCC and the Paris Agreement and reaffirm the importance of accelerating action in this critical decade on the basis of the best available science, reflecting equity and the principle of common but differentiated responsibilities and respective capabilities.”  The key actionable innovation compared to the zero draft is a new working group under the auspices of the UN General Assembly on consistency and transparency in climate reporting and ODA. The fact that double accounting of climate finance and ODA is possible has received a lot of criticism in recent years. The document recalls the New Collective Quantified Goal agreed at the last UN Climate Summit in Baku, but no longer mentions the actual figures. 

The negotiation text concludes for IDC that “overall, development cooperation has not kept pace with rising and evolving needs of developing countries (and) there is an urgent need to refocus international development cooperation on poverty eradication”. In this regard, it has probably not been helpful that the target to “increase the share of ODA programmed at the country level and focused on long- term sustainable development” has been deleted from the text. 

Domestic public resources gain more relevance

The chapter on Domestic Public Resources retains most substance from the zero draft, including the political commitment to “engage constructively in the negotiations on a United Nations Framework Convention on International Tax Cooperation and its protocols”. Despite the reluctance by some parties at PrepCom3 on the actual deliverables, the negotiation text retains them, e.g., such as extending country-by-country reporting obligations to high-net worth individuals, or establishing a global beneficial ownership registry. The language on progressive tax systems and the taxation of high-net-worth individuals also remains. In response to stakeholders’ desire to further expand and operationalize the new global financing framework, a few additional elements have been added to the chapter. Notably: 

• The commitment to effective taxation of natural resources
• The call to include the financing of social protection floors in country strategies, and to support countries that aim to increase social protection coverage
• A call on development partners to double their support for domestic revenue mobilization and public financial management by 2030
• Demand-based technical assistance to ensure that countries benefit from the Organisation for Economic Co-operation and Development (OECD) Two-Pillar Solution

• Support for the media and civil society in exposing illicit financial flows.

Private finance and trade get diluted

The chapter on private finance saw substantial edits; some of them unfortunately watered down the text. Just one example: while the zero draft encourages the adoption of sustainability disclosure legislation, this has been reduced to standards in the recent negotiating text. However, few new deliverables have been added. Worth mentioning is the “common taxonomy of risk-sharing mechanisms to evaluate how different blended finance structures affect developmental outcomes under different circumstances and to facilitate investment”.

The trade chapter, which was surprisingly strong in the zero draft, saw fewer changes. But unfortunately, these changes are retrograde steps: for instance, the calls to eliminate distortionary agricultural export subsidies were deleted, as were the invitation to the Financial Stability Board (FSB) to re-evaluate risk ratings for trade finance in regulatory systems (such as Basel III), and better data collection on effective trade policies. 

Debt and debt sustainability: win for World Bank and IMF

The debt chapter has been edited to appease the World Bank and the International Monetary Fund (IMF), so it seems. For instance, the document continues to mandate a new working group on responsible lending and borrowing at the UN. The group is no longer just tasked to develop but also to consolidate existing principles in this area, with explicit reference to the existing principles by UNCTAD and the G20. The findings should be presented to the 2027 FfD Forum, one of the few time-bound activities in the document. But it is striking that the only stakeholders that are explicitly mentioned, besides Member States, are the IMF and World Bank. The World Bank is now also mentioned as the host for the central debt data registry. 

Perhaps most importantly, while the zero draft already called for an “institutional home” for an institution that would give all sorts of liquidity and liability management support to countries, the first draft now appoints the World Bank (through its Debt Reduction Facility) to take over this role. Obviously, a major creditor institution will not be able to give independent and objective advice to a heavily indebted country. It will likely have significant debts to this institution already so this sounds like a very bad institutional choice.

Other modifications to the negotiation text include that the UN Secretary-General appointed working group to develop a model law on debt restructuring has now got a start date (the 81st session of the UN General Assembly. i.e. autumn 2026). Furthermore, the G20 has been asked to expand eligibility for their Common Framework to Middle Income Countries, and include rules that favour so-called priority lenders during debt restructurings. This looks like another present to the IMF and the MDBs. 

The language on credit rating agencies (CRAs) also received an interesting twist. While the document disappointingly does not include a commitment to establish a public CRA, it calls “upon public entities conducting economic surveillance to publish such assessments in ways that can be compared to private credit ratings in essence serving the role of a public CRA”.

The new draft considers the critique made by one influential party at PrepCom3 that it was inappropriate to depict recent sovereign debt restructurings as “too little – too late”. They are now characterized as – just as true – “inadequate and lengthy”.

Systemic issues: Social progress, environmental regression

Systemic issues, or international financial architecture reforms, have been at the heart of the FfD process. And while the first draft largely retains the political commitments of the zero draft, it adds a few new ones, notably:

•   The (re-)commitment to open and transparent, gender-balanced and merit-based selection of the heads of international financial institutions.
• A call upon the international community to support countries in ensuring adequate and uninterrupted funding on appropriate terms of social protection and other essential social spending during shocks and crises.
• A “commitment to support the operationalization of the African Union’s African Financial Stability Mechanism”.

The first point obviously refers to the “Gentlemen’s Agreement” that the USA always appoints the World Bank President, while the Europeans appoint the IMF Managing Director. The second point responds to lessons learnt during the COVID-19 crisis, when poorer countries lacked the funds to mitigate the impact on their people. 

The document retains the important mandate for the Financial Stability Board (FSB) to review the miscalibration of risk-weightings in financial regulation, such as Basel III. However, the invitation to the FSB to include sustainability factors in risk-weightings disappeared, alongside the commitments to incorporate climate transition plans and climate stress testing in financial regulation.

Interim conclusion: Still a long way to go

The first draft retained most concrete deliverables from the zero draft, and even added a substantial number of new ones. This was not necessarily to be expected, as not all elements were met with unreserved enthusiasm by all parties at the recent PrepCom meeting. This approach shows that the co-facilitators are not yet ready to write off multilateralism, and continue to have confidence in the international community’s willingness to cooperate and, when necessary, compromise – especially when it comes to fundamental issues such as financing sustainable development. 

On the negative side, the operationalization of the vague political commitments has made little progress between zero draft and first draft. This agreement, if adopted, is still not the comprehensive action plan that is needed, and desired, by many. And while the first draft now gives a figure for the Sustainable Development Goal (SDG) financing gap  – namely US$4 trillion per year, it is not clear how a new global financing framework in this form should mobilize additional funds on this scale. There is still a lot to do, it seems, on the remaining miles to Sevilla.