Search

Begin New Search Publishing Institution Center for Global Development

81. Identifying Binding Constraints on Digital Payment Services in Ethiopia: An Application of a Decision Tree Framework

Author:
Getnet Alemu, Tadele Ferde, and Alejandro Fiorito
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
While several comparable countries in sub-Saharan Africa have seen a significant increase in financial inclusion, mainly driven by digital financial services, Ethiopia still performs poorly. Even digital payment and transfer services, which lower-income and less literate segments of the population could benefit from, are rarely used. Given the low development level of Ethiopia, numerous supply and demand factors could explain this disappointing outcome. We use a decision tree framework to isolate and analyze potential constraints to find which are binding—that is, which constraints limit the expansion of digital payment services in Ethiopia. Our analysis indicates that supply-side problems are pervasive, and we find that competition problems in the essential digital infrastructure market and in the financial sector are responsible for the inadequate provision of digital payment services in Ethiopia. However, the root cause of inadequate competition, and therefore of low financial inclusion through digital payment services, is institutional deficiencies. The two key institutional deficiencies are the lack of capacity of regulatory and supervisory institutions, and the unwillingness of the central government to enable and promote competition. The dominance of public enterprises, Ethio Telecom and the Commercial Bank of Ethiopia, has kept the prices of digital payment services high, particularly for low-income populations, as fees charged for undertaking low-value transactions are very high and the cost of digital infrastructure (mobile phones and plans) is also substantial. Unless these institutional binding constraints are removed, digital payment services in Ethiopia, and digital financial services more generally, will hit a very short ceiling that limits their enormous potential to improve livelihoods in the country.
Topic:
Development, Finance, Digital Economy, and Digitalization
Political Geography:
Africa and Ethiopia

82. Financing the Humanitarian Public Good: Towards a More Effective Humanitarian Financing Model

Author:
Emmanuel Saez, Jeremy Konyndyk, and Rose Worden
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The international humanitarian system provides a global public service but is financed on a voluntary basis. The way official donor funding is mobilised and allocated is unpredictable and haphazard, reducing efficiency and effectiveness. Donors should overcome the collective action problem that is inhibiting change and reach a critical mass of finance delivered through collective mechanisms. This paper outlines the case for - and obstacles against – change. It suggests three ways to make some progress: a multi-year common replenishment model for protracted and predictable crises; rebalancing country-level pooled mechanisms; and aligning core funding to agencies with agreed core functions.
Topic:
Humanitarian Intervention, Humanitarian Crisis, Donors, and Public Goods
Political Geography:
Global Focus

83. A Decision Tree for Digital Payment Services: The Case of Mexico

Author:
Ivonne Acevedo and Miguel Szekely
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper explores the reasons why digital payment services in Mexico are used to a much lower extent than would be expected considering the country’s level of development and the authorities’ efforts to expand these types of services during the past two decades. The paper applies the analytical framework proposed by Claessens and Rojas-Suarez (2020), which consists of identifying the binding constraints preventing an increase in the usage of digital payment services, among a set of alternative explanations. The methodology starts by evaluating the price and usage of digital payment services to discover whether constraints may be on the supply side, the demand side, or both. The main findings suggest that the crucial binding constraints on the expansion of digital payment services in Mexico are mainly on the supply side of the decision tree. Indeed, we identify the regulatory framework seems to be a binding constraint, since it creates an unlevel playing field among the providers of digital payment services. Current regulation could also be a constraint on increasing the provision of digital financial infrastructure, particularly for expanding cash-in and cash-out access points in rural areas. Thus, relaxing the regulatory constraint could enable the expansion of digital payment services. In addition, there is evidence suggesting that a coordination failure, reflected in a strong preference for transacting in cash, might be a binding constraint in the country. Perceived low or nonexistent benefits from using digital payment services could be the source of the coordination failure, since it prevents the formation of a critical mass of users, which in turn discourages suppliers from offering these services.
Topic:
Economics, Finance, Services, and Digitalization
Political Geography:
North America and Mexico

84. Searching for the Binding Constraint to Digital Financial Inclusion in Pakistan: A Decision Tree Approach

Author:
Imran Khan and Karrar Hussain Jaffar
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Over the last decade, Pakistan has seen improvements in the coverage of its networks of bank branches, ATMs, and mobile money agents. However, the country is lagging behind comparator countries when it comes to the financial inclusion of its population; according to the latest estimates, barely 20 percent are currently included. By using the Claessens and Rojas-Suarez (2020) decision tree methodology, this paper assesses the potential demandand supply-side constraints limiting the usage of digital payment services to identify which constraints are binding. Our main finding is that Pakistan’s institutional weaknesses constitute the most important binding constraint. These weaknesses have incentivized the creation of a sizable informal economy that has resulted in a preference for cash over the use of formal financial channels for the majority of the population. Reflecting institutional deficiencies, the imposition of a withholding tax on financial transactions undertaken by individuals who did not file tax returns has further encouraged a move toward cash and away from digital finance. On the demand side, Pakistan lags behind comparable countries on various indicators such as technical literacy, awareness about the functionality of products, and social inclusion of women. Nevertheless, we find that these constraints are severe only for specific subpopulations. Consistent with our conclusion that institutional weaknesses, the binding constraint, have created deep incentives to remain informal, a considerable proportion of mobile phone–owning financially excluded individuals continue to choose to be financially excluded in spite of having high levels of technical literacy, functional awareness, and trust.
Topic:
Finance, Innovation, Banking, and Digitalization
Political Geography:
Pakistan and Asia

85. Improving Performance in the Multilateral Humanitarian System: New Models of Donorship

Author:
Patrick Saez, Lewis Sida, Rachel Silverman, and Rose Worden
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The humanitarian system has undergone three series of reforms over the past couple of decades, with mixed results. Multilateral agencies play a central role in the system. Faced with the prospect of growing humanitarian needs as a result of conflict, climate change and pandemics, the elusive quest to improve their performance continues. Yet while donors agree on the benefits of a strong multilateral system to respond to humanitarian crises, they diverge when it comes to measuring performance and providing financial incentives. A political economy defined by co-dependence and information asymmetry complicates the picture. Donors should unbundle their funding of different multilateral functions and measure their performance accordingly. Commonly agreed core functions and capacities should be supported by a greater proportion of core rather than earmarked funding. Performance of these core functions should be measured using multi-donor assessments and functional reviews. Independent measurement of outcomes should be linked to pooled mechanisms that would channel a significantly greater proportion of funding earmarked to specific crises.
Topic:
Finance, Multilateral Relations, Multilateralism, and Donors
Political Geography:
Global Focus

86. A Path to Resiliency: Mitigating the Impacts of COVID-19 on Essential Medicines Supply Chains

Author:
Anthony McDonnell, Elizabeth Pisani, and Somya Singhvi
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
COVID-19 has put a spotlight on health product supply chains, highlighting the challenges in multiple steps in the global supply chain. This paper seeks to understand the impact of COVID-19 on the supply chain of a subset of essential medicines. It identifies the main categories of blockages in the global supply chain created by COVID-19, then uses data on trade flows, wholesalers, and pharma companies, and from surveys, to track the impact. There was significant short-term disruption to manufacturing caused by COVID-19. Surveys, pharmacy, and export data indicate that COVID-related disruptions impacted the supply of essential medicines, but this varied greatly by markets and product. The paper highlights that (1) data-driven approaches should be considered to make supply chains more robust, (2) solutions must account for the political and institutional landscape, (3) price surges benefit the wealthiest, and (4) local solutions are often needed to manage global shocks. More research is needed, particularly into how to obtain granular data to track supply shocks in real time? How do we increase surge capacity? Is it possible to improve procurement practices through pooled procurement, where applicable? And can pharmaceutical production be diversified, with products produced regionally to limit the risk of disruption?
Topic:
Pandemic, Resilience, COVID-19, and Medicine
Political Geography:
Global Focus

87. Ethical Recruitment of Health Workers: Using Bilateral Cooperation to Fulfill the World Health Organization’s Global Code of Practice

Author:
Michael Clemens and Helen Dempster
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In a bid to better manage the increasing migration of health workers, in 2010 the World Health Organization (WHO) adopted its Global Code of Practice on the International Recruitment of Health Personnel. The Code has been misinterpreted by many as banning all recruitment from the 57 countries it deemed to have a “critical shortage” of health workers. But that is neither what the WHO intended, nor what the Code says. Recruitment from these countries was always allowed, even encouraged, as long as it was conducted under a mutually beneficial government-to-government agreement. In this policy paper, we outline how the WHO defined a “critical shortage” of health workers, both for the original Code and for its newly published Health Workforce Support and Safeguards List. The paper then goes onto explore how countries of migrant destination and origin can (and should) design ethical and sustainable health worker migration partnerships that fulfil the requirements of the Code.
Topic:
International Cooperation, Health Care Policy, Ethics, and Labor Market
Political Geography:
Global Focus

88. The Quality of Official Development Assistance

Author:
Ian Mitchell, Rachael Calleja, and Sam Hughes
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
The Quality of Official Development Assistance (QuODA) measures and compares providers of official development assistance (ODA) on quantitative indicators that matter most to development effectiveness and quality. It aims to encourage improvements to the quality of ODA by highlighting and assessing providers’ performance. QuODA considers the agency-level measures and characteristics in areas that evidence suggest matters to development and where providers have made commitments. It is a dashboard of key indicators rather than a full assessment of how effective ODA has been, which depends on a wider set of actors and factors. This is the fifth edition of QuODA; it has been substantially revised since the last iteration. The indicators are based on the evidence of what matters to ODA impact and the principles agreed by 161 counties following a series of international meetings leading up to Busan in 2011 and taken forward by the Global Partnership for Effective Development Cooperation.
Topic:
Development, International Cooperation, Humanitarian Intervention, and Development Assistance
Political Geography:
Global Focus

89. Incentivising Investment in Human Capital through the European Fund for Sustainable Development

Author:
Mikaela Gavas and Samuel Pleeck
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
As the EU prepares to significantly scale up its deployment of blended finance, guarantees, and other risk-sharing tools aimed at stimulating investment in developing countries, and, in the face of spiralling needs as a result of COVID-19, this paper analyses how the EU could use its development budget to incentivise private investment in human capital. The paper provides three contributions. First, it gives an overview of the allocation of the EU’s external investment to date. Second, based on interviews with stakeholders, it documents cases of private investment in health and education while exploring some of the barriers to a higher share of investment in these sectors by the EU and its development finance partners. Finally, it puts forward a set of proposals for how to steer greater European external investment through the European Fund for Sustainable Development Plus (EFSD+) toward human capital.
Topic:
Development, Regional Cooperation, European Union, Investment, Human Capital, and Sustainability
Political Geography:
Europe

90. An Analysis of the Binding Constraints on Digital Financial Inclusion in India Using a Decision Tree Methodology

Author:
Nandini Harihareswara and Howard Miller
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The past decade has seen significant innovation and growth in the volume and value of digital payments in India. However, we find that the associated gains have been heavily concentrated in favor of wealthier and urban customers and have had less impact on lower income and rural populations. While some customers now have a far greater selection of quick, cheap, and convenient digital payments methods, as much as 65 percent of the population remains effectively excluded. Using a decision tree framework, we test a range of factors on the supply and demand sides that could be binding constraints on further digital finance penetration. We find that an unlevel playing field in favor of the (primarily state-owned) banking sector results in a lack of effective competition that could be inhibiting greater innovation and outreach in favor of lower-income and marginalized people. This unlevel playing field is potentially a function of institutional weakness combined with the nexus of control of the government and the banking sector, which is reinforced by the position of the National Payments Corporation of India. This control may also be viewed by the government as necessary to protect economic stability in a very dynamic market. To the extent that institutional deficiencies are the root cause of regulatory barriers to the entry of new providers and the scope of digital financial services offered, they are a binding constraint on advancing digital financial inclusion. Under this market structure, the outreach and inherent business models of digital payments and transfers do not provide sufficient perceived benefits to attract large segments of the population. Further, a lack of trust in providers combines with the perception of low benefits to generate an additional binding constraint, preventing the market from reaching a critical mass at which the bulk of the population would have the means and the incentives to use the system. Therefore, the market remains at an equilibrium below its potential.
Topic:
Development, Governance, Finance, and Digitalization
Political Geography:
India and Asia

91. A Review of the 2X Women’s Initiative: Recommendations for the Biden-Harris Administration

Author:
Megan O'Donnell and Jocilyn Estes
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Amidst an economic crisis disproportionately impacting women in low- and middle income countries, the US International Development Finance Corporation (DFC) is well positioned to prioritize the promotion of gender equality through its investment portfolio and in turn contribute to an inclusive recovery. This policy paper reviews the extent to which DFC (and its predecessor, OPIC) have focused on the promotion of women’s economic empowerment and broader gender equality to date, particularly through the 2X Women’s Initiative. Using project data from the DFC project database and mobile application, as well as consultations with the DFC 2X team, we compile all 2X projects and analyze key trends across sector, geography, financial tool and intermediary. The paper also reviews the initiative’s contributions to accelerated momentum in gender lens investing across development finance institutions through the 2X Challenge. After highlighting strengths of DFC’s gender lens investing approach, as well as gaps and areas of opportunity, we make recommendations for how DFC under the Biden-Harris administration can both build on DFC’s early progress to improve gender integration in external lending, technical assistance, advisory services, and its internal policies and practices – as well as increase the ambition of its gender targets and its focus on transparency and results.
Topic:
Governance, Women, Leadership, and Gender
Political Geography:
North America and United States of America

92. Unpacking Gender Gaps and Data Gaps in Public Sector Employment and Pay

Author:
Ugonma Nwankwo, Megan O'Donnell, and Charles Kenny
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We look at available sources to ask (i) Where is data available on employment and wages allowing for comparisons between women and men, and the public and private sectors? (ii) How do women’s employment, compensation, and seniority compare with men’s in the public and private sectors? (iii) How do gender gaps vary by countries’ income level, education levels, and other factors? What are the policy implications of the data we analyze? (iv) Which countries’ efforts can be modeled by others, and how else can global gender gaps in employment and compensation be narrowed? We suggest the Open Government Partnership as a promising platform through which governments can commit to increased transparency around disaggregated employment and wage data, in turn improving policy decision-making aimed at closing gender gaps (or those rooted in other forms of inequality and discrimination).
Topic:
Labor Issues, Women, Inequality, Feminism, Data, and Gender
Political Geography:
Global Focus

93. Addressing the COVID-19 Crisis’s Indirect Health Impacts for Women and Girls

Author:
Carleigh Krubiner, Megan O'Donnell, Julia Kaufman, and Shelby Bourgault
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
As donor institutions and governments seek to provide relief and support recovery from the COVID-19 pandemic and global recession, CGD’s COVID-19 Gender and Development Initiative aims to ensure that their policy and investment decisions equitably benefit women and girls. We seek to support decision-makers in understanding the gendered impacts of the COVID-19 pandemic; assess health, economic, and social policy response measures with a gender lens; and propose evidence-based solutions for an inclusive recovery. Recognizing that the dialogue to date has largely emphasized challenges facing women and girls in high-income settings, our analysis centers on women and girls in low- and middle-income countries. In this policy brief, we summarize the findings of a CGD working paper, Addressing the COVID-19 Crisis’s Indirect Health Impacts for Women and Girls. We examine how the pandemic is affecting women’s and girl’s health, including their sexual and reproductive health; some of the ways national governments and donor institutions have sought to maintain the provision of essential health services; and existing gaps, opportunities, and promising strategies donors and governments should pursue to address indirect harms to women’s and girl’s health during and beyond the COVID-19 crisis.
Topic:
Health, Children, Women, Pandemic, COVID-19, and Health Crisis
Political Geography:
Global Focus

94. Promoting Women’s Economic Empowerment in the COVID-19 Context

Author:
Megan O'Donnell, Mayra Buvinic, Charles Kenny, Shelby Bourgault, and George Yang
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
As donor institutions and governments seek to provide relief and support recovery from the COVID-19 pandemic and global recession, CGD’s COVID-19 Gender and Development Initiative aims to ensure that their policy and investment decisions equitably benefit women and girls. We seek to support decision-makers in understanding the gendered impacts of the COVID-19 pandemic; assess health, economic, and social policy response measures with a gender lens; and propose evidence-based solutions for an inclusive recovery. Recognizing that the dialogue to date has largely emphasized challenges facing women and girls in high-income settings, our analysis centers on women and girls in low- and middle-income countries. In this policy brief, we summarize the findings of a CGD working paper, Promoting Women’s Economic Empowerment in the COVID-19 Context. We explore the impacts of the crisis on women’s economic opportunities and outcomes, document the extent to which governments and donors are taking action to respond to these impacts, and make recommendations for how decision-makers can elevate women’s economic empowerment as a priority in response and recovery efforts. Specifically, we examine the impact of the COVID-19 global recession on women’s work and employment in low- and middle-income countries, including entrepreneurship, wage and salaried work, work in subsistence and commercial agriculture, and unpaid housework and care work.
Topic:
Economics, Women, Inequality, Pandemic, COVID-19, and Gender
Political Geography:
Global Focus

95. The Gendered Dimensions of Social Protection in the COVID-19 Context

Author:
Megan O'Donnell, Mayra Buvinic, Shelby Bourgault, and Brian Webster
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
As donor institutions and governments seek to provide relief and support recovery from the COVID-19 pandemic and global recession, CGD’s COVID-19 Gender and Development Initiative aims to ensure that their policy and investment decisions equitably benefit women and girls. We seek to support decision-makers in understanding the gendered impacts of the COVID-19 pandemic; assess health, economic, and social policy response measures with a gender lens; and propose evidence-based solutions for an inclusive recovery. Recognizing that the dialogue to date has largely emphasized challenges facing women and girls in high-income settings, our analysis centers on women and girls in low- and middle-income countries. In this policy brief, we summarize the findings of a CGD working paper, The Gendered Dimensions of Social Protection in the COVID-19 Context. We explore the role of social protection, with an emphasis on social assistance policies and programs, in addressing increasing poverty, food insecurity, unpaid care work, and gender-based violence—all exacerbated by the onset of the crisis and associated containment measures. We document these trends and how they disproportionately impact women and girls, as well as the extent to which governments and donors are integrating a gender lens into their social protection efforts and make recommendations to ensure that future efforts effectively reach and benefit women and girls.
Topic:
Women, Inequality, Pandemic, COVID-19, and Gender
Political Geography:
Global Focus

96. How Do Development Agencies Support Climate Action?

Author:
Rachael Calleja
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper explores how development agencies are integrating climate action into development portfolios in response to calls to scale-up climate engagements in alignment with both the Sustainable Development Goals and the Paris Agreement. Using data compiled on all 30 members of the Organisation for Economic Co-operation and Development’s Development Assistance Committee (OECD-DAC), this paper maps and analyzes trends in both the scale and usage of official development assistance allocated to support climate activities and the tools and approaches used to integrate climate across development activities. This paper shows that while climate has become a key priority for development agencies, there remains scope for deepening integration by improving monitoring and reporting of climate and development results, integrating climate considerations across the life cycle of projects, and searching for complementarities across agencies.
Topic:
Climate Change, Development, Environment, and Green Transition
Political Geography:
Global Focus

97. Gender Gaps in Education: The Long View

Author:
David Evans, Maryam Akmal, and Pamela Jakiela
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Many countries remain far from achieving gender equality in the classroom. Using data from 126 countries between 1960 and 2010, we document four facts. First, women are more educated today than fifty years ago in every country in the world. Second, they remain less educated than men in the vast majority of countries. Third, in many countries with low levels of education for both men and women in 1960, gender gaps widened as more boys went to school, then narrowed as girls enrolled; thus, gender gaps got worse before they got better. Fourth, gender gaps rarely persist in countries where boys are attaining high levels of education. Most countries with large, current gender gaps have low levels of male educational attainment. Many also perform poorly on other measures of development such as life expectancy and GDP per capita. Improving girls’ education is an important goal in its own right, but closing gender gaps in education will not be sufficient to close critical gaps in adult life outcomes.
Topic:
Education, Gender Issues, Labor Issues, Inequality, Feminism, and Equality
Political Geography:
Global Focus

98. Creating an Accountability Framework that Serves the Global Fragility Act’s Mission

Author:
Susanna Campbell, Dan Hoing, and Sarah Rose
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
In the final days of 2019, Congress passed the Global Fragility Act, an ambitious bill that aims to im- prove how the US government approaches stabilizing conflict-affected states and preventing the es- calation of violence in other fragile contexts. Introduced by a coalition of lawmakers from both sides of the aisle in the House and Senate—led by House Foreign Affairs Committee Chair Eliot Engel (D- NY) and Senator Chris Coons (D-DE)—a version of the legislation was passed by the House this spring and boasted 26 cosponsors in the Senate. The Global Fragility Act’s final passage, as part of a large FY2020 spending bill, is a testament to bipartisan commitment and cooperation. The Global Fragility Act asks the State Department to create—jointly with USAID, the Department of Defense, and other agencies—a coordinated, coherent strategy to help prevent violence in fragile states and stabilize conflict-affected areas. As overseers of the taxpayer funds that will be used to implement the act, Congress also included several provisions to hold these agencies to account for achieving results. Accountability for results is important, especially when overseers are far removed from implementation. But how accountability is structured matters quite a bit. When accountability frameworks revolve largely around tight controls and reporting against targets, their good intentions can backfire and contribute to ineffective programming, especially in fragile states. To ensure that the Global Fragility Act’s accountability requirements support rather than undermine the act’s laudable goals, the monitoring, evaluation, and learning processes that accompany the act’s implementation must accomplish two linked but fundamentally distinct things. They must be able to satisfy Washington-based overseers’ reporting needs while also providing projects the space needed for locally informed adaptive management and learning (or continuous adjustment aimed at achiev- ing transformative aims in a dynamic context), which is associated with better outcomes in fragile states. The Global Fragility Act offers an opportunity to rethink the tools through which aid agencies pursue accountability. This note explains how tight controls and target-oriented reporting can nega- tively affect outcomes in fragile states and offers some initial recommendations for creating a stron- ger, outcome-oriented accountability framework.
Topic:
Foreign Aid, Leadership, Fragile States, Legislation, and Accountability
Political Geography:
North America and United States of America

99. Constraints to Enhanced Revenue Mobilization and Spending Quality in Kenya

Author:
Nelson H.W. Wawire
Publication Date:
01-2020
Content Type:
Research Paper
Institution:
Center for Global Development
Abstract:
This study addresses constraints to enhanced revenue mobilization and spending quality in Kenya. The structure and growth of Kenya’s economy and spending quality have a bearing on its taxable capacity. Constraints to enhancement of revenue mobilization and spending quality include the existence of a large informal sector; inadequate information on property ownership; perceived corruption; inefficient use of public resources; political interference; volatile election cycles; abuse of tax incentives; uneven transfer pricing; illicit financial flows; and untaxed online businesses, coupled with poor administrative capacity and tax policy design. Policy implications on revenue performance are (1) the National Treasury and Kenya Revenue Authority (KRA) should focus on property taxes and capital gains taxes to expand the tax base; (2) development partners are needed to direct technical assistance to the informal sector, to aid with transfer pricing, to monitor illicit financial flows, and to properly tax online businesses; (3) greater use of technology is needed to increase efficiency; (4) intervention by the Geospatial Information System is needed to link data on land and property ownership with tax information in the existing database; (5) a pay-for-results model needs to be deployed; (6) need to reduce tax expenditures; and policy reforms to be initiated in the agricultural sector. The policy implications on expenditure are (1) the need for efficient utilization of tax revenues; (2) the need for implementation of digital technologies; (3) the need to revisit an integrated financial management information system (IFMIS) configuration; (4) the need to adhere to long-term planning; and (5) adoption of the GFS 2014 reporting standard. Overall, an independent entity needs to be established that will set budget ceilings, monitor budget implementation, and carry out audits.
Topic:
Governance, Revenue Management, Public Spending, and Mobilization
Political Geography:
Kenya and Africa

100. Senegal: Making Domestic Resource Mobilization Work to Sustain Growth and Improve Service Delivery

Author:
Birahim Bouna Niang and Ahmadoi Aly Mbaye
Publication Date:
01-2020
Content Type:
Commentary and Analysis
Institution:
Center for Global Development
Abstract:
Senegal’s recent economic performance is impressive. For the first time, Senegal has achieved a GDP growth rate of more than 6 percent for three consecutive years (2015–2017), and per capita GDP has increased at an annual average of 4.1 percent. In parallel, progress in fiscal revenues has been recorded, with the ratio of average revenues to GDP increasing by 5.7 percentage points between 2000-2002 and 2014-2017, placing Senegal above the regional average of 15 percent. Notwithstanding, the performance of the Senegalese tax system is limited by the country’s narrow tax base, largely attributable to a sizable informal sector. Despite accounting for more than half of GDP, Senegal’s informal sector makes up less than 3 percent of total tax collection. Revenue collection is also limited by the fast-growing array of exemptions, and by tax expenditures. These special dispensations mainly went to multinationals with local branches in Senegal. Tax expenditure more than doubled between 2010 and 2014, from18.4 percent of tax revenues and 3.4 percent of GDP to 40 percent of tax revenues and 7.8 percent of GDP. According to some estimates, the cumulative costs are close to 18 percent of annual GDP. Other factors deterring effective domestic resource mobilization include poor governance and the limited technical capacity of the tax administration, failures of the information system, and weak system transparency. Expenditures are often ineffective, particularly in the education and health sectors. Improving the state of public finances requires reforms to strengthen technical and institutional capacities and to adapt the management framework in view of Senegal’s entry into the hydrocarbon era. This might include setting up a public finance monitoring committee, adopting new budgetary rules consistent with those set by the West African Economic and Monetary Union, building relevant tax administration capacities. On the expenditure front, actions are needed to improve the targeting of support programs for vulnerable groups, and to implement capacity-building programs for government officials in charge of project evaluation, including in the Planning Directorate and in technical ministries. Lastly, a systematic ex ante and ex post evaluation of public investments is needed.
Topic:
Labor Issues, Economic Growth, Services, Mobilization, and Domestic Work
Political Geography:
Africa and Senegal