The challenges facing global development today are not only more complex, but also more urgent. Yet the resources available to meet them are falling short.

The world’s poorest countries face an annual financing gap of between 246 and 285 billion dollars to reach the Sustainable Development Goals (UNCDF 2024). Global development assistance fell in 2024 by around 7 percent in real terms compared to 2023 to 212.1 billion dollars. The math simply does not work. And it never will, if we continue treating public finance as the final answer, rather than the starting point.

That makes one question impossible to ignore: are we running out of options?

The answer is no.

The global financial system holds more than 482 trillion dollars in assets (Financial Stability Board). But only about 4 percent of that reaches low- and middle-income countries. And less than 1 percent of private finance for climate and SDG-related investments has been mobilized by official development assistance (Convergence 2025).

This is not a crisis of capital. It is a failure to connect that capital with the people and places who need it most.

Often the underlying issue is risk. Investors face too many barriers: currency volatility, uncertain regulations, shallow markets, limited pipelines. These are real challenges, but not unfixable. What they demand is a different approach, where public financing plays a catalytic role.

This shift is already happening, and it is working.

In Tanzania, one million dollars in public finance enabled the launch of a 21-million-dollar green bond, which will deliver clean water supply to nearly half a million people, and a new water connection to more than 26,000 people for the first time

In Kenya, a blended finance initiative is supporting solar-powered cold storage for smallholder farmers. UN Capital Development Fund is deploying catalytic blended finance (concessional loans, guarantees, and performance-based grants) to de-risk investment, while the United Nations Development Programme leads technical support, training, and policy engagement. The program is attracting more than twice its original private capital target and aims to benefit 60,000 farmers and create over 1,200 jobs.

In Papua New Guinea, a one-million-dollar guarantee with a local bank will expand credit to women-led reef-positive small businesses in coastal economies—sectors long ignored by traditional finance. While UNCDF de-risks lending through a blended finance facility, UNDP provides technical support to build capacity and strengthen the bank’s ability to serve marine micro-, small, and medium-sized enterprises.

These are not isolated success stories. They are signs of a broader change: the strategic use of public finance can deliver far more than its face value. It can build confidence. It can build markets. And, ultimately, it can build resilience.

Let’s be clear, this isn't about replacing traditional aid, but about evolving it— preserving its core purpose while unlocking domestic capital and attracting private finance, dramatically increasing its impact to deliver lasting change.

When public resources are used only to fund delivery, aid is underpowered - its impact ends when the funding does. When they are used to unlock investment, the results multiply and endure.

To scale this transformation, three things are needed.

First, for development institutions to strengthen their role as market enablers, they need to invest in risk expertise, deal structuring, and financial innovation.

Second, donors must consider additional metrics of success, looking not only at how much is disbursed, but at the multiplier effect in mobilizing additional capital of each dollar spent.

Third, developing countries must be supported to build stronger national financial ecosystems, so that investment can flow more easily to sectors like clean energy, sustainable agriculture, and small enterprises.

The time is now, and the upcoming Financing for Development Conference offers a critical opportunity to accelerate this transition.

Climate finance needs are rising sharply. Debt distress is spreading. And too many countries remain locked out of global capital markets. The poorest and most fragile countries are also the ones with the fewest options. They cannot wait for capital to trickle in. It must be guided, supported, and de-risked.

The future lies in using development finance as a catalyst that makes every public dollar work exponentially harder. In a world of constrained resources and urgent challenges, we can afford nothing less.