Perspectives 2019 2020 Public Sector

Citi Perspectives 33 Conclusion The investment requirements to fulfill Sustainable Development Goals remain substantial (estimated at $6 trillion 2 globally.), against a modest pool of available public sector capital (estimated at $1.6 trillion 2 globally). The below chart extracted from the Citi’s GPS report — “UN Sustainable Development Goals: Pathways to success — a systematic framework for aligning investment” provide a sense of the relative scale of investment needed across all SDGs. It has become clear that private sector investment is critical in bridging this gap and scarce public sector resources should be optimized to enable such private capital mobilization. However for countries in Africa, where the shortage of SDG finance is most acute — driven by governments’ internal resources constraints, the risks — whether real or perceived, are unfortunately most elevated. Blended Finance could play an instrumental role in addressing this with the reallocation of risk and blending of return. Governments must be prepared to contribute the first loss absorbing tranche of the capital (i.e., equity) to induce both public and private capital contributions in Blended Finance structures. Addressing the challenge of closing the funding gap for the SDGs requires adopting multi-tranche capital structures that efficiently and effectively allocates the appropriate levels of risks and returns to the various capital providers. Blended Finance structures allows continued control and ownership of projects by the public sector but bring these projects to financial close and increase the efficiency, effectiveness and volume of the limited public resources at hand. It has become clear that private sector investment is critical in bridging this gap and scarce public sector resources should be optimized to enable such private capital mobilization. Peter Sullivan Head of Africa, Citi Anh Khuat EMEA Public Sector, Citi