The Anatomy of Domestic Resource Mobilization

When former Finance Minister Felix Mutati took over the ministry, we had heard him echo the words Domestic Resource Mobilization over and over during his tenure. However, many did not know what the full implications of Domestic Resource Mobilization were. Furthermore, what amazed the team at Financial Insight is that there were bread crumbs that were being laid all over that had all the hallmarks of Domestic Resource Mobilization. Even the new Minister Margret Mwanakatwe has continued with the same ethos.

But what is Domestic Resource Mobilization. According to the USAid, Domestic Resource Mobilization (DRM) is the process through which countries raise and spend their own funds to provide for their people. They also dub it “the long-term path to sustainable development finance”.  Furthermore, they declare that DRM not only provides governments with the funds needed to alleviate poverty and deliver public services, but is also a critical step on the path out of aid dependence. The end of aid as we know it.

However, many pundits would believe that DRM is actually a justification for any sitting government that purses it as a means of introducing new taxes.  Winston Churchill once saidI contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” That is why the reason for a pure implementation of DRM is not the introduction of new taxes.  Far from it (one would have to call it another name if it was).

Nehemaih Osoro presented a paper entitled “Domestic Resource Mobilization in Sub-Saharan Africa: The Case of Tanzania” and it he drew an interesting comparison between public and private sector resource source mobilization. In the case of the former, mobilization of domestic resources is done through taxation and public revenue generation and invests them in social services and infrastructure. As for the latter, mobilization is done through  the  savings  of  the  households  and  firms  through  financial intermediaries,  who  allocate  resources  to  investment  in  productive  activities.

What is interesting with Osoro’s thesis is that he contends that DRM when applied to poor countries entails increasing the fiscal capacity of the country. In recent times we have heard these sentiments being echoed by financiers with deep pockets of demand it in order for them to give developing countries like ours some silver. But what we seldom hear though is the other component that DRM also seeks to achieve which, we believe needs to be echoed and that is improving the social rate of return to public investments (creating social value for the natives).

Sadly though, it is a very difficult position that many countries within the region find themselves in. Many struggle with balancing fiscal and balance of payments deficits. No doubt, meetings with the likes of the World Bank and IMF can be arduous to say the least.

Evidence of DRM implementation in Zambia can be seen through the work of ZRA and some of the initiatives that have been put in place. For example, tax amnesty of 2017 was merely the beginning of the cleanup process. Introduction of new over the country till systems will ensure tax compliance. Streamline vehicle tax grading system means it’s become even more predictable in terms of knowing how much one’s tax bill will be when they import that luxury car (no speculation from the boarder).

This is the reason why the Commissioner General of ZRA is confident that they will meet their targets in terms of resource mobilization. However, it will be up to the successfully implementation of the 7th national development for social return on investment to be realized.


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