OECD-ECDPM. 2012. Editorial: More effective and efficient public expenditure: taking the domestic resource mobilisation agenda forward. GREAT Insights, Volume 1, Issue 3. May 2012. Maastricht: ECDPM
In the current economic context, marked in particular by the continuing global financial crisis, the issue of domestic resource mobilisation (DRM) has received increasing attention from developing country governments and donors alike. The stakes are enormous. Relying increasingly on domestic resources could allow developing countries to distance themselves from the vagaries and volatility of external financial flows and reduce dependence on official development assistance (ODA) – an objective which appears all the more critical at a time when donor country governments have to deal with fiscal constraints and public sector cuts at home. It also holds the potential of increasing the policy space of developing countries, opening up opportunities to strengthen accountability relations between governments and citizens and achieving greater country ownership of their own development strategies.
In essence, DRM comprises a revenue side and an expenditure side – two interrelated ends that should be jointly examined. Not only could efficient and effective public spending boost growth and development, thereby enhancing the revenue raising potential in developing countries, but the way tax revenues are spent also matters to taxpayers. Indeed, transparent, effective and equitable public spending geared towards fairer social outcomes and tackling inequalities could, to some extent, reinforce the “fiscal legitimacy” of public policies, strengthening the social contract between governments and tax-paying citizens and helping to boost “tax morale”, i.e. building a “sense of duty” around tax-compliance.
While fiscal space has increased in several developing countries, not least in Africa, the scope and popular support for raising taxation or debt may be limited, especially if expenditures do not boost growth and if the quality and reach of public services does not improve. For this reason, enhancing the effectiveness of public expenditure and the capacity of public spending is paramount, all the more since pressures on public spending in developing countries are likely to intensify in the coming years, not least because of the sharp rise in the African population and of urbanization.
Against this background, the question is: how can government effectively link resource mobilisation to service delivery? What are the framework conditions and good practices that could enhance the effectiveness of government expenditures, including the political economy behind changing budget practices and making reform happen? What should be the role of the international community?
These were some of the questions analysed during the latest OECD Global Forum on Development, which gathered OECD and non-member governments, as well as development experts and civil society actors in Paris from 28-29 February 2012, back-to-back with a celebration of the OECD Development Centre’s 50th Anniversary.
The Forum highlighted the importance for governments and the international community to pay greater attention to the dual challenge of enhancing the effectiveness of revenue and expenditure policies, and the significant capacity bottlenecks that remain to be addressed. Specific examples in the area of the policy cycle for expenditures in infrastructure and the question of multi-level governance were discussed. Based on the discussions that were held during this global forum, ECDPM and the OECD Development Centre are joining their efforts this month to provide a platform for reflections on those questions. We have asked high-level participants to share their insights and expertise, not only on the linkage between resource mobilisation and service delivery, but also on priorities and best practices in making public expenditure more effective and efficient for development. It is thereby the intention of this special issue of GREAT Insights to provide critical analyses of policy instruments for DRM, be they linked to public revenues and/or public spending.
ECDPM and the OECD Development Centre
This article was published in Great Insights Volume 1, Issue 3 (May 2012)