Economic development is a domestically driven enterprise. No amount of foreign assistance or investment can substitute for a coherent, dynamic and domestically driven capital accumulation, intermediation and mobilization process. Such a process is vital, even in the poorest of countries, so that nations can gradually ease their need for aid and for other unpredictable external sources of funding, sources which had been disproportionately drawn upon to finance their development needs.
NSI has been working with African, UK and Canadian partners to bridge the gap between research and practice regarding domestic resource mobilization (DRM). DRM refers to savings and investments that are generated by both the public sector, primarily through taxation, and the private sector, as a channel for private savings by households and domestic firms.
Aid and Taxation: Is Sub-Saharan Africa Different?
Published: May 13, 2012
Since the Monterrey Consensus in 2002, there has been increasing emphasis on domestic resource mobilization (DRM) to meet the MDGs. Nowhere are the challenges to DRM more pronounced than in sub-Saharan Africa, with its low savings rates, high dependence on foreign aid and weak capacity to mobilize domestic resources. In fact, aid receipts are higher than taxation revenue and also constitute a significant part of government revenue in several African countries. In this paper, we focus on one particular aspect of DRM, namely taxation and the extent to which it is affected by aid, in sub-Saharan Africa over the period 1972-2008. The existing literature has generally found a negative relationship between aid and taxation but the results are very sensitive to data quality and specification problems. We revisit the aid-taxation link using more recent data as well as a new and more detailed dataset by Keen and Mansour (2009), which allows us to focus on revenues that require more state capacity to collect. Controlling for the different determinants of taxation, we find that aid has had no significant impact on taxation generally or in sub-Saharan Africa particularly. Our results are robust to different specifications and time periods, as well as aid thresholds. Drawing on recent findings from five case studies of sub-Saharan countries that identified significant untapped DRM potential in the region (North-South Institute, 2010), we conclude that aid could be better targeted to increase DRM.
Authors: Aniket Bhushan and Yiagadeesen Samy
Do-It-Yourself Development: Domestic Resource Mobilization in Africa
Published: July 14, 2012
Bolstered by external aid, global demand for commodities and recent macroeconomic stability, growth in Sub-Saharan Africa has outpaced most of the world over the past decade. Sustaining this expansion will depend, however, on a shift toward greater reliance on domestic resources — that is, government revenues and domestic savings and investment — to fuel growth.
Authors: Roy Culpepper and Aniket Bhushan
Domestic Resource Mobilization in Africa: National Stakeholder Engagement Workshops
Published: October 1, 2010
This narrative report covers five National Stakeholder Engagement Workshops on Domestic Resource Mobilization organized by The NorthSouth Institute in collaboration with the Banque de la Republique du Burundi in Bujumbura; the Prime Minister’s Office in Cameroon; the Department for International Development country office in Ethiopia; the Tanzania Revenue Authority and the Ministry of Finance, Uganda. The workshops took place between September 13 and 24, 2010. The report draws on narratives prepared by country rapporteurs and NSI.
Author: Aniket Bhushan
Enhancing Domestic Resource Mobilization for Effective Development: Role of the Donor Community
Published: April 24, 2010
This paper is on the role of the donor community in enhancing domestic resource mobilization for effective development.
Authors: Yiagadeesen Samy & Aniket Bhushan