The Trillions Tracker
Transitioning our energy systems, combatting the impacts of climate change, and supporting people to lift themselves out of poverty are the great challenges of our time. We can tackle them, but it costs money.
Governments have made progress on an additional US$700 billion per year over the past few years on these priorities, but a US$1.75 trillion annual spending gap remains in official finance.
Progress towards the public spending gap
The grey buckets represent the financing needed, and the coloured blocks show the progress
“Domestic” refers to Domestic Resource Mobilisation, “Aid” refers to Official Development Assistance, “Multilateral” refers to Multilateral non-concessional, and “Bilateral” refers to Bilateral non-concessional + Innovative finance.
The full story
In 2022, independent experts estimated1 a US$2.5 trillion annual public spending gap to fund the energy transition, prepare for and protect people from climate change, and fund development needs like education and healthcare in low- and middle-income countries.2
According to their scenario, the governments of these countries are expected to fill roughly US$2 trillion of the gap using domestic resources. The international community – G20 governments, multilateral development banks, and the IMF – would fill the remaining US$500 billion using international public finance.
How close have we gotten to these targets?
Annual public spending (and planned spending)3 on climate and development increased by roughly US$700 billion over the last few years – 29% of what’s needed to fill the financing gap. That leaves a gap of nearly US$1.75 trillion.
Let’s break that down:4
- Domestic resources from low- and middle-income countries (excluding China) increased by US$416 billion each year between 2019 and 2022; that helped cover 21% of the domestic financing gap.
- International public finance flows (including potential commitments) have increased by US$285 billion between 2019 and 2022; that helped cover 57% of the international financing gap.
How should external public finance be increased?5
- An additional US$180 billion in official development assistance (ODA) by 2030 from G20 governments and other advanced economies. That would be almost double the US$192 billion in ODA provided in 2019. By 2023, ODA had increased by US$73.3 billion (41% towards closing the gap), but US$31 billion was spent at home on in-country refugee costs. So in real terms, they have closed 24% of the target.
- An additional US$250 billion per year is needed from multilateral non-concessional lending. This increased by US$21.5 billion between 2019 and 2022. The major multilateral development banks (MDBs) have reported that recent reforms will unlock an additional US$357 billion in MDB lending headroom over the next decade (that’s potentially $186 billion in planned spending by 2030)6. Although additional lending headroom is not guaranteed to translate completely to new lending, the combined potential increase in multilateral non-concessional lending plus new headroom could total US$207 billion in new non-concessional lending per year — 83% towards the US$250 billion target.
- An additional US$70 billion per year should come from bilateral non-concessional lending and innovative finance. But since 2019, bilateral non-concessional lending has decreased by US$4.1 billion. In terms of innovative finance, G20 governments and other advanced economies’ commitments to recycle US$100 billion of Special Drawing Rights to low- and middle-income countries could yield on average US$8.3 billion in additional lending per year via IMF trust funds.7 That would yield total additional financing of US$4.2 billion, just 6% towards the target.
We should celebrate progress in closing the finance gap.
But we have a long way to go.
How to close the gap
Here’s a four-point plan to close the remaining 70%:
Concessional financing is critical for meeting development needs, particularly in low-income and fragile states. But it has been almost stagnant for a decade, rising just 0.06 percentage points of gross national income (GNI) between 2010 and 2023. High-income countries must prioritise aid budgets to help with global economic growth and climate adaptation.
Governments must ensure a robust replenishment for the International Development Association (IDA) — the world’s largest social fund for development. They should increase commitments by at least 25% in total. This will allow low- and middle-income countries to access the low-cost financing they need to build healthy, resilient communities.
Hundreds of millions of additional dollars could be unlocked from the MDBs through policy reforms that cost limited additional investment. Some progress has been made, but the governments that govern these banks (mostly high-income countries) should give greater value to callable capital, better reflect preferred creditor treatment, and enhance efforts to mobilize private capital.
SDRs are a reserve asset that can boost resources for low- and middle-income countries at low cost. The US$112 billion in SDRs that advanced economies have committed could lead to an average of US$8.3 billion in increased lending per year to 2030 (2019 prices). But governments must unlock the potential of channeling SDRs through MDBs, where each dollar of SDRs could be leveraged to US$4 and lent for maximum impact.
Methodology and sources
This notebook contains a detailed overview of our methodology and data. For replication code, please visit this report’s GitHub repository.
- There are various papers that build on the financing calculations we used for this paper. The two main ones we reference are Bhattacharya A et al. (2022); and Summers, Lawrence; and Singh, N.K. et al. (2023). ↩︎
- Excluding China. Researchers also estimated an additional US$500 billion in private finance would be needed, which we are not currently tracking, leading to a total gap of approximately US$3 trillion for total development and climate needs in low- and middle-income countries. ↩︎
- Planned spending includes expected or potential spending resulting from recent MDB reforms and SDR recycling, as described below and in the methodology. ↩︎
- All numbers are presented in 2019 prices, to compare real terms increases against the baseline. ↩︎
- The Independent Expert Group for the 2023 G20 Summit proposed this breakdown of international public finance as a potential way of filling the gap. ↩︎
- Assuming a linear annual increase, and converted to 2019 prices. ↩︎
- US$5.3 billion annual from the PRGT and US$3 billion annual from the RST, in 2019 prices. Analysis conducted in partnership with Center for Global Development. ↩︎