The Role Of Fiscal Decentralization in Promoting Effective Domestic Resource Mobilisation in Africa

The lingering economic impact of the COVID-19 pandemic is disrupting sub- Saharan Africa’s traditional financial inflows, revealing the heightened need to strengthen domestic resource mobilization and improve tax administration in the region. This unprecedented shock to the world economy has revealed the volatility of financial inflows that African nations are dependent on: Indeed, foreign direct investment (FDI)—an increasingly important source of development financing traditionally rooted in oil, gas, and infrastructure projects—has declined approximately 12 percent and 25 percent in sub-Saharan and North Africa, respectively, between 2019 and 2020. Remittance inflows, which millions of African households rely on to support their families, declined by 12.5 percent throughout sub-Saharan Africa over the same period. In addition, discontent with globalization, inconsistent political environments, and competing humanitarian issues are transforming official development assistance (ODA) into an increasingly uncertain source of development financing.