Researchers Discuss Politics of Domestic Resource Mobilization

Are tax systems providing governments with sufficient revenues to implement policies? Are rents from natural resources and mining a corrective for fiscal austerity? What are the linkages between domestic resource mobilization and donor relations in aid-dependent countries? And how do revenue policies impact on state-building and democratization?

Meeting in Geneva on 2-3 May 2013, country researchers and international experts discussed these questions at a methodology workshop for the project, Politics of Domestic Resource Mobilization for Social Development. Researchers from Bolivia, Guatemala, Uganda and Zimbabwe reported that domestic resource mobilization and its linkages with social development feature high on policy agendas in all four countries. Hear them discuss the project’s relevance for their countries.

Bolivia, one of the poorest countries in Latin America, is characterized by both a wealth of mineral resources, and entrenched patterns of poverty and inequality. Under President Evo Morales the government has nationalized the oil and gas industries, and increased fiscal space in a context of booming world energy prices. Higher fiscal revenues have allowed more generous social expenditures, in particular on various cash transfer programmes for families and older persons, making significant inroads into extreme poverty. However, against the backdrop of a new constitution and a highly mobilized society, the country is also affected by numerous social and regional conflicts concerned with rent distribution, management of natural resources, fiscal policies and decentralization.

Guatemala has the lowest tax burden and the lowest public expenditure in the Central American region. Yet more than half of the population lives in poverty, and rates of child malnutrition, and infant and maternal mortality, are among the highest in the region. Despite a devastating civil war and closer integration of the country into world markets, traditional elites remain strong and political and legal systems present obstacles to more inclusive social policies. Successful tax reform in 2012, an emerging oil and mining sector, as well as newly implemented cash transfer programmes offer some hope for more fundamental change.

Will the recent discovery of oil in Uganda—one of the largest aid recipients in Africa—translate into diminishing dependence on external donors? Despite years of reconstruction, tax reforms, inflows of donor support and an average growth rate of about 7 per cent per year between 1998 and 2006, revenue as a proportion of GDP remained at around 13 per cent in 2010. The public budget is under pressure, with the leading party NRM (National Resistance Movement) in need of resources to keep the ruling coalition together, to win elections, and to fund national development and poverty reduction strategies.

By the end of the first decade of the 2000s, Zimbabwe had become heavily dependent on donors and the non-governmental sector for the provision of key social services, including health and food security. And since 2009, there has been gradual political and economic recovery, with positive growth fuelled by a favourable external environment, and incipient progress in macroeconomic stabilization and donor relations. Yet the country, which extracts high-value minerals such as diamonds, gold and platinum and has one of the highest tax shares in the region, continues to struggle with severe constraints regarding domestic resource mobilization and the funding of social development programmes. Expectations are high that the new constitution, and upcoming elections in 2013, will usher in an era of positive transformation.

The project, Politics of Domestic Resource Mobilization for Social Development, aims to move beyond the technical aspects of tax reform and efficient resource management to analyse the political dynamics that are associated with taxation, resource extraction and revenue bargains. Researchers are examining the processes and mechanisms that connect the politics of resource mobilization and demands for social provision; changes in state-citizen and donor-recipient relations associated with resource mobilization and allocation; and governance reforms that can lead to improved and sustainable revenue yields and services. For more information, visit www.unrisd.org/pdrm.

Photo: Scott Weston (CC BY-NC-SA 2.0)