Working Paper 101 - The Global Financial Crisis and Domestic Resource Mobilization in Africa
As access to foreign resources has becomeincreasingly difficult, in the wake of the globalfinancial crisis, the use of domestic resourcesfor development purposes is becoming moreand more important. Ironically, however, thereare possibilities of the financial crisis also affectingthe mobilization of domestic resources. Theglobal financial crisis affected the capacity ofthe public sector to mobilize tax revenues. Theintroduction of such new taxes as VAT, the rationalizationof trade tariffs, the strengthening oftax offices, the reform of incentive structures,reduction and removal of subsidies have thepotential to improve domestic resource mobilization.Another significant challenge that African countriesface is how to strengthen their financialsystems in order to make them deliver thenecessary financial resources to be used forboosting investments and facilitate employmentcreation. Reforms in this area will enhance thepolicy environment for financial institutions andprovide incentives for them to become morecompetitive. Despite the effort, studies of financialsystems performance in most African countriesover the last two decades have often suggestedthat the reforms have generally had limitedsuccess in effectively mobilizing domesticresources and channeling these into productiveinvestments.While the African financial sector remains marginallyintegrated in global financial market, it isgenerally true that in knowing that they couldborrow from international markets to supplementwhatever resources were available to themfrom domestic markets encouraged Africanfinancial institutions to be a lot more out-goingin terms of the development of new instrumentsin recent years. But going back old ways wherethere was little interest in new instruments andnew clients, opting for safer government businessonly, will not be beneficial in the long-term.Reforms to enhance the continent’s integrationinto the global market are therefore important.This paper attempts to answer some importantquestions: Whether the mobilization of domesticresources is counter-cyclical and whether externalshocks will lead to improvements in domesticresource mobilization? The paper argues thatif there should be any interruptions in the flowof domestic resources, this may not be easilyattributable to the onset of the financial crisis,rather it is argued that the structural and institutionalconstraints that have hindered resourcemobilization for a long time will continue tomake it difficult for the financial systems torespond adequately to any interruptions inexternal resource flows. The paper highlights anumber of suggestions for countries to improvedomestic resources mobilization.
|Date of creation:||11 Jan 2010|
|Date of revision:|
|Contact details of provider:|| Postal: 15 Avenue du Ghana P.O.Box 323-1002 Tunis-Belvedère, Tunisia|
Phone: (+216) 71 10 39 00
Fax: (225) 21.77.53
Web page: http://www.afdb.org/en/knowledge/publications/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin MÃ¼hleisen & Dhaneshwar Ghura & Roger Nord & Michael T. Hadjimichael & E. Murat Ucer, 1995. "Sub-Saharan Africa; Growth, Savings, and Investment, 1986-93," IMF Occasional Papers 118, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:adb:adbwps:237. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adeleke Oluwole Salami)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.