From relief to recovery:
Rethinking development finance in fragile states
This essay is the seventh piece that Devex is producing in partnership with the Children's Investment Fund Foundation as part of The next frontier: Reimagining financing for development and growth — a series convening diverse global voices to redefine collaboration and unlock capital for future growth.
The views in this opinion piece do not necessarily reflect the views of Devex or the Children's Investment Fund Foundation.
According to the United Nations’ Sustainable Development Goals Report 2025, only 35% of SDG targets are currently on track or making moderate progress, while 18% have regressed — a sobering verdict halfway between the adoption of the 2030 Agenda and its deadline.
The Organisation for Economic Co-operation and Development reports that official development assistance, or ODA, from Development Assistance Committee members — the group of many of the historically largest providers of aid — fell to $174.3 billion in 2025. This marked a 23.1% decline in real terms with respect to 2024 and was the largest annual contraction ever recorded, bringing aid back to where it stood in 2015, when the 2030 Agenda was adopted. An additional decline of close to 7% is projected for 2026.
On the other side of the ledger, the gap continues to widen. UNCTAD estimates that developing countries need $4.3 trillion in annual investment to deliver the SDGs; the OECD warns that, without significant reform, the cumulative shortfall could reach $6.4 trillion by 2030.
Public funding alone cannot close a gap of this scale. And the honest answer is not simply that we must find more money — though more is certainly needed.
The challenge facing the international community is therefore not simply a shortage of global capital. Rather, it is the absence of sufficient mechanisms capable of channeling capital effectively, particularly into fragile and underserved environments where risks remain elevated and investment horizons uncertain.
The real challenge, then, is not capital — it’s building confidence.
Too often, fragile states are viewed solely through the lens of crisis. This creates a cycle in which private capital stays away, local systems deteriorate further, and recovery becomes increasingly difficult.
Breaking that cycle requires development finance to play a more catalytic role.
The role of blended finance
The future of development finance cannot depend exclusively on direct assistance. It must increasingly focus on rebuilding confidence, reducing risk, and creating conditions under which wider flows of investment can participate.
Blended finance has an important role to play in this context. When structured effectively, it allows concessional and public financing to mobilize additional resources that would otherwise remain unavailable to fragile states. Instruments such as concessional lending, guarantees, political risk mitigation, technical assistance, and cofinancing platforms can improve the viability of investments in sectors including energy, healthcare, water, agriculture, housing, and small business recovery.
For example, concessional infrastructure financing can help rehabilitate damaged electricity networks and water systems in post-conflict settings, reducing operational risks for future investors.
Credit guarantees can encourage local financial institutions to resume lending to small and medium-sized enterprises that are critical for employment generation and economic recovery. Technical assistance and project preparation support can also help fragile states develop investment-ready projects capable of attracting development finance institutions and long-term institutional investors.
Similarly, blended financing approaches can support the rehabilitation of education systems, including schools, vocational training institutions, and digital learning infrastructure — helping restore human capital, expand economic opportunity, and strengthen long-term societal resilience.
A teacher delivers an Arabic class at a school in Damascus. QFFD and Saudi Fund are supporting Syrian civil servants with salaries. June 9, 2026. Photo by: Qatar Fund for Development
A teacher delivers an Arabic class at a school in Damascus. QFFD and Saudi Fund are supporting Syrian civil servants with salaries. June 9, 2026. Photo by: Qatar Fund for Development
A boy on crutches walks out of QFFD-funded Bab Al-Hawa hospital in Idlib, northern Syria, after a doctor's appointment on June 10, 2026. Photo by: Qatar Fund for Development
A boy on crutches walks out of QFFD-funded Bab Al-Hawa hospital in Idlib, northern Syria, after a doctor's appointment on June 10, 2026. Photo by: Qatar Fund for Development
An elderly woman undergoes dialysis treatment at QFFD-funded Bab Al-Hawa kidney centre in Idlib, northern Syria, on June 10, 2026. Photo by: Qatar Fund for Development
An elderly woman undergoes dialysis treatment at QFFD-funded Bab Al-Hawa kidney centre in Idlib, northern Syria, on June 10, 2026. Photo by: Qatar Fund for Development
A wheat farmer waters his produce in Syria. Photo by: Qatar Fund for Development
A wheat farmer waters his produce in Syria. Photo by: Qatar Fund for Development
In several fragile contexts globally, blended finance structures have already demonstrated the ability to mobilize additional capital into sectors traditionally considered too risky for investment. According to the International Finance Corporation, every dollar of concessional capital deployed strategically alongside private investment can help mobilize multiple times that amount in additional financing under the right conditions.
This growing emphasis on blended finance is also reflected in the OECD Blended Finance Principles, which encourage the strategic use of development finance to mobilize additional commercial capital toward sustainable development outcomes, particularly in higher-risk environments.
From assistance to catalytic finance
Traditional donors account for the majority of the ODA decline previously referenced, reflecting a significant shift in the development financing environment.
This shift reinforces a central point: No single donor — nor traditional donors — collectively can bridge today’s development financing gap.
A decade ago, the Addis Ababa Action Agenda recognized that achieving sustainable development would require stronger partnerships between governments, multilateral institutions, philanthropies, sovereign development funds, and private investors.
That imperative is even more urgent today. Diversifying sources of development finance is no longer optional — it is essential.
Recognizing this shift, the Qatar Fund for Development, or QFFD, is evolving its development financing model accordingly. Under our expanded 2025 strategy, approximately 20% of our portfolio will remain grant-based, ensuring continued support for the most acute humanitarian needs. The remaining 80% will increasingly focus on impact investments, with returns reinvested into development priorities — creating a long-term multiplier effect rather than a one-time transfer of resources.
The objective is not to replace public responsibility with private capital. Rather, it is to use public capital more strategically — through concessional financing, guarantees, cofinancing mechanisms, technical assistance, and risk mitigation tools that can make difficult markets more investable.
A new model of development financing: The case of Syria
When I traveled to the sisterly Syrian Arab Republic in January 2025 as part of the visit undertaken by His Highness Sheikh Tamim bin Hamad Al Thani, Amir of the State of Qatar —an important example of regional engagement and support for Syria’s development and recovery efforts — the scale of the losses was impossible to overlook.
We were standing at the cusp of a defining moment, carrying the weight of responsibility for millions of Syrians who were hoping for a fresh start.The data tells part of the story: Syria’s gross domestic product has cumulatively contracted by more than half since 2010, and gross national income per capita has fallen to around $830 — well below the threshold for low-income countries. The World Bank’s October 2025 damage assessment puts direct physical damage to infrastructure and buildings at U$108 billion — with nearly one-third of Syria’s preconflict gross capital stock affected — and estimates reconstruction costs at a conservative $216 billion.
But what stayed with me was not the scale of destruction. It was the determination of brotherly Syrians to rebuild their lives.
To support their efforts, the State of Qatar, in cooperation with the Kingdom of Saudi Arabia, settled Syria’s $15.5 million arrears to the World Bank, facilitating the release of more than $100 million in grants and helping restore access to financial support aimed at revitalizing critical sectors.
An aerial photo of civil defense teams searching for earthquake survivors in the town of Basniya in the Idlib countryside. Photo by: Qatar Fund for Development
An aerial photo of civil defense teams searching for earthquake survivors in the town of Basniya in the Idlib countryside. Photo by: Qatar Fund for Development
A family was rescued after their house collapsed in Korin, Idlib countryside in northwestern Syria. Photo by: Qatar Fund for Development
A family was rescued after their house collapsed in Korin, Idlib countryside in northwestern Syria. Photo by: Qatar Fund for Development
It also became increasingly clear that reconstruction cannot be understood solely through the lens of physical infrastructure. We saw in Syria what we have seen across many fragile settings: Recovery depends equally on whether institutions, financial systems, and economic structures can function. It can only start when systems begin to work again.
Years of conflict had severely weakened Syria’s financial architecture — from banking systems and regulatory frameworks to market confidence and institutional capacity — limiting the country’s ability to mobilize investment, facilitate economic activity, and reconnect with the international financial system.
And yet, despite everything, Syrians carried a quiet conviction that they could turn things around. In fragile contexts, that conviction is itself a resource.
Recognizing this conviction, QFFD supported a comprehensive financial sector reform initiative in partnership with Syria’s Central Bank and Ministry of Finance, as well as international technical experts. The initiative focuses on conducting a full financial sector gap assessment, defining a five-year target state aligned with international standards and peer practices, and developing a sequenced reform road map across banking, capital markets, insurance, payment systems, governance, and regulatory frameworks.
The objective extends beyond technical reform alone. It is about helping rebuild the institutional foundations necessary for long-term economic resilience — including strengthening central banking functions, restoring supervisory capacity, supporting financial governance, improving operational and regulatory systems, and creating the conditions required for investment and private sector recovery.
This approach reflects a broader shift in how recovery must increasingly be understood across fragile contexts: Long-term stabilization requires restoring the systems that allow societies to function independently over time, including financial frameworks that enable economic participation, market confidence, and sustainable growth.
In fragile and recovering economies, that sequencing is everything, reflecting the importance of bridging the humanitarian-development nexus.
Amid displacement and uncertainty, joy finds a way. A young resident of Zaatari (Jordan) gives the only verdict that matters. Photo by: Qatar Fund for Development
Amid displacement and uncertainty, joy finds a way. A young resident of Zaatari (Jordan) gives the only verdict that matters. Photo by: Qatar Fund for Development
A 23-year-old kidney patient undergoes dialysis treatment three times a week at the QFFD-funded Bab Al-Hawa kidney center in northern Syria, on June 10, 2026. Photo by: Qatar Fund for Development
A 23-year-old kidney patient undergoes dialysis treatment three times a week at the QFFD-funded Bab Al-Hawa kidney center in northern Syria, on June 10, 2026. Photo by: Qatar Fund for Development
Opening of main roads closed due to rain in Ariha, Idlib countryside, Syria. Photo by: Qatar Fund for Development
Opening of main roads closed due to rain in Ariha, Idlib countryside, Syria. Photo by: Qatar Fund for Development
Restoring the foundations of recovery
This broader understanding of recovery also shaped QFFD’s support for Syria’s energy sector.
In March 2025, QFFD announced it would provide 400 megawatts of generation capacity to Syria’s electricity grid. Five months later, we launched a second phase — an additional 800 megawatts delivered in partnership with Azerbaijan and Türkiye.
Today, more than 5 million Syrians across 12 governorates have moved from four hours of electricity a day to between seven and 10 hours of uninterrupted supply.
QFFD Director General Fahad Al-Sulaiti and Turkish and Azerbaijan authorities officially open the pipeline to support Syria’s power sector. Photo by: Qatar Fund for Development
QFFD Director General Fahad Al-Sulaiti and Turkish and Azerbaijan authorities officially open the pipeline to support Syria’s power sector. Photo by: Qatar Fund for Development
Jandar power station in Homs, Syria, is one of the country’s major power stations receiving QFFD-funded support. Photo by: Qatar Fund for Development
Jandar power station in Homs, Syria, is one of the country’s major power stations receiving QFFD-funded support. Photo by: Qatar Fund for Development
This was not a conventional development intervention — it was an effort to restore the foundations on which recovery depends.
The same principle applies across many fragile contexts. In Yemen, restoring water and energy systems directly supports humanitarian resilience and local economic activity. In Sudan and Lebanon, rebuilding critical infrastructure and supporting financial system functionality will ultimately be essential for long-term growth and stability.
Sustainable recovery requires more than emergency response or the injection of resources. It requires rebuilding the systems and institutions that allow societies to function both now and independently over time — including healthcare, education, water, agriculture, and the economy.
A call to global development finance
The pressure on traditional ODA means that diversifying the sources of development finance is no longer optional — it is the precondition for keeping the 2030 Agenda within reach.
This shift cannot be sustained by individual players alone. It will require a broader coalition across the international development financing architecture: from the G7, G20, and regional unions, to multilateral development banks, development finance institutions, philanthropies, sovereign funds, and the private sector. All must be prepared to adopt more coordinated, catalytic, and risk-tolerant approaches to financing recovery, resilience, and sustainable development in fragile and underserved contexts.
Humanitarian needs must be met with the urgency they deserve. But recovery can only begin once systems are spurred back into operation.
This holistic approach — centered around rebuilding confidence, reducing risk, and creating the conditions to incentivize investment — is the model we are committed to employing across every fragile context where the gap between crisis and recovery is waiting to be bridged.
The aim is not to replace public responsibility with private capital. It is to use public capital in ways that make recovery credible enough for others to participate. When development finance lowers risk, strengthens systems, and signals confidence, it can unlock resources far beyond its own balance sheet.
That is what we saw in Syria. And it is the model we are taking forward.
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This content is produced in partnership with CIFF as part of The next frontier: Reimagining financing for development and growth — a series convening diverse global voices to redefine collaboration and unlock capital for future growth.
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