UN flags worsening finance crisis as global cooperation weakens

Global development financing is moving in the wrong direction, with progress stalling and, in some cases, reversing, the United Nations said on Wednesday, citing weakening international cooperation, rising trade barriers, geopolitical tensions and climate shocks.

The warning comes in the Financing for Sustainable Development Report 2026, which assesses progress on the Sevilla Commitment agreed at the 2025 international conference on financing for development. The framework aims to reform the global financial system and improve developing countries’ access to funding.

“Global development requires working together for common goals to avoid reversing the gains of what has been painstakingly built,” said UN Deputy Secretary-General Amina Mohammed, urging stronger cooperation to deliver financing for the Sustainable Development Goals.

The report said developing countries, particularly the poorest and most vulnerable, face a widening gap in financing needs while dealing with falling aid, rising climate-related costs, high borrowing costs and growing debt burdens.

Debt service in developing countries reached a 20-year high in 2024. Official development assistance fell 6% to $214.6 billion and is projected to decline by 10–18% in 2025, and by as much as 25% for least developed countries. Foreign direct investment dropped 11% to $1.5 trillion, marking a second consecutive year of decline.

Trade pressures have also intensified. Average tariffs on exports from least developed countries rose from 9% to 28% in 2025, while tariffs for developing countries excluding China increased from 2% to 19%.

“These are extremely perilous times for international cooperation, as geopolitical considerations increasingly shape economic relations and financial policies,” said UN Under-Secretary-General Li Junhua. He added that resilience remains in areas such as renewable energy investment, supported by continued cooperation among countries.

Global investment in renewable energy reached a record $2.2 trillion in 2024, double the level of fossil fuel investment, which fell to a historic low. Trade among developing countries has also expanded more than fourfold over the past two decades.

However, the report said growing global fragmentation is making it harder to implement reforms agreed under the Sevilla Commitment, including changes to the international financial architecture aimed at improving access to development finance.

It concludes that economic hyper-globalisation is no longer viable and calls for a more layered approach to cooperation, linking national efforts with regional and global support. More than 130 initiatives under the Sevilla Platform for Action are expected to support this process.

The findings are particularly relevant for regions such as South Asia, where countries face rising financing needs for development, infrastructure and climate resilience amid tightening fiscal space and external financing constraints. South Asia faces the largest last-mile infrastructure capital expenditure gap of $179 billion, followed by $101 billion in Africa and $53 billion in East Asia and the Pacific. 

The report also shows, that while Africa and East Asia have experienced notable declines in income growth, South Asia remains the only region showing sustained gains. South Asia is projected to maintain robust momentum, with growth projected at 5.6% in 2026, led by India's strong consumption and investment demand. In a world where development financing trends are fragmenting and funding from traditional donors are declining, the report shows how Asia is now the destination for 63% of South-South cooperation grants among developing countries, compared to 13% to African countries and 24% to Latin American and Caribbean countries.

The report will inform discussions at the ECOSOC Forum on Financing for Development later this month, as countries consider steps to mobilise resources and close an estimated $4 trillion annual financing gap.

“We know how much global development depends on global cooperation,” Li said. “As we get closer to 2030, our task is to come together as one and deliver a sustainable future.”

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