Fourth Financing for Development (FfD4) Conference Domestic Public Resources Roundtable: Remarks by DMD Nigel Clarke

IMF News, June 30, 2025

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Bibliographic details

Published: June 30, 2025

Context and framing

Delivered in Seville, Spain on June 30, 2025.
Speaker: Nigel Clarke, Deputy Managing Director (remarks delivered on behalf of the IMF).
Personal background: Served as Jamaica’s Minister of Finance prior to joining the IMF "last Fall," with experience during periods marked by elevated uncertainty including COVID-19 and extreme weather events.
Central thesis: Tax capacity is the crucial financial enabler of state capacity; development requires deliberate, disciplined, and equitable mobilization of resources rather than hope.

Key findings and empirical claims

There is a tipping point of tax to GDP that—once crossed—leads to higher sustained economic growth.
Research suggests targeting at least 11-15 percent of GDP in tax revenue is best; below that, it is very difficult for governments to manage their economies and provide adequate public services.
As countries progress past the taxation tipping point, higher economic growth is accompanied by:
- better financial development,
- more government effectiveness,
- stronger legal institutions.
IMF research indicates that low-income countries could gain as much as 7 percent of GDP in tax revenue over the medium to long term by raising their tax efforts to match the best-performing developing countries.

Challenges identified

Across much of the world, increases in tax capacity have slowed.
Productive expenditure is being crowded out by rising debt service.
Spending pressures are intensifying.
Deep political resistance to tax increases remains in many developing countries.
Progress on improving revenue levels has stalled in much of the developing world.

Positive examples and country cases

Noted countries that have made great progress on tax capacity and reforms: Cabo Verde, Cambodia, Rwanda, and Jamaica.

Policy recommendations and priorities

Country-led reform agendas should focus on:
- building trust,
- taxing fairly,
- spending wisely.
Spending and revenue reforms must be part of a coherent country program to be successful.
Implementing strong public financial management systems is essential to ensure revenues are used efficiently.

IMF support and institutional response

The IMF created the Global Public Finance Partnership to provide flexible and holistic capacity development support.
Support is:
- tailored to each country,
- designed to equip countries with tools and expertise,
- delivered in close partnership with the international community.

Concluding message

Tax capacity underpins national resilience: "Without it, there is no fiscal space. Without fiscal space, no sustainable development."
Taxation encompasses more than revenue—it's about trust, fairness, and long-term stable and enduring growth.

Source: Fourth Financing for Development (FfD4) Conference Domestic Public Resources Roundtable: Remarks by DMD Nigel Clarke — https://www.imf.org/en/news/articles/2025/06/30/sp063025-ffd4-domestic-public-resources-roundtable-dmd-nigel-clarke