Deep into the second year of our most recent commitment to the Maldives, the United Nations Development Programme (UNDP) continues to adapt its country programme offer and provide complementarity with our development partners. This includes helping protect the resilience of state financing through the promotion of strategic revolving investment instruments that harness private resources for public purposes and help make investing in development become more affordable. 

Ultimately, the relevance of the United Nations (UN) system when operating within the economic framework of Agenda 2030 in Upper-Middle-Income Countries and Small Island Developing States, such as the Maldives, requires answers. We need effective solutions transmitted throughout our entire decentralized presence. This requires us to regularly review our programme offerings. A reflection that has led us to reconfigure approaches both within and outside UN-wide efforts. 

We have started by classifying projects and pipelines both spatially, considering various categories of sustainable development financing; as well as in time, to extend and deepen content of dialogues with policy makers at all levels of the Maldivian public administration. This helps us to deliver through updated policy support and tangible project results. 

Furthermore, UNDP flexibility has ensured we align our support portfolio with the Maldives’ most recent public finance budget formula. Like in many other countries from the region, challenges exist to balance public expenditure with public revenue. This is exacerbated by the high vulnerability to natural calamities and the cost of annual adaptation measures. 

Financing solutions

UNDP in the Maldives has been primarily focused on supporting national Strategic Plans, guided by a governance and climate action agenda influenced by voluntary financing and Official Development Assistance (ODA). Historically, the Maldivian government has primarily engaged with donors and multilateral organizations to help secure additional resources. This led to demands on development partners to seek new grant awards that could help fill gaps in government financing for under-funded priorities.

Competition for such development finance remains high and increases as the number of global crises intensifies. We therefore made the decision to explore alternatives that could bolster traditional grant-based funding to development finance. Our UNDP SDG Finance Hub proved pivotal in helping us to reinforce three distinctive intervention pathways:

• Proactive policy engagement, 
• Updated UN partnership architecture, and 
• Innovative financial instruments. 

We initiated this transformation by prioritizing public revenue-enhancing measures and aligning Government of Maldives budgetary practices with the SDGs. Simultaneously, we are extending our support to the government in crafting policies to combat tax evasion and strengthen tax compliance. Our objective is to refine mechanisms that can help us benefit from new domestic and foreign revenue. 

This includes taking advantage of opportunities to blend and combine grants with repayable capital. A good example of this approach is the recently signed Global Fund for Coral Reefs (GFCR) which uses US$10 million to unlock $40 million of additional private equity. This environmental conservation programme centers on the viability of financial security instruments such as guarantees, loans, and bio-credits. It also aids carbon market entry at fair prices.

The GFCR represents a beacon for new approaches to attract private investors and complement public finance. A blended finance approach can promote the use of central government grants to local authorities to be used for strategic uses, such as catalytical funding to attract private capital. Classic UN partnership architecture can be strengthened to embrace new stakeholders from the private finance sector. We see the possibilities available here from applying new portfolio approaches to packaging development investment as key levers of transformational change.

The UNDP Insurance and Risk Finance Facility (IRFF) is another proven and valuable development asset in this realm. It allows us to establish a strong presence in policy development while also supporting our top-tier technical assistance activities in diagnostic work. 

The ultimate goal is to grow and nurture a sector that engages with the global insurance market effectively. In this regard, our most recent efforts include welcoming a renowned worldwide provider of actuarial and related products and services. This collaboration can further bolster our efforts and increased interest in partnering with private investors to help us deliver SDG contributions.

Our SDG Investor Mapping is in its final stages. It will help us target ourselves towards new architectural partnership approaches that can help us underwrite risk for larger-scale investment sources. This would subsequently lever and release a much larger range of SDG results and national benefits than could be possible from the value of the de-risking capital acting alone. 

These next generation of development financing instruments can help tackle national budget challenges while aligning government and SDG finance with public finance goals and standards. For example, we are exploring possibilities with the Central Bank, SME Development Finance Corporation, the Ministries of Environment and Finance, to better advocate for improved access to Climate Finance, focusing on Climate Justice in the context of a forthcoming paper which places great emphasis on Loss and Damage.

Financial instruments work well in situations where profits and/or savings are generated to repay investors.  With our extended support to the health sector, we aim to yield saving to public finance, building on our international position, critical mass, and quality assurance reputation in the nation's health supply market. 

Reviewing debt arrangements, for both the public and private sectors, presents even more significant opportunities for a renewed set of joint public financing ventures between the government and UNDP. We can focus on constructing a sustainable framework model that both appeals to investors and ensures compliance with internal or state policy. We are supporting the Capital Development Authority to design the country’s first ESG reporting framework for the private sector, while also preparing the ground for issuing future securities by building the capacities of auxiliary market institutions.

One key takeaway from the above experiences is that, although it may resemble high stakes, it is about playing better hands with the stack accredited to the government with the acclaimed release of the first SIDS Integrated National Financing Framework (INFF). This SDG tool provides a development finance strategy for supporting the government in creating a new zone of engagement (reliant on interconnected governance, climate action and finance).

To sum up, we are advancing with our transitional goals for public financing in ways which reduce dependence on the limitations associated with grant-based development. UNDP expertise and resources remain ready to continue supporting the government and people by helping highlight new opportunities for reinforcing the long-term resilience of state financing.

* About the author: Enrico Gaveglia is the UNDP Resident Representative in Maldives since October 2021. He is an experienced development professional with over 18 years of experience in the United Nations system.