Mobilizing domestic financial resources for poverty alleviation

Connecting capital markets to poor communities
Mobilizing domestic private sector resources for development

Public savings, in the narrow sense, are defined as the excess of current revenue over current expenditure in annual budgets. The two factors which in most developing countries depress, in varying degrees, the contribution of the public sector to domestic savings are pressures on governments to increase current expenditure from year to year, and the political and administrative difficulties of raising tax revenues. On average, government savings account for a only 25% of total savings, or about 2-3% of GDP in most developing countries, but there is a wide range of inter-country variations. In many developing countries where the tax base is narrow and inelastic, governments depend on seigniorage to fill up the revenue shortfall. Such a money-creating alternative to borrowing from the banking system may have undesirable consequences on private savings habits and propensities and the distribution of income. Governments may be able to raise additional savings by holding back current expenditures on production and consumption of goods that have little economic rationale, and by eliminating unnecessary subsidies and weeding out other low productivity non-developmental expenditures. Public enterprises are another aspect of public sector performance, which constitute a drain on government resources, particularly when administered prices are below cost and when there is bureaucratic control and political pressure


An OECD paper found that foreign assistance from western European countries, including private funding and direct investment encouraged through national policies, was more globally oriented in 1900 than in 2002.


Efforts to increase the amount of capital for community and economic development must tap the vast resources of private markets because the demand far exceeds what can be supplied by philanthropy of by the public sector.

Type Classification:
C: Cross-sectoral strategies