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Picture Credit: Achim Konopatzki Mobilizing Domestic Financial Resources
for DevelopmentDeveloping countries must mobilize domestic resources for development. National budgets contain potential for savings and redistribution. Governments can make additional resources available for sustainable development by reforming their tax systems and eliminating harmful subsidies and unproductive expenses. Of course, when dictators send billions to secret bank accounts, and when wealthy citizens send their savings overseas, they drain domestic financial resources, undermining the basis for development. This page posts articles on the challenges and opportunities of mobilizing domestic resources for development.
Also See GPF's Pages on:
Financing for Development
Articles and Documents
2007 | 2006 | 2004 | 2003 | 2002 | 2001 | 2000
The Precarious State of Public Finance (January 2007)
To decrease their dependency on rich countries and achieve long-term development, poor countries must raise revenue domestically. In this paper, author Jens Martens looks at a range of different obstacles that prevent governments of poor countries from raising sufficient public revenue and spending it on development. For example, governments of rich countries pressure poor countries to liberalize trade, thus reducing customs revenues. Also, ineffective tax systems exempt transnational corporations, landowners and rich individuals from paying taxes to poor countries. (Global Policy Forum, DGB Bildungswerk, terre des hommes)
In this contribution to the 2006 Social Watch Report, Jens Martens of Global Policy Forum calls for a “paradigm shift in the international discourse on development financing.” Martens draws up concrete policy recommendations to enable poor countries to mobilize “enough domestic resources to guarantee universal access to reasonable quality essential public goods and services.” Presently, a tax “race to the bottom” in attracting foreign investment, ineffective tax administrations, and pressure towards tariff reductions deprive poor countries of billions of dollars in potential income every year. In addition to tackling these income challenges, policies must ensure poor countries spend less on debt service, harmful subsidies and military budgets.2007
Africa: Countries Stand Up to EU(August 28, 2007)
Leading up to the September 2007 round of negotiations of the Economic Partnership Agreements with the EU, sixteen Common Market Eastern and Southern Africa (COMESA) countries oppose the EU’s attempt to lower trade barriers which will open African markets to EU products. Such a decision would have devastating effects on African industrial capacity and tariff revenues. COMESA also draws attention to the absurdity of the EU using a relatively developed country such as South Africa as a standard for the African continent’s capacity to handle lost revenue. (Inter Press Service)Adios, World Bank! (May 9, 2007)
An increasing number of Latin American countries – such as Venezuela, Ecuador, and Brazil – have paid off debts to the IMF and the World Bank in an effort to “break free” from the harsh conditionalities for debt relief imposed by the two institutions. Citing “doubts about the World Bank’s credibility [and] legitimacy,” Venezuela and Argentina have launched the “Banco del Sur,” or Bank of the South, a more democratic and development-focused alternative where “voting power will be based on financial need” rather than economic or political power. (TomPaine)2006
Eye on Extractive Industries Transparency Initiative (October 11, 2006)
The Publish What You Pay coalition examines progress made on the ‘Extractive Industries Transparency Initiative’ (EITI). “By developing a process to publicly disclose the revenues governments receive” from oil, gas and mining, EITI works to help countries avoid the “resource curse.” Outlining steps necessary to curb corruption and ensure countries spend natural resource revenues to reduce poverty and generate economic growth, this report evaluates government performance in the 21 countries that endorsed the EITI in 2002. While Nigeria and Azerbaijan have made significant progress, “in about half of the countries, governments have failed to match their rhetoric with tangible measures.”Urgent Need to Invest More in Developing World's Record Youth Population, Says World Development Report (September 16, 2006)
Focusing on youth, the 2007 annual World Bank publication reports that the world population of people aged 12-24 has reached a record 1.3 billion, living mainly in poor countries. According to the report, this “demographic dividend” creates a short “window of opportunity” for poor country governments to stimulate social and economic development, before this huge generation reaches middle-age. The report strongly emphasizes the importance of governments investing in better education, healthcare and job training thereby “expanding opportunities,” “improving capabilities,” and “offering second chances” to the young.Cash-strapped Cambodia Eyes Black Gold (August 30, 2006)
US oil giant Chevron may have uncovered large oil resources in Cambodia. According to United Nations Development Programme estimates, revenues from the oil could double the country’s GDP in the coming years. As a potential source of finance for education and infrastructure projects, the oil money could represent a huge opportunity for the impoverished country. But, development experts warn, it could also add Cambodia to the list of poor countries ruined by the “resource curse.” Oil money that makes government less dependent on taxes could erode the leader’s sense of obligation to the people, and allow Cambodia to turn into a “full-scale kleptocracy.” (Christian Science Monitor)The Hard Truth Behind Asia’s Boom (August 22, 2006)
With 42 percent still living on less than US$2 a day in China and almost half of all children in India undernourished, economic growth has failed to improve the lives of hundreds of millions of impoverished people in these countries. However, as this International Herald Tribune article suggests, economic growth enables governments to tackle the “roots of poverty” by providing health care and education. The author argues that the public must hold policy makers responsible to provide these services as well as address factors that impede the poor’s use of them.Are Poor Nations Wasting Their Money on Dollars? (April 30, 2006)
International reserves held by poor countries have tripled since 2002, amounting to US$2.9 trillion at the end of 2005. Aware of the disturbing economic and social effects of past financial crisis, many countries opted for macroeconomic stability and political independence by accumulating vast sums of low-return US Treasury bonds. This New York Times article argues that many poor countries pay a “high price” for their caution since the money could foster development in areas such as health care or education.Better Data Needed for Policy Research on Access to Financial Services (February 22, 2006)
This article looks at how restricted access to basic financial services is limiting poor peoples’ chances to escape poverty. In many poor countries, although financial services such as checking accounts or credit-lines may be available, small firms and poor households cannot use them due to high costs. Often, access barriers such as account opening costs amount up to 30% or 50% of the GDP per capita. The World Bank also points out that governments need more data and research to foster poor peoples’ access to financial services.In the Public Interest – Health, Education, and Water and Sanitation for All (2006)
This Oxfam and WaterAid report argues that public provision of health and education services play a most important role in ending global poverty. Poor country governments must commit to bigger and better investments in health and education. Rich countries, for their part, must support these initiatives and increase both quantity and quality of aid, fully cancel debt for all poor countries that need it and stop demanding budget cuts in and privatization of public services through the international financial institutions.2004
Africa's New Model for Spreading Oil Wealth (July 28, 2004)
Chad's government began a new oil-drilling plan, intended to channel resources directly from exports to social welfare and development projects. Because past endeavors have been stifled by corrupt leaders and expropriation, the funds from this project will be held by the World Bank and monitored by a panel of government and NGO officials. (Christian Science Monitor)Making Mining Work: Bringing Poverty-Stricken, Small-Scale Miners into the Formal Private Sector (July 12, 2004)
Multilateral agencies and government institutions have historically argued that small-scale and artisinal mining (ASM), is unsustainable, dangerous, and exploitative of women and children. However, as ASM continues to grow and employ thousands of impoverished people, thereby becoming more integrated into local development, organizations are shifting their focus from ending the industry to reforming it. (International Development Research Center)The Economic Dimensions of Interpersonal Violence (June 2004)
Interpersonal violent acts have high economic, social and psychological costs which often hold perpetrators and victims in a cycle of poverty. In some states, associated financial costs, which are being diverted from other important social welfare programs, exceed 3.3% of GDP. In this extensive report, the WHO recommends more political and financial investment in prevention.Arms Sales Killing Development Goals (June 22, 2004)
"Inappropriate arms sales are responsible for entrenching and exacerbating poverty." Poor governments spend millions of dollars each year on weaponry; in many states, this sums to more than education and healthcare combined. This report suggests an international arms trade treaty to cap defense spending and protect sustainable development. (Inter Press Service News Agency)2003
Brazil Pays Its Poor to Send Kids to School (July 1, 2003)
Poor Brazilian children often spend their day trying to earn enough money to eat, rather than attending school. A government program offers families a stipend for their child’s school attendance. (Washington Post)Marketing of Unique Diversity Offers South Africa the Global Edge (June 26, 2003)
A South African business professor contends that when local entrepreneurs rush to compete in the markets of more industrialized, slower-growth economies, they forego sustainable market development in their own emerging regions. (Business Day)The South Strikes Back (June 11, 2003)
Breaking from a history of Anglo-American-imposed low-profit commodity exporting, the “G3,” Brazil, India, and South Africa, plan to pursue their own national development policies. (Asian Times)Who's Really to Blame for Low Coffee Prices? (June 4, 2003)
Farmers are locked in a vicious cycle of mismanaged government policy that “fixes” access to coffee markets. Governments encourage the flooding of markets with low-quality beans, by subsidizing export-oriented production. (International Policy Network)How These People Are Doing More for the Third World Than Western Governments (April 20, 2003)
World Bank reports demonstrate that relatively poor migrant workers in rich countries provide more financial flows to developing countries than the combined total of government aid, private bank lending, and IMF/World Bank assistance. In many smaller developing countries, remittances are playing a significant developmental role. (Observer)2002
The Fallacy of Foreign Aid as Engine of Economic Development (October 4, 2002)
Economic assistance and aid to Ethiopia have done nothing to alleviate poverty, and accepting more aid only increases the country’s debt burden. Instead, this author argues for an approach that relies on domestic resources and promotes Ethiopia’s private sector as an engine of growth. (Addis Tribune)Argentina Is Recovering (September, 2002)
The currency devaluation that followed Argentina’s abandonment of a fixed exchange rate system is already fueling domestic production. Joseph Stiglitz argues that the next step to Argentina’s recovery should not be IMF loans but credit to develop domestic resources. (Project Syndicate)Filipinos Swap Guns for Rakes (March 5, 2002)
In an area of the Philippines previously characterized by militancy and instability, US Agency for International Development (USAID) grants help finance a program of economic revival, benefiting the local population and helping to maintain peace in the region. (Christian Science Monitor)Mobilizing Finance for Nation's Future (March 4, 2002)
At Nigeria’s 'National Dialogue on Financing for Development,' delegates discussed whether the country should focus on Overseas Development Aid, or mobilizing finance within the economy. Either way, Nigeria “must present conditions that are predictable, coherent and stable" to attract investment. (This Day, Lagos)Republican Member of Congress Calls for Increase in Aid Budget (February 9, 2002)
Republican Jim Kolbe, chair of the House appropriations subcommittee on foreign aid, urges the US to increase its aid budget while conceding that aid productivity deserves more attention. Remaining at the bottom of the donor list, the Bush administration believes productivity gains alone suffice. (Washington Post)2001
Small-Scale Financing Takes Hold in Africa (December 17, 2001)
In the past decade a number of African-based investment companies have emerged to finance and advise small and medium-sized businesses. These firms combine experience and first-world contacts with "inside knowledge of Third World businesses," and they are proving to be vital for Africa's economic development. (New York Times)Mexican Village Raises Flowers to Stem Migration (December 3, 2001)
Money from migrant workers in the U.S. is helping to create jobs back in Mexico. Will these micro-businesses stimulate the local economy enough to slow massive migration to the U.S.? (Los Angeles Times)Up From the Mexican Underground (November 28, 2001)
The expansion of the underground economy in Mexico and the rest of Latin America has perpetuated poverty and deprived the government of much-needed tax revenues. Now, a pilot program hopes to make it easier for unregistered street vendors to become legitimate. (Los Angeles Times)Power Politics Trump Reform (September 27, 2001)
Privatization of public utilities was supposed to ease Thailand's public debt and give a much-needed boost to its market. But, as the continuing woes of the country's energy sector show, the terms of deregulation are often decided by political interests. (Far Eastern Economic Review)Jungle Capitalists and Tame Pussycat Partners (July 2, 2001)
In its “love affair” with business, the British Government is in jeopardy of persuading itself of nonsense. Whitehall believes everyone in the private sector is smarter than anyone in the government sector, therefore the very presence in Whitehall of the business breed makes it all worthwhile. (Independent)An Alternative to Progress (May/June 2001)
The Nayakrishi, or “New Agriculture” movement in Bangladesh promotes crop diversity, pesticide-free growing zones, and local control. Is it a viable alternative to the “Green Revolution”? (Mother Jones)Ditching the Farmers (June 22, 2001)
In the aftermath of foot and mouth crisis and after 50 years of subsidies, agriculture is the most hopelessly inefficient and neglected sector of the whole economy of England. Tony Blair, the Prime Minister of England, wants to cut down agricultural subsidies and give more cash to other rural business. But a new analysis underlines the mis-match between farming subsidy and support for the wider rural economy. (Guardian)2000
UN Says Bad Governance, Not Lack of Cash, Hurting Poverty Reduction (April 4, 2000)
A UN Development Program report calls for governments to develop national anti-poverty programs that address a wide range of related development issues, not just how to increase incomes. The report also calls for the world's wealthy countries to provide debt relief to the developing world. (Associated Press)
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