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Thursday, 05 August 2010

Why enhance domestic resource mobilisation in Africa?

Developing countries that have achieved and sustained high rates of growth have typically done so largely through the mobilisation of their domestic resources. Domestic resource mobilisation (DRM) at a significant level is essential to solidify ownership over development strategy and to strengthen the bonds of accountability between governments and their citizens. In effect, DRM provides “policy space” to developing countries which is often constrained under the terms and conditions of external resource providers. Foreign aid comes with conditionality or policy strings attached, not to mention procurement restrictions that accompany “tied aid”. Aid also tends to be pro-cyclical and volatile. Foreign direct investment typically flows into sectors and projects dictated by the commercial interests of the foreign investors - for example, natural resource extraction. Moreover, governments that are heavily dependent on foreign aid, or on sharing the profits of foreign investors, have less incentive to raise taxes and less reason to pay attention to the demands of taxpaying citizens.

Source: International Centre for Trade and Sustainable Development