October 1, 2024

Domestic Resource Mobilisation (DRM)—the process through which countries raise and spend their own funds to provide for their people—is the long-term path to sustainable development finance.

DRM has been a focus of IDA action since the adoption of Country Policy and Institutional Assessment (CPIA) ratings in 1980. DRM is one of the 16 CPIA criteria (see Box 1, below), under the public sector management and
institutions cluster, that determine the allocation of IDA resources and is used to evaluate the performance of IDA action.

It is estimated that some 32 IDA countries received support for various aspects of DRM between 2005 and 2019 (IDA 17 and 18) through one or in combination of development policy operations (DPO), investment
projects, or the IFC’s advisory services on business taxation (World Bank, 2023c). IDA reforms of this era have endured small incremental success as opposed to overall commitment targets of lifting tax yields above the
15 percent threshold.

Combined with an average disbursement to commitment ratio of 70 percent during IDA 17 and 18, the actual sums spent on DRM are likely to have been considerably lower. As a result:

• Concerted IDA action and indeed concrete outcomes have at best been mixed and at worst sparsely existent.
• Limited prioritization of DRM funding has partly mirrored the initial coupling of DRM with other broader reform areas that have tended to
  obscure focus, and specificity of action over the years.

While IDA 17 saw exclusive support for DRM in small island and fragile and conflict-affected states (FCS) as well as the expansion of DRM support to resource-rich countries under the auspices of the Extractive Industries
Transparency Initiative (EITI), the continued bundling of ideally concrete and specific DRM reforms with other broader sub-sector initiatives compounded the difficulties of aligning DRM action with operational
targets and objectives leading to an array of ill-targeted and under-focused DRM action.

IDA 19 (2019-2021) extended DRM support to 36 countries beyond its baseline target of 32 (World Bank, 2023). A combination of lessons from reforms discontinuity and optimistic forecasting of the long-term success of IDA 19’s DRM reforms saw a consolidation of DRM reforms in IDA 20. The latter initially aimed to achieve a tax-GDP ratio of at least 15 percent in the medium term in some 15 IDA countries through support for equitable (fair and progressive) revenue policies. A midterm appraisal of IDA 20 in November 2023, found the coverage of DRM support to have extended to 21 countries (World Bank, 2023), with recipients who had been receiving support since IDA 18 finally recording nominal improvements in their DRM.  IDA 20 continues the institutionalization of policy commitments aimed at supporting DRM and broader Governance and Institutions.

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