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Developing local capacities in Africa for the identification of growth opportunities through resource mobilization

Background:

Recent estimates suggest that growth rates need to be doubled to about 7 to 8 per cent per annum and sustained for about a decade if Africa is to meet the Millennium Development Goals (with specific reference to Goal 1, on poverty reduction). This calls for policies that recognize the roles of market-based incentives in stimulating growth, enhancing the efficiency of the State through institution-building and human resource development and raising national productivity and competitiveness and thereby the overall growth prospects of African economies. Rising average incomes should lead to increases in domestic savings, which should help to gradually reduce dependence on external concessionary aid flows. Sustained growth and an improved enabling environment would also make these economies more attractive to external private capital investment, which, together with higher levels of domestic savings, should eventually replace official development financing in the long term.

The Monterrey Consensus and the New Partnership for Africa’s Development both stress increased domestic resource mobilization and the attraction of international flows as part of the means to attain the internationally agreed development goals, including those contained in the Millennium Declaration. The project will cover the experiences of eight countries to identify country differences in terms of their capacities to mobilize domestic savings and external resources and derive lessons learned for adoption by other, less developed countries in the Africa region. The project will be executed by UNCTAD in cooperation with ECA.

Objective:

To strengthen the capacity of African countries to identify and utilize non-debt-generating domestic and foreign resources for the achievement of the Millennium Development Goals.

Expected accomplishments:

  • Improved national capacities (banking and non-banking) and financial intermediation to establish new mechanisms for domestic resource mobilization and investment
  • Mechanisms developed for increasing capital flows from traditional and alternative (non-debt-creating) sources to close the domestic financing gap
  • A definitive policy and strategy devised to accelerate growth through external and domestic resource mobilization, including the incorporation of resource mobilization initiatives into the Poverty Reduction Strategy Papers to support efforts to achieve the Millennium Development Goals

Implementation status:

The activities implemented under the project contributed to strengthening the capacity of African countries to mobilize financial resources for development. Two regional training seminars and six country workshops were organized for African countries under the project. Furthermore, a Policy Handbook on Enhancing the Role of Domestic Financial Resources in Africa's Development was published and disseminated in African countries. The exposure of officials to policy discussions at the training seminars and workshops has enhanced their capacity to design and implement policies to boost domestic resource mobilization. The evaluations of the workshops received from participants indicate that the meetings were very useful and productive.

As a result of the capacity-building and dissemination activities associated with the project, there has been increased awareness by African policymakers of the need to boost domestic resource mobilization as an important mechanism for exiting aid-dependence and laying the foundation for sustained growth and development. The growing emphasis on domestic resource mobilization issues by African policymakers is evidenced by the fact that the 2009 Conference of African Ministers of Finance, Planning and Economic Development, jointly organized by the African Union Commission and the United Nations Economic Commission for Africa (ECA) was held under the theme Fiscal Policy and Domestic Resource Mobilization in Africa.

The project has also had an impact on economic policy-making in Africa. Since its inception in 2006, several African countries have introduced domestic reforms aimed at augmenting the total volume of development resources. For example, the recommendations of the project on broadening the tax base, computerization of the tax system, and reducing tax exemptions have been adopted and implemented by Ghana. In addition, the Democratic Republic of Congo, Rwanda and Zambia have also implemented some recommendations emanating from the project.