Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?

Author/Editor:

Ernesto Crivelli ; Sanjeev Gupta

Publication Date:

July 21, 2016

Electronic Access:

Download PDF. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper assesses whether conditionality in IMF-supported programs has helped offset the potential negative effect of foreign aid on tax revenues. The analysis—carried out on panel data covering 1993–2012 for 111 low- and middle-income countries—shows that growing use of revenue conditionality by low-income countries partially offsets the depressing effect of foreign grants on tax revenue, particularly on taxes on goods and services. The impact of conditionality is strong in countries where aid dependence is high and where institutions are strong, suggesting that revenue conditionality cannot substitute for weak institutions in mitigating the negative effect of aid on tax revenue collection.

Series:

Working Paper No. 16/142

Subject:

English

Publication Date:

July 21, 2016

ISBN/ISSN:

9781498379847/1018-5941

Stock No:

WPIEA2016142

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

28

Please address any questions about this title to publications@imf.org