Fiscal pressures in developing countries make stronger domestic revenue systems more important than ever
Developing countries face major difficulties as income from natural resource extraction industries decreases and wealthier nations reduce their aid.
Nontax revenue from natural resources extraction and foreign aid grants for general spending have fallen by a combined 3.8 per cent of gross domestic product since 2000, according to the latest annual update of the IMF’s World Revenue Longitudinal Database.
Gains from tax collection since then amounted to just 2.6 per cent, offsetting only two-thirds of the decline, our unique tally of detailed public revenue data shows.
The Chart of the Week shows that the decrease in proceeds from nontax extractive revenue was the biggest driver of the drop for both low-income developing countries and emerging market economies. These revenues are generally what governments earn from industries like oil, gas, and mining—such as royalties, profit sharing, and dividends from state-owned enterprises. Declining foreign aid grants for general spending also contributed to lower revenues.
Closing the gap often requires collecting more tax revenue, and affected countries won’t be able to deliver on their economic development goals without doing so. To succeed, they need sustained investment in domestic tax policy and tax administration, supported by effective institutions to underpin them. The IMF supports member countries through its capacity development efforts—customised technical assistance and training services, often delivered through collaboration with donor countries and other international organisations.
Capacity development helps developing countries build expertise and policy frameworks to improve tax systems and institutions. It also reduces dependence on volatile and declining revenues, such as from extractive industries and foreign support. Helping developing countries with this work, known as domestic revenue mobilisation, contributes to fiscal resilience, which ultimately benefits global economic growth.
Evaluating how governments raise more reliable, sustainable revenue from within the economy requires high-quality, granular data. Our database tracks decades of tax and nontax revenue consistently across 195 economies using data provided by our members. The database is also a unique resource for researchers, policymakers, and development practitioners seeking to analyse revenue trends, benchmark performance, and identify reform priorities.
—Download the dataset: World Revenue Longitudinal Database
