Spending needs for financing the Sustainable Development Goals (SDGs) in developing countries are large and cannot be covered by external flows alone. This has made it imperative for these countries to raise more resources domestically over time—an urgency accentuated by the fiscal impact of COVID-19, possibly with a long-lasting impact on revenue-generating capacity. This paper argues that there is considerable potential for raising more revenues from domestic sources in developing countries to finance development, but this would require strong political leadership to overcome resistance from vested interests. The paper identifies the areas where revenue potential exists and the type of reforms needed to tap this potential.
Prepared for the CGD Conference on “Financing Low-Income Countries: Towards Realistic Aspirations and Concrete Actions in a Post-Covid 19 World.”
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