Report on the Impact of Declining Financial Flows on Sustainable Development Goals

Overview of Reductions in Global Financial Support

• International aid experienced its first decline in six years, falling to US$212.1 billion in 2024, with further decreases anticipated.
• Global remittances, a critical financial lifeline, reached US$923 billion in 2024, a figure more than four times greater than official overseas aid.
• A proposed United States tax on remittances threatens to compound the negative effects of declining aid, creating a dual financial shock for recipient nations.

Direct Challenges to SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities)

• The convergence of falling aid and taxed remittances is projected to disproportionately harm the world’s poorest populations, creating a significant obstacle to achieving SDG 1 (No Poverty).
• The remittance levy is characterized by the World Bank as a double taxation on migrant earnings, affecting an estimated 48 million foreign-born residents in the U.S.
• This policy measure intensifies global economic disparities, undermining the core principle of SDG 10 (Reduced Inequalities) by placing an additional financial burden on developing countries that depend heavily on these inflows.

Country-Specific Impacts and Setbacks for SDG 2 (Zero Hunger)

1. Mexico: As the world’s second-largest recipient of remittances, the nation is forecast to lose approximately US$1.5 billion annually. This follows a recent report from Mexico’s central bank indicating the sharpest monthly drop in remittances in nearly 13 years.
2. Other Highly Affected Nations: Guatemala, India, the Philippines, and El Salvador are also projected to lose hundreds of millions of dollars, impacting their capacity to fund development initiatives.
3. Liberia: In a nation where remittances are more than triple the size of foreign aid, U.S. aid cuts are expected to reduce Gross National Income (GNI) by 2%, with the remittance tax removing an additional 0.16%.
4. Haiti: The country is estimated to lose 0.31% of its GNI due to the remittance tax. This financial strain exacerbates a severe humanitarian crisis where, according to the United Nations, over half the population already faces food insecurity, directly compromising progress on SDG 2 (Zero Hunger).

Implications for SDG 8 (Decent Work and Economic Growth) and SDG 17 (Partnerships for the Goals)

• Reductions in both aid and remittances directly threaten the GNI and macroeconomic stability of recipient countries, hindering their progress toward SDG 8 (Decent Work and Economic Growth).
• The taxation of remittances acts as a disincentive to a vital source of capital that supports local economies, entrepreneurship, and household investment in health and education.
• The decline in international aid signifies a weakening of global financial cooperation, which is the foundation of SDG 17 (Partnerships for the Goals), and jeopardizes the collective effort to achieve sustainable development worldwide.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 1: No Poverty

   • The article directly connects the fall in international aid and the proposed tax on remittances to negative impacts on the poor. It states that the “double drop in outside support is expected to hit the poor hardest” and that the tax will “exacerbate poverty in nations that are heavily reliant on both remittances and foreign aid.”

2. SDG 2: Zero Hunger

   • The article highlights the situation in Haiti, a country that will be affected by the remittance tax. It notes that “more than half the population is already short on food,” implying that a reduction in financial inflows like remittances will worsen food insecurity and hunger.

3. SDG 10: Reduced Inequalities

   • The article discusses a policy (remittance tax) that disproportionately affects a specific group: “48 million foreign-born US residents.” It also highlights the unequal impact among countries, with nations like Mexico, Guatemala, and the Philippines set to lose hundreds of millions of dollars, thereby increasing inequality between nations. The concept of “double taxation on migrant earnings” also points to an inequitable policy.

4. SDG 17: Partnerships for the Goals

   • This goal is central to the article, which focuses on international financial flows. It explicitly mentions the decline in “International aid” (Official Development Assistance) and the volume of “Global remittances,” both of which are key components of the global partnership for development.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 1.a: Ensure significant mobilization of resources from a variety of sources…to implement programmes and policies to end poverty.

   • The article discusses the decline of two major resource streams for developing countries: international aid and remittances. The fall in aid and the new tax on remittances directly undermine the “mobilization of resources” needed for poverty reduction.

2. Target 2.1: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations…to safe, nutritious and sufficient food all year round.

   • The article’s reference to Haiti, where over half the population is “short on food” even before the new cuts, shows a direct link to this target. The reduction in remittances, a vital source of income for many families, threatens their ability to access sufficient food.

3. Target 10.c: By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.

   • The proposed US tax on remittances directly contravenes this target. Instead of reducing the cost of sending money, the tax adds a new levy, effectively increasing the transaction cost for migrants. The article describes it as a “double taxation on migrant earnings.”

4. Target 17.2: Developed countries to implement fully their official development assistance commitments.

   • The article opens by stating that “International aid fell in 2024 for the first time in six years.” This directly relates to the failure of developed countries to meet their ODA commitments, which is the core of this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Volume of International Aid and Remittances

   • The article provides specific figures that serve as indicators. It states international aid was “US$212.1 billion” in 2024 and global remittances reached “nearly US$923 billion.” These figures are direct measures for targets related to financial resource mobilization (Target 1.a and Target 17.2).

2. Cost of Remittances

   • The proposed “remittances tax” is a direct indicator related to Target 10.c. While the exact percentage isn’t finalized in the text, the introduction of any such tax can be measured as an increase in the cost of sending remittances, moving away from the goal of reducing these costs.

3. Impact on Gross National Income (GNI)

   • The article implies the use of GNI as an indicator by stating that US aid cuts are expected to “remove about 2 per cent of the country’s gross national income (GNI)” in Liberia, and a remittance tax would “shave off a further 0.16 per cent.” This measures the economic impact of reduced financial flows.

4. Prevalence of Food Insecurity

   • The statement that in Haiti “more than half the population is already short on food” is a direct, quantifiable indicator of hunger (Target 2.1). It provides a baseline against which the impact of the new financial pressures can be measured.

4. Table of SDGs, Targets, and Indicators

Source: eco-business.com