## External Private Financing and Domestic Revenue Mobilization: A Dilemma?

_IMF Working Papers, November 8, 2020_

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## Bibliographic details
- Authors: Hippolyte W. Balima, Deirdre Daly, Boileau Loko
- Published: November 8, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513560397.001

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### Key question and context
- Domestic revenue mobilization (DRM) is essential for low-income and emerging economies to sustainably finance their development needs.
- DRM reforms can be slow and carry political costs; countries may turn to donors or private investors to meet spending needs.
- The study examines whether access to external private financing (bond markets, external commercial loans) undermines efforts to collect tax revenue.

### Data and methodology
- Sample: 72 developing countries.
- Methods: Impact assessment methodology and panel regressions.

### Main findings
- No evidence that access to bond markets or external commercial loans undermines countries’ efforts to collect tax revenue.
- Access to markets has a positive impact on domestic revenue mobilization.
- Plausible mechanisms:
  - Private financing must be repaid.
  - Strong macroeconomic fundamentals are key for maintaining market access.
- Macroeconomic stability and the strength of institutions matter for domestic revenue mobilization.

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2020/11/08/external-private-financing-and-domestic-revenue-mobilization-a-dilemma-49741_