Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants

By Paulo Drummond, Wendell Daal, Nandini Srivastava, Luiz E Oliveira

May 1, 2012

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Paulo Drummond, Wendell Daal, Nandini Srivastava, and Luiz E Oliveira. Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants, (USA: International Monetary Fund, 2012) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Mobilizing more revenue is a priority for sub-Saharan African (SSA) countries. Countries have to finance their development agendas, and weak revenue mobilization is the root cause of fiscal imbalances in several countries. This paper reviews the experience of low-income SSA countries in mobilizing revenue in recent decades, with two broad aims: identify empirical norms of how much and how fast countries have been able to mobilize more revenue and empirical determinants (panel estimates) of revenue mobilization. The paper finds that (i) the frequency distribution of changes in revenue ratios for SSA low-income countries (LICs) peaks at a pace of about ½-2 percentage points of GDP in the short-to-medium term and at a pace of about 2-3½ percentage points of GDP over the longer term, and that (ii) almost all SSA-LICs managed to increase revenue ratios by more than 2 percentage points of GDP in the short-to-medium term, at least once in the last two decades. The sustainability of large increases in revenue ratios can be an issue, in particular for fragile countries. The panel estimates suggest that structural factors, such as per capita GDP, share of agriculture in GDP, inflation, degree of openness, and rents received from natural resources, are important determinants of tax revenue.

Subject: Agricultural sector, Balance of payments, Current account balance, Economic sectors, Environment, Fiscal policy, Natural resources, Revenue administration, Revenue mobilization

Keywords: Agricultural sector, Current account balance, Econometric panel estimation, Fiscal policy, Fiscal revenue, Fragile country, Frequency distribution, Mobilizing revenue, Natural resources, Revenue gain, Revenue mobilization, Revenue performance, Revenue ratio, Sub-Saharan Africa, Tax revenue, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/108
Stock No:

WPIEA2012108
ISBN:

9781475503296
ISSN:

1018-5941

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