Domestic Resource Mobilization for Economic Development in Africa: Challenges, Policy Options, and Prospects in the New Horizon

This paper reviews the literature on the challenges, policy options, and prospects for Domestic Resource Mobilization (DRM) in Africa. Despite efforts made by African countries to enhance their resource mobilization capacity for the realization of both Agenda 2030 and Agenda 2063; notable challenges still exist and continue to hamper optimal revenue collection. Indeed, the prevailing global shocks namely the COVID-19 pandemic, the Russia-Ukraine conflict, and the climate change crises have generated colossal financing gaps which now portray mixed visions for the continent. Nonetheless, the new horizon presents a vast array of prospects in which DRM endeavors within the continent can blossom. First, African countries should expedite their respective ratification processes for entry into force and operationalization of the African Continental Free Trade Area (AfCFTA) agreement to harness the trade opportunities embedded therein. Secondly, unlocking the idle resources entrenched in sovereign wealth and pension funds is paramount. Thirdly, harnessing the digital technology potential especially, mobile technology is pivotal. Four, capital market deepening promotes financial asset diversification. Five, to reap optimal benefits from their rich resource endowments, African countries need to invest in sophisticated skills and technology. Six, the Base Erosion and Profit Shifting (BEPS) project provides many African countries with the opportunity to seal any tax evasion or avoidance loopholes employed by Multinational Corporations (MNCs). BEPS addresses the transfer pricing challenge and is also instrumental in taming illicit capital flight. Finally, mitigating the effects of the climate change crisis requires the transfer of environmentally sound technologies from developed to developing countries.