Economics & Development

On a request by the French G7 Presidency, the World Bank Group (WBG) and International Monetary Fund (IMF) prepared a background note to inform discussions by Finance and Development Ministers on Domestic Resource Mobilization (DRM). This note recognizes that DRM is essential for sustainable development financing, fiscal resilience, and stronger state capacity, yet many low-income and fragile states still collect less than 15% of gross domestic product (GDP) in tax revenue - well below the threshold linked to meaningful improvements in growth and public services. The note highlights that there are untapped tax potential in low-income countries, which are achievable through sustained tax policy reforms and improvements in revenue administration and spending efficiency. Progress, however, is constrained by narrow tax bases, large informal economies, weak public trust, and significant political challenges that require careful management alongside sound technical design. Sustained technical assistance and capacity building - supported by improved diagnostics, stronger analytics, and deeper partner collaboration - are critical enablers of lasting DRM reform. Partnerships will be especially important as foreign aid budgets decline, with effective support requiring country-led, well-coordinated, and evidence-based approaches in which multilateral institutions play a central role alongside bilateral and regional partners.