African countries must mobilize more domestic resources — particularly via taxation — in order to finance development spending as foreign aid declines, a new report argued.
The continent has the lowest tax-to-GDP ratio in the world, with Ethiopia, Niger, Nigeria, and Sudan among the bottom 10 countries when it comes to raising such revenues, according to research published by the African Development Bank, African Union, UN Development Programme, and Economic Commission for Africa.
The report’s authors recommended investing in digitized tax systems, including electronic filing and tax tools, to “improve compliance and transparency,” in turn boosting domestic revenue.
Innovative financing mechanisms — such as blended finance, diaspora bonds, and climate-related instruments — should also be used to draw private capital, it said.
