Policy changes in the realm of sustainability do not occur in isolation. To effectively bridge the sustainable finance gap in the Asia-Pacific region, coherence among key governmental ministries, regulators, and other stakeholders is essential. Recognizing this need, ESCAP’s fifth edition of its Financing for Development Series, titled ‘Sustainable Finance: Bridging the gap in Asia and the Pacific’, emphasizes the importance of inter-ministerial coordination as a crucial principle of action. This principle highlights how policy coherence and capacities must be developed across key government ministries such as finance, energy, transport, and environment, ultimately reducing the costs of financing.
Governments must invest in building institutional capacity to improve coordination and make policy more coherent. Doing so will not only enhance internal alignment of policies but also enable governments to collaborate more effectively with external partners like multilateral development banks, development finance institutions, and other development partners, thereby aiding the achievement of national and global sustainability targets.
Strategic Role of Ministries of Finance
Ministries of finance play a pivotal role in supporting sustainable development by designing and implementing appropriate fiscal policies that facilitate investments in sustainable development. Their broad mandate, which includes oversight of public revenue, spending, tax policies, public assets, and debt, positions them centrally in aligning economic policies with sustainable development priorities.
As financing remains a cornerstone for achieving the Sustainable Development Goals (SDGs), ministries of finance are well-placed to lead inter-ministerial efforts. Not only do they direct funding towards priority areas, but their policies also enable and shape the work of other line ministries responsible for energy, agriculture, and the environment through well-designed budgetary support, subsidies, tax incentives, and investment frameworks. Initiatives like the Coalition of Finance Ministers for Climate Action exemplify how finance ministries can mobilize to address the climate crisis. Collaboration across government institutions is essential for enabling a coherent and comprehensive approach to sustainable economic transformation.
Lessons from Thailand: Cross-Ministerial Collaboration
Thailand provides an exemplary model of how inter-ministerial coordination, particularly between the Ministry of Finance and the Ministry of Agriculture and Cooperatives, can support sustainable livelihoods, financing, and environmental goals. A key institution in this collaboration is the Bank for Agriculture and Agricultural Co-operatives (BAAC), a Specialized Financial Institution under the Ministry of Finance. BAAC plays a central role in providing financial services to farmers.
Supporting Livelihoods through Targeted Lending
The Ministry of Finance and BAAC launched a large-scale loan project targeting village and city community funds, farmers, agricultural cooperatives, and community enterprises. With a total loan facility of 50,000 million baht, the project has approved loans for 6,734 clients amounting to 29,463 million baht.
Debt Relief and Skill Development
To ease financial burdens, a 12-month debt moratorium was introduced for farmers with loan obligations of up to 300,000 baht. About 1.7 million farmers registered for the program, covering loans worth over 238,000 million baht. Furthermore, BAAC partnered with state agencies to provide skills training for 300,000 farmers to boost productivity and income.
Expanding Climate Resilience through Insurance
In response to growing climate risks, the Ministry of Finance and BAAC expanded crop insurance schemes to protect farmers against natural disasters. In 2022, the corn crop insurance scheme provided coverage worth 188.24 million baht to 71,642 farmers, while the rice crop insurance scheme disbursed 2,890.26 million baht in premiums to nearly 1.94 million farmers.
Embedding Sustainability in Financial Institutions
Under its five-year policy framework for Specialized Financial Institutions (2022–2026), the Ministry of Finance aims to integrate sustainable finance and technological innovation into institutional mandates. BAAC’s efforts include a financial literacy and digital access project, which has recorded 576,824 digital transactions and trained 118,658 clients in financial management.
These examples demonstrate how coordination between financial institutions and ministries, guided by coherent government policies, can serve as powerful mechanisms to support sustainability. Aligning policies consistently across ministries and sectors, keeping in view sustainable development ambitions, is crucial for bridging the financing gap.
Thailand’s efforts illustrate that meaningful progress is possible when ministries of finance take a leadership role in promoting cross-sectoral collaboration. However, challenges remain in many developing Asia-Pacific economies, particularly in strengthening inter-agency cooperation and improving institutional mechanisms for knowledge transfer.
Moving forward, there is a pressing need for a further unified policy approach and ongoing investment in capacity-building and expertise across government agencies. Sharing knowledge and experiences can enhance policy coherence, unlock effective financing strategies, and drive broader economic and environmental transformation. ESCAP stands ready to work with governments in the region to achieve these goals.
Note: This article is inspired by content from https://www.unescap.org/blog/enhancing-policy-coherence-bridge-sustainable-finance-gap-asia-and-pacific. It has been rephrased for originality. Images are credited to the original source.