The paper investigates how a country’s mix of development finance changes as it grows – the so-called ‘missing middle' dilemma. It finds that public resources overall fall continuously until a country is well into middle-income status, as international assistance falls faster than tax revenues rise. Static per capita income thresholds are becoming increasingly unreliable guides to resource allocation. This paper looks at alternative groupings, especially taking into account fiscal capacity, creditworthiness and vulnerability.
The roadmap also assess the recent literature on trade-offs between rapid growth and climate change mitigation imperatives. We conclude by contrasting two alternative world views: (1) making international public finance a complement to private finance everywhere, and (2) focusing public support where the private sector is not present.