IMF | Fourth Financing for Development (FfD4) Conference Domestic Public Resources Roundtable: Remarks by DMD Nigel Clarke

Thank you so much for inviting me to join you today. It is an honor to participate on behalf of the IMF.

As you know, before I joined the IMF last Fall, I served as Jamaica’s Minister of Finance. This was during some of the most turbulent years in recent memory—marked elevated uncertainty, including COVID-19 and extreme weather events. And I can tell you that it has profoundly shaped my view on the role of tax capacity as the crucial financial enabler of state capacity.

Development is not funded by hope. It is funded by the deliberate, disciplined, and equitable mobilization of resources. That is the lesson I carry with me from my time as Finance Minister. And it is a lesson I believe holds true for all nations.

Sound public finances are essential to safeguard macroeconomic stability and lay the foundations for sustained growth. But across much of the world, increases in tax capacity have slowed. Productive expenditure is being crowded out by rising debt service. And spending pressures are intensifying.

The key to progress lies in country-led reform agendas that focus on building trust, taxing fairly, and spending wisely.

Tax capacity is not just about revenue. It is about the state’s capacity to invest in infrastructure, respond to crises, and deliver services for people—from roads and electricity, to sanitation and health, to education and security. And, according to our latest research, there is a tipping point of tax to GDP that—once crossed—leads to higher sustained economic growth.

The right level of taxation will depend on each country’s economic and social circumstances. But our research suggests that targeting at least 11-15 percent of GDP is best. Below that, it is very difficult for governments to manage their economies and provide adequate public services. Unfortunately, many countries are well below this level.

And as countries progress past the taxation tipping point, higher economic growth is accompanied by better financial development, more government effectiveness, and stronger legal institutions. This creates fertile ground for the private sector to help boost growth and job creation. It all sounds great, right? But we know that it is not easy.

In much of the developing world, progress on improving revenue levels has stalled. And deep political resistance to tax increases remains. And yet, countries like Cabo Verde, Cambodia, Rwanda, and, I’m proud to say, Jamaica have made great progress. And there is potential for others to follow.

Our research shows that low-income countries could gain as much as 7 percent of GDP in tax revenue over the medium to long term by raising their tax efforts to match the best-performing developing countries. If they implement strong public financial management systems, they can ensure that those revenues are used efficiently.

This is critical: To be successful, spending and revenue reforms must be part of a coherent country program. And that can often benefit from international support.

That is why we created the Global Public Finance Partnership. Through this, we provide flexible and holistic capacity development support to our members—tailored to each country and designed to equip them with the tools and expertise they need to succeed.

We will continue to deliver this essential capacity development in close partnership with the international community. What is the bottom line? Going back to the beginning: Tax capacity is the ultimate foundation of national resilience.

Without it, there is no fiscal space. Without fiscal space, no sustainable development. It’s not just about revenue—it’s about trust, fairness, and long-term stable and enduring growth.

Compliments of the International Monetary Fund