The ERA draft report recommends that African governments to maintain stable income and expenditure flows, and avoid the deterioration of their fiscal and debt position
THE Economic Commission for Africa, ECA, on Tuesday, December 4, hosted a policy makers’ forum in Kigali, Rwanda, at the ongoing 2018 African Economic Conference to discuss findings in the draft Economic Report on Africa 2019.
The Economic Report on Africa is the main flagship report of the ECA. Each edition of the report reviews the economic and social situation in Africa and discusses in detail a key policy issue facing the continent. For 2019, the report will cover ‘Fiscal policy for financing sustainable development in Africa’.
Building on previous editions of the ERA and various analytical work undertaken by the ECA on financing Africa’s development, solely and in collaboration with others, ERA 2019 examines the role of fiscal policy in the mobilization of resources for financing the implementation of the global sustainable development goals, SDGs, and Africa Union’s Agenda 2063.
Adam Elhiraika, the Macroeconomic Policy Division director, said the overall aim of the 2019 edition of the Economic Report on Africa, was to bring together salient information on potential sources of development financing which Africa could use to fund the implementation of strategies for meeting the SDGs.
He said the 2019 report will provide evidence-based reference material for policymakers and other stakeholders on harnessing fiscal policy finance for Africa’s sustainable development.
“We do not claim to know it all that is why we are here so we can consult with you as key policymakers on the continent to see how we can enrich and improve the report before it is finalized for the benefit of the continent,” Elhiraika said.
He said the policy makers’ forum was designed to deepen ownership of the report by member States through testing the outcomes of the research done so far on selected policy makers.
Khaled Hussein, the chief of Macroeconomic Analysis at the ECA, presented the findings of draft ERA 2019; lessons, challenges and emerging innovations that are tackled in the draft report.
“With the forum we seek to enhance uptake of the recommendations that we think will help African countries use fiscal policy to step-up domestic resource mobilization for financing sustainable development on the continent. It will also enhance of the relevance of the Economic Report on Africa through increased ownership of the findings by the continent’s policy makers,” he said.
Some of the key areas addressed by the report include the nature and role of fiscal policy in Africa; the potential of fiscal policy, including taxes and non-tax revenues, to enhance domestic resource mobilization in Africa; the role of fiscal policy in macroeconomic management and achievement of the SDGs; key challenges and opportunities of fiscal policy in Africa and how African countries can address these challenges; and policy lessons and frameworks countries should use.
The draft report recommends that African governments need to rebalance their policy frameworks in order to maintain stable income and expenditure flows, and prevent the deterioration of their fiscal and debt position.
To improve debt management, governments should finance their fiscal deficits in domestic currency markets through the issuance of financial obligations with longer maturities, the report recommends.
It adds that there’s an urgent need for the continent to build and strengthen skills and institutional capacities in order to conduct assessments or analysis of risks to public debt sustainability and risks to public borrowing for long-term development and infrastructure projects
“Our governments also need to develop early warning systems – through improved reporting modalities – of deterioration of debt sustainability in order to avoid debt vulnerabilities and also ensure greater transparency on the scale and terms of the different lending mechanisms,” Hussein said.
The report also urges African nations to create an institutional mechanism that can convert foreign currency debt into domestic debt, for example foreign exchange swaps market, especially in the face of financial crisis and commodity cycles.
To increase revenue collection, the report says African countries must widen the tax revenue base by including the informal and hard to reach sectors, optimize taxation rates, invest in infrastructure to collect revenue transparently and decentralize revenue collection where comparative advantage shows lower collection costs.
African countries are also urged to promote compliance through simplification of the tax system, digitisation, such as in South Africa and Rwanda, to register and make payments easier, minimize non-equity exemptions to close the tax gap.
The report will be launched sometime next year.
– Dec. 5, 2018 @ 14:39 GMT |