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To achieve the Sustainable Development Goals, finance for development must increase from “billions to trillions” per year. While prospects for public and private financing from the developed to the developing world are increasing, the key to sustainable human and infrastructure investment over the long term will be increased domestic resource mobilization (DRM)—the process through which low-income and lower middle-income countries raise and spend their own funds to provide for their people. The 2015 Addis Agenda, and the ensuing Addis Tax Initiative, enshrine global DRM aspirations and have prompted an acceleration in DRM-related technical assistance to LIC/LMICs.
CGD's work in this area seeks to enhance understanding of the political and economic constraints to increasing DRM and the distributional consequences of DRM policies. To support this learning process, CGD will:
Establish a common understanding of what constitutes “good” DRM;
Understand what the structural and political constraints are to increasing DRM;
Explore what multidimensional measures are best suited to track the efficiency and distributional impact of DRM;
Assess the effectiveness of policy advice, financial support and technical assistance for DRM from multilateral and bilateral institutions, particularly from the LIC/LMIC policymakers’ perspective;
Understand the impact that international finance and tax regimes have on LIC/LMICs and propose reforms that will assist LIC/LMIC development;
Develop an agenda of new ideas and actions to enhance DRM support and effectiveness.
This will be done in close consultation with bilateral and multilateral partners and developing country officials.
The Financing for Development conference in Addis Ababa in July represents one of President Obama’s last major opportunities to secure his development legacy. This memo offers 14 proposals from the Center's experts for commitments the United States Government should consider advancing for the Conference on Financing for Development. Each of the proposals has the opportunity to yield tremendous development impact, some as standalone USG commitments, and others as commitments ripe for broader cooperation.
The total scale of incremental investment requirements in infrastructure in developing countries has been estimated at around USD 1 trillion a year, with a range of related studies suggesting numbers between $815 billion to $1.3 trillion. While all such numbers are open to considerable debate, and were not designed to measure the cost of delivering the specific SDG infrastructure targets, they suggest the likely scale of the financing challenge for an SDG agenda which includes universal coverage to adequate housing, water, sanitation, modern energy and communications technologies.
Domestic measures have greater potential for raising tax yields over time. Rough estimates indicate that there may be $9 of additional tax capacity from domestic policy measures for every $1 from international action. The main enabler is political commitment.