Transcript Resource Mobilization and Structural Transformation

Resource Mobilization
and Structural
Transformation
Abdoulie Sireh-Jallow
Lead Economist, IsDB
2011 African Economic Conference
Green Economy and Structural Transformation
Format of presentation
• Structural Transformation
• Resource Mobilization - Fiscal Space Expansion
• Traditional (the Usual)
• Non-Traditional sources (Ethiopian Case)
• Conclusion
Definition
• Structural Transformation
Large scale transfer of resources from some
sectors to others in a system, necessitated by
fundamental changes in policies or
objectives.
• Why Transfer? How about Creation?
• Transitioning into a Green economy is a
structural transformation
• How can we fund this?
Resource Mobilization
• From where????
• Traditional Sources (the Usual Workhorses)
• Tax and Non-Tax Revenue
• ODA
• Borrowing (External or internal)
• Efficient management of what we
already have
And if these are NOT Enough?
• Non-Traditional Sources of Development Finance to COMPLEMENT
traditional ones
• WHAT is Non-traditional??
• Lets look at the Tax Landscape in SSA
Revenue sources as % of GDP - SSA
Total
Tax
Nontax
0
2
4
6
2000-2005
8
10
12
14
1990-95
Source: Raising Domestic Revenue for MDGs, Terry Mckinley, IPC, UNDP using IMF Statistics
16
Estimated Tax Effort
100
90
80
70
60
50
40
30
20
10
0
Tax ratio (% of GDP)
Estimated Effort (%)
Source: Revenue Mobilization in Developing Countries, IMF (March 2011)
Government Revenue as % of GDP in SSA
Average Revenue as percent of GDP in SSA
40
35
30
25
20
15
10
Financial and Economic Crisis
5
Food and Fuel Crisis
0
2004-2008
2004
2005
2006
2007
2008
2009
2010
2011
Oil Exporting
Middle-Income countries
Low-Income Countries
Fragile countries
Oil importing countries
SSA
2012
Source: Regional Economic Outlook: Sub Saharan Africa, IMF (Apr, 2011)
What are Non-Traditional Sources?
• Very country-specific
• What is N-T to country A may be Traditional in Country B
• Examples
• Carbon Sequestration and Trading
• Diaspora Bonds
• Trade in Services
• Centers of Excellence – Trading Services in the Social Sectors
• Tourism
• You can only own your development when you FUND it
yourself.
The Case for Ethiopia
Source: Min of Finance, Ethiopia, UNDP MP, IMF, Own computations
ODA – Gleneagles Scenario
Food and
Fuel Crisis
Source: Min of Finance, Ethiopia, OECD, Own computation
FEC
Carbon Trading Scenario
Table 2 - Potential fiscal space from deforestation for Ethiopia
Total Change of Forest Cover (1990-2005) (Hactares)
Annual Change of Forest Cover (1990-2005) (Hactares)
2
Potential CO sequestered by 1 Hactre of Forest Cover
Cost of a Metric Ton (US$)
Fiscal space with 50% reduction in Deforestation rate
Fiscal space with 25% reduction in Deforestation rate
Fiscal space with 10% reduction in Deforestation rate
Fiscal space with 1% reduction in Deforestation rate
2,114,000.00
140,933.33
200.00 Metric Tons
10.00
US$ M
140.93
70.47
28.19
2.82
Birr M
% of GDP
1,550.27
0.63
775.13
0.32
310.05
0.13
31.01
0.01
Tax Revenue as % of GDP
Non-Tax Revenue as % of GDP
Grants as % of GDP
Source: www.Mongabay.com and own computations
9.70
2.40
4.00
Potential Fiscal Space
(Select N-T Sources)
Potential Fiscal Space Creation (US$ M)
Carbon Sequestration
Tourism
Diasphora Bonds
Total
US$ M
141
83
175
% of GDP
0.60
0.30
0.70
399
1.60
Source: Prospects of Non-Traditional Sources of Development Finance in Ethiopia, UNDP
Ethiopia (2010)(Unpublished)
Solar Energy Potential
Source: Millennium AG
Fiscal space expansion helps in relaxing binding
constraints induced growth Catch-22 cycle
Binding
Constraints (e.g.
Non-competitive
economy
Infrastructure
Deficit)
Unfavorable debt
sustainability situation
Sub-Optimal
Exports
Limited
Fiscal
Space
Conclusion
• YES WE CAN!
• YES AFRICA CAN!
• Analytical Study in only ONE step, the next is a
STRATEGIC ACTION PLAN to implement the
study recommendations
• Let us explore and exploit Non-Traditional Sources of
Development Finance (Country-specific).
• The more you can fund your development, the more
you own your development.
Thank You
Reference documents
Revenue Mobilization in Developing Countries, IMF (March 2011)
Regional Economic Outlook: Sub Saharan Africa, IMF (Apr, 2011)
Raising Domestic Revenue for MDGs. Why wait for 2015? Terry Mckinley, IPC,
UNDP (2007)
Prospects of Non-Traditional Sources of Development Finance in Ethiopia, UNDP
Ethiopia and CDPR, SOAS (2010)
Fiscal Space and Carbon Sequestration in Ethiopia: a potential non-traditional
source of development finance to meet the MDGs, Abdoulie Sireh-Jallow (2010)