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Issues faced in Resource Mobilization in recent times

Issues faced in Resource Mobilization

The challenges associated with human resources, financial resources, and natural resources have a profound impact on the overall mobilization of resources within a nation. When it comes to foreign aid, it often brings along restrictions and conditions that can pose significant hurdles. On the other hand, although foreign direct investment can contribute to the commercial goals of the investor, it may not align well with the developmental plans of the host country. In essence, these limitations underscore the complexities and considerations involved in leveraging external support for a nation’s growth and development.

Limited Domestic Public Resources:

  • In many of the world’s least developed countries (LDCs), there is a heavy reliance on external resources, which unfortunately limits their ability to shape their own policies and fosters a sense of dependency.
  • The constant battle with poverty in low-income countries adds another layer of complexity, making resource mobilization a daunting challenge.
  • Consequently, a majority of developing economies find themselves leaning on foreign direct investment, income from exports, foreign aid, and other external sources to meet their needs. To achieve sustained and substantial economic growth, it becomes crucial to reduce poverty rates within these economies.

Weak Domestic Taxation and Fiscal Policies:

  • In many developing nations, maintaining financial responsibility is quite challenging. Oftentimes, they turn to borrowing money to fund their development goals.
  • The tax system is usually narrow, and many people evade taxes, making it difficult to generate enough revenue for public spending.
  • For sustainable development to thrive, there’s a need for a solid foundation of support that ensures uninterrupted progress.

Lack of National and sub-regional development banks with rural penetration:

  • In many developing countries, it’s often challenging to maintain strict fiscal discipline. They frequently turn to deficit financing as a means to drive development initiatives.
  • Unfortunately, the tax system in these nations is not inclusive enough, and tax evasion is widespread, limiting the resources available for public spending. Achieving a solid foundation for continuous, sustainable development is crucial in this context.

Illicit financial flows from developing countries:

  • Illicit financial flows involve the illegal or improper acquisition, transfer, or utilization of resources. One major worry regarding these flows from developing nations is the identification of activities that could harm economic development.
  • In economies that are still evolving, crucial development resources are disappearing due to the unchecked growth of capital flight within a complex and opaque international financial system. This issue is closely tied to the belief that illicit capital flows from developing economies point to deeper structural challenges in their political governance.
  • Concerns surrounding illicit financial flows encompass a range of policy issues, yet there is ongoing debate about the underlying analytical frameworks and empirical methodologies. It’s important to note that these flows may not necessarily be illegal if existing legal frameworks do not adequately represent broader public, social, and economic interests, or if they fail to encompass such flows.

International tax cooperation:

  • Addressing the issue of illegal financial flows has become a central focus of global efforts to enhance international tax cooperation. This is especially crucial in today’s highly interconnected world, where the tax policies of one country can impact the revenue collected by others.
  • For instance, the actions of wealthy individuals stashing assets in tax havens for tax evasion, and the questionable financial practices of multinational corporations engaging in creative accounting or manipulating transfer pricing, can have widespread consequences across national borders.
  • In essence, international collaboration on tax matters has gained prominence due to the intricate ways in which financial activities in one country can affect the fiscal well-being of others.

      Lack of Multilateral development Banks:

      • Meeting the financing requirements for achieving the Sustainable Development Goals (SDGs) is a substantial challenge. It’s important to note that the lack of funding is not a result of insufficient global savings.
      • In fact, institutional investors worldwide currently manage an impressive $115 trillion in assets. However, a significant portion of these assets is invested in securities and other low-return assets from developed countries.
      • This allocation poses a hurdle in redirecting funds towards initiatives that would support the SDGs.

      Multilateral development banks and other international banks, existing and new, are therefore needed to bridge finance from end-savers to development projects. Development banks can thus be key players in development by providing long-term financing directly from their funding sources, by tapping into new sources and by leveraging additional resources, including private, through the co-financing of projects with other partners.

      Read Also: Sources of Resource Mobilization in India

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