Helen Clark: Remarks on Domestic Resources Mobilisation at MDG Summit

20 Sep 2010

Panellist at the MDG Summit Side Event:"Domestic Resources Mobilisation: achieving development and the MDGs in a sustainable way"
New York


UNDP observes from its experience that with strong leadership and capacity, and through targeted, evidence-based interventions, backed by adequate funding, the MDGs can be met.  

I am pleased, therefore, to join you for this practical and important discussion about mobilising domestic resources in support of the MDGs. The reality of budget constraints in many countries, and the range of challenges to development, make our topic today particularly salient. 

Discussion about domestic resource mobilisation needs to be placed within the broader context of securing adequate and sustainable financing for development.

Well targeted and predictable ODA, consistent with country priorities and systems, remains critical for meeting the MDGs. ODA can also play a catalytic role in helping countries develop the capacities and solid programmes which will attract private investment and the new sources of climate finance.

Unfortunately, adjusted for growth, ODA delivery by the end of 2010 is projected by the OECD to be 38 per cent short of the increase promised at the G8 Summit in Gleneagles in 2005. To avoid costly setbacks, it is important for the developed world to meet its ODA commitments – both in quality and quantity.

But achieving the MDGs will also require more domestic financing. Sustained MDG progress demands, for example, more and better trained teachers and health workers, which triggers a permanent increase in spending.

A number of developing countries have stepped up budget allocations in such areas. Senegal increased its education spending, as a share of total public expenditure, by 39 per cent between 2005 and 2008, and Mauritania doubled its education spending within the same time period. The African Union has given an important lead in its 2001 Abuja Declaration, by calling on African governments to allocate at least fifteen per cent of their public expenditure to health services.

To make the transition from levels of dependence on ODA to self reliance, countries need to be able to make use of the ‘fiscal space’ they have.  UNDP can help countries assess their available ‘fiscal space’ and identify ways of mobilising domestic resources for MDG achievement. These could include:

  • Raising tax revenue: The costs of new taxes – and in particular the potential costs to the poorest – will need to be weighed against the social and economic returns from stepped up public investments. 
As many in this room are well aware, developing effective taxation regimes poses particular challenges where there are relatively large informal economies and a weak institutional capacity to collect taxes and prevent evasion.
In a number of countries, UNDP works with partners to help develop the capacity of tax and customs administrations. For example, in Laos we helped the government to align its fiscal policy with its poverty reduction objectives.
  • A second way of expanding ‘fiscal space’ for the MDGs is by drawing on the substantial domestic savings which exist in many developing countries to invest in infrastructure, health, and education - for example, by establishing a bond market. Improving and expanding access to financial services can also be an important way to expand fiscal space, by pooling savings which can be used for domestic investment.
  • A third approach is to increase the efficiency of public spending.  It is critical to link spending with measurable results – including poverty reduction. As development financing is increasingly channelled through national budgets, sound and effective public financial management has become even more important.  Expenditure needs to be prioritised according to its potential to support meeting development goals.
In this respect the MDG Acceleration Framework, which UN Country Teams have been piloting with governments, can be an effective tool to help countries identify both constraints on achieving the MDG and proven solutions.  

I look forward to this discussion and to hearing ideas from participants on how to make domestic resource mobilisation an important part of the effort to accelerate MDG progress and meet our commitments.