Improving access to development capital

The concern for poor countries is not so much how to manage the dislocations caused by the volatility of short-term capital flows, but rather how to attract capital, especially long-term finance, to support faster and sustained growth.

The phenomenal surge in capital flows in the past decade has fuelled the belief that the development financing needs of developing countries would be met by the more or less normal functioning of the market. However, the reality is that there is a high concentration of FDI flows in middle-income countries in South-East Asia and Latin America, while the low-income countries on the whole have been bypassed.

Combined with a low level of domestic resource mobilization resulting from low-incomes, sub-Saharan Africa and South Asia are the most capital-scarce regions of the world. They are also the least integrated into world financial markets and heavily dependent on falling aid flows.