Financial resources and mechanisms play a key role in the implementation of Agenda 21. In general, the financing for the implementation of Agenda 21 will come from a country's own public and private sectors. For developing countries, ODA is a main source of external funding, and substantial new and additional funding for sustainable development and implementation of Agenda 21 will be required. Hence, all financial commitments of Agenda 21, particularly those contained in chapter 33, and the provisions on new and additional resources that are both adequate and predictable need to be urgently fulfilled. Renewed efforts are essential to ensure that all sources of funding contribute to economic growth, social development and environmental protection in the context of sustainable development and the implementation of Agenda 21.

For developing countries, particularly those in Africa and the least developed countries, ODA remains a main source of external funding and is essential for the prompt and effective implementation of Agenda 21 and cannot generally be replaced by private capital flows. Developed countries should therefore fulfil the commitments undertaken to reach the accepted United Nations target of 0.7 per cent of GNP as soon as possible. In this context the present downward trend in the ratio of ODA to GNP causes concern. Intensified efforts should be made to reverse this trend, taking into account the need for improving the quality and effectiveness of ODA. In the spirit of global partnership, the underlying factors that have led to this decrease should be addressed by all countries. Strategies should be worked out for increasing donor support to aid programmes and revitalizing the commitments that donors made at UNCED. Some countries already meet or exceed the 0.7 per cent agreed target. Official financial flows to developing countries, particularly least developed countries, remain an essential element of the partnership embodied in Agenda 21.  ODA plays a significant role, inter alia, in capacity-building, infrastructure, combating poverty and environmental protection in developing countries, and a crucial role in the least developed countries. ODA can play an important complementary and catalytic role in promoting economic growth and may, in some cases, play a catalytic role in encouraging private investment and, where appropriate, all aspects of country-driven capacity building and strengthening.

Funding by multilateral financial institutions through their concessional mechanisms is also essential to developing countries in their efforts to fully implement the sustainable development objectives contained in Agenda 21. Such institutions should continue to respond to the development needs and priorities of developing countries. Developed countries should urgently meet their commitments under the eleventh replenishment of the International Development Association (IDA).

Continued and full donor commitments to adequate, sustained and predictable funding for GEF operations is important for developing countries so that global environmental benefits can be further achieved. Donor countries are urged to engage in providing new and additional resources, with a view to equitable burden-sharing, through a satisfactory replenishment of GEF, which makes available grant and concessional funding designed to achieve global environmental benefits, thereby promoting sustainable development. Consideration should be given to further exploring the flexibility of the existing mandate of GEF in supporting activities to achieve global environmental benefits. With regard to the project cycle, further efforts should be made to continue streamlining the decision-making process in order to maintain an effective and efficient, as well as transparent, participatory and democratic framework. GEF, when acting as the operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change and the Convention on Biological Diversity, should continue to operate in conformity with those Conventions and promote their implementation. The GEF implementing agencies, the United Nations Development Programme (UNDP), UNEP and the World Bank, should strengthen, as appropriate and in accordance with their respective mandates, their cooperation at all levels, including the field level.

The efficiency, effectiveness and impact of the operational activities of die United Nations system must be enhanced by, inter alia, a substantial increase in their funding on a predictable, continuous and assured basis, commensurate with the increasing needs of developing countries, as well as through the full implementation of resolutions 47/199 and 48/162. There is a need for a substantial increase in resources for operational activities for development on a predictable, continuous and assured basis, commensurate with the increasing needs of developing countries.

Private capital is a major tool of economic growth in a growing number of developing countries. Higher levels of foreign private investment should be mobilized given its mounting importance. To stimulate higher levels of private investment, Governments should aim at ensuring macroeconomic stability, open trade and investment policies, and well-functioning legal and financial systems. Further studies should be undertaken, including studies on the design of an appropriate environment, at both the national and international levels, for facilitating foreign private investment, in particular foreign direct investment (FDI) flows to developing countries, and enhancing its contribution to sustainable development. To ensure that such investments are supportive of sustainable development objectives, it is essential that the national Governments of both investor and recipient countries provide appropriate regulatory frameworks and incentives for private investment. Therefore further work should be undertaken on the design of appropriate policies and measures aimed at promoting long-term investment flows to developing countries in activities which increase their productive capability, and reducing the volatility of these flows. ODA donors and multilateral development banks are encouraged to strengthen their commitments to supporting investment in developing countries in a manner that jointly promotes economic growth, social development and environmental protection.

The external debt problem continues to hamper the efforts of developing countries to achieve sustainable development. To resolve the remaining debt problems of the heavily indebted poor countries, creditor and debtor countries and international financial institutions should continue their efforts to find effective, equitable, development- oriented and durable solutions to the debt problem, including debt relief in the form of debt rescheduling, debt reduction, debt swaps and, as appropriate, debt cancellation, as well as grants and concessional flows that will help restore creditworthiness. The joint World Bank/International Monetary Fund (IMF) Heavily Indebted Poor Countries (HIPC) Debt Initiative supported by the Paris Club creditor countries is an important development to reduce the multilateral debt problem. Implementation of the HIPC Debt Initiative requires additional financial resources from both bilateral and multilateral creditors without affecting the support required for the development activities of developing countries.

There is a need for a fuller understanding of the impact of indebtedness on the pursuit of sustainable development by developing countries. To this end, the United Nations Secretariat, the World Bank and IMF are invited to collaborate with UNCTAD in further considering the interrelationship between indebtedness and sustainable development for developing countries.

While international cooperation is very important in assisting developing countries in their development efforts, in general financing for the implementation of Agenda 21 will come from countries' own public and private sectors. Policies for promoting domestic resource mobilization, including credit, could include sound macroeconomic reforms, including fiscal and monetary policy reforms, review and reform of existing subsidies, and the promotion of personal savings and access to credit, especially micro- credit, in particular for women. Such policies should be decided by each country, taking into account its own characteristics and capabilities and different levels of development, especially as reflected in national sustainable development strategies, where they exist.

There is a need for making existing subsidies more transparent in order to increase public awareness of their actual economic, social and environmental impact and to reform or, where pertinent, remove them. Further national and international research in that area should be promoted in order to assist Governments in identifying and considering phasing-out subsidies that have market distorting, and socially and environmentally damaging impacts. Subsidy reductions should take full account of the specific conditions and the different levels of development of individual countries and should consider potentially regressive impacts, particularly on developing countries. In addition, it would be desirable to use international cooperation and coordination to promote the reduction of subsidies where these have important implications for competitiveness.

In order to reduce the barriers to the expanded use of economic instruments, Governments and international organizations should collect and share information on the use of economic instruments and introduce pilot schemes that would, inter alia, demonstrate how to make the best use of such instruments while avoiding adverse effects on competitiveness and terms of trade of all countries, particularly developing countries, and on marginalized and vulnerable sectors of society. When introducing economic instruments that raise the cost of economic activities for households and small and medium-sized enterprises (SMEs), Governments should consider gradual phase-ins, public education programmes and targeted technical assistance as strategies for reducing distributional impacts. Various studies and practical experiences in a number of countries, in particular developed countries, indicate that the appropriate use of relevant economic instruments may help generate positive possibilities for shifting consumer and producer behaviour to more sustainable directions in those countries. There is, however, a need to conduct further studies and test practical experiences in more countries, taking into account country-specific conditions, and particularly the acceptability, legitimacy, equity, efficiency and effectiveness of such economic instruments.

Innovative financial mechanisms are currently under discussion in international and national forums but have not yet fully evolved conceptually. The Secretary-General is to submit a report concerning innovative financing mechanisms to the Economic and Social Council at its substantive session of 1997. In view of the widespread interest in those mechanisms, appropriate organizations, including UNCTAD, the World Bank and IMF, are invited to consider conducting forward-looking studies of concerted action on such mechanisms and to share them with the Commission on Sustainable Development, other relevant intergovernmental organizations and non- governmental organizations. In this regard, innovative funding should complement ODA, not replace it. New initiatives for cooperative implementation of environment and development objectives under mutually beneficial incentive structures should be further explored.