Financing Developmental Social Policies in Low-Income Countries: Conditions and Constraints

The consolidation of states cannot be dissociated from the structure of taxation and expenditure, which constitutes a major problem in low-income countries. Taxation systems are institutions, which need credibility in order to be effective, and revenues and spending are crucial in building this credibility. The economic literature has likewise highlighted the difficulty in financing social policies, in particular in the poorest countries, which are often caught in vicious circles where citizens and states do not feel bound by mutual ‘contractual’ obligations. This situation therefore weakens the justifications for the citizens to pay taxes and for governments to provide public goods, further weakening state credibility and capacity.