IMF-WBG Background Paper for G-7

Domestic Resource Mobilization (DRM is central to achieving sustainable financing for development, building fiscal buffers, and strengthening state capacity. Recent work by the IMF and the World Bank shows that many countries—especially low-income countries (LICs) and fragile and conflict-affected states (FCSs)—are still collecting less than 15 percent of GDP in tax revenue. World Bank and IMF research suggests that collection beyond this threshold is linked to lasting improvements in growth, public service delivery, and state capacity. DRM—central to the IMF-WBG three pillar approach to helping countries address liquidity challenges (IMF and World Bank 2024a)—is crucial for building fiscal space to advance public spending for development, reduce reliance on volatile external financing, support jobs and growth, and strengthen the social contract between the state and its citizens.