The Seville compromise: A move forward for development financing while Washington steps back

What happens when the world’s biggest donor walks away?

Grace Stanhope

27 June 20255 min read

Negotiations on a new global deal for financing development – a usually staid and cautious affair – saw a sensational twist in recent days when the United States suddenly withdrew from the talks. Other countries ploughed on, striking an eventual consensus, and next week in the southern Spanish city of Seville are set to formally adopt a new agreement on the global financing framework.

The final outcome document, the Compromiso de Sevilla, is aptly named. Compromiso means commitment, but its likeness to the English word compromise captures the spirit of these negotiations.

Prior to the Trump administration’s full-throated attack on development cooperation in January, and the ensuing series of announcements from European capitals that they were slashing their own aid budgets, there was a genuine sense of appetite for reform for financing development. But the agreement shows that original ambition was moderated sharply. At 38 pages, the text canvasses a wide range of issues but makes strong commitments on very few. That balance was essential to securing a consensus, and that consensus is the real win here: a pledge to protect multilateral cooperation, with or without the United States.

Many delegates were glad to see the United States walk out of talks this week: a recently leaked draft version of the outcomes document laid bare Washington’s demands, which included rejection of debt reform, language about gender equality, or reference to the Sustainable Development Goals. It underscores the sharp policy shifts under US President Donald Trump by what had been formerly the world’s largest aid donor and long-standing patron of the global multilateral system.

The developing world doesn’t want to see traditional donors weasel out of previous promises on foreign aid.

The key issue for these negotiations was sovereign debt, with the developing world facing an ongoing debt crisis. Without the United States, the final agreement progressed operationalisation of a Debt Sustainability Support Service to provide technical advice to governments of small island developing states on their debt, independent of lending organisations (usually the multilateral development banks or International Monetary Fund). Earlier in negotiations, the conference was split over a push for a United Nations Convention Framework on Sovereign Debt, criticised as a costly duplication of the G20’s five-year-old Common Framework and rejected by creditor nations. There’s no question the Common Framework requires reform, but the UN Convention proposal is so controversial that standard negotiating blocs fractured. China – the developing world’s largest bilateral lender and debt collector – diverged from the G77 and joined the European Union and United States in opposition, which saw the Convention removed from the text.

A further benefit of the US withdrawal was inclusion of language around sustainability and climate change. However, broader efforts to discuss climate finance and support for the developing world’s clean energy transition are complicated by the position held by some developing countries that climate finance should be kept distinct from development finance, to ensure funds to combat climate change are “new and additional”. A paragraph on the phasing out of fossil fuels did not survive negotiations even without the United States and was absent from the final text.

The Palacio de Congresos y Exposiciones de Sevilla, or FIBES, venue for the International Conference on Financing for Development from 29 June to 3 July (Rocio Ruz/Europa Press via Getty Images)

Other contentious issues in development look to be stuck in a holding pattern. Like its predecessors, this latest agreement urges developed countries to increase aid volumes but does not include any deadline or roadmap for action. The section on trade also fails to meet the challenge posed by Washington’s haphazard imposition of tariffs, which risk derailing the all-important development model of export-led growth. And despite intensifying rates of war around the world, the text is remarkably light on peace and conflict.

Another touchy subject is so-called “South-South cooperation”, countries that are still developing and accepting aid, while themselves providing development assistance to other developing countries. The developing world doesn’t want to see traditional donors weasel out of previous promises on foreign aid – they’re insistent that South-South cooperation can complement, but must not replace, traditional aid from wealthy nations. And they argue that emerging donors, with far more constrained resources than established ones, should not be subject to the same monitoring and evaluation standards.

This debate is shaped by the recent collapse of the US foreign aid program and deep cuts by major European donors. That backdrop weakens the legitimacy of traditional wealthy donors, especially those 33 who are part of the OECD’s Development Assistance Committee. The conference next week, known as FfD4 for the “Fourth International Conference on Financing for Development”, is make or break for this group – it will either entrench or challenge the perception that the world’s wealthiest countries are abandoning global development goals.

In these negotiations, the legitimacy of the Organisation for Economic Cooperation and Development was already a challenge. While the OECD currently holds de facto carriage of international aid policy, governance and monitoring, the developing world would prefer the United Nations, considered to be a more inclusive and democratic organisation, to lead.

Meanwhile, the UN’s own reforms and funding crisis are impeding its effectiveness. And to add to the gridlock, important development finance providers, the multilateral development banks and the International Monetary Fund, operate separately to the UN and are subject not only to their own complex reform processes but also to the whims of their shareholders.

The adoption of the Compromiso de Sevilla is a milestone, and a diplomatic achievement in the spirit of global cooperation, notwithstanding the blow from the self-imposed exile by the United States.

A follow-up conference has been proposed for 2029. But with less than five years to go until the 2030 deadline for the Sustainable Development Goals, and with most of those goals off track, more urgency is needed.

About the author

Grace Stanhope

Grace Stanhope is a former Research Fellow in the Indo-Pacific Development Centre at the Lowy Institute, working on the Southeast Asia Aid Map. Her work focused on tracking and analysing foreign aid and development finance flows to Southeast Asia.

Topics

Economy United Nations