In the face of deteriorating fiscal and debt positions, while government revenues account for a mere 21.4%, grossly insufficient to meet development financing needs, the Economic Commission for Africa (ECA), on Sunday said there is need for governments across the continent to focus on fiscal policy.
In a statement announcing the unveiling of its 2019 Economic Report on Africa, a flagship publication of the United Nations released at the 52nd session of the Conference Finance, Planning and Economic Development Ministers, holding in Marrakech, Morocco, the commission challenged African governments to digitise their economies, broaden tax base and prevent further deterioration further deterioration of fiscal and debt positions, and aim for double-digit growth.
In this way, the report believes African can record double-digit growth, and achieve the United Nation’s 2030 global goals (SDGs), and the African Union Agenda 2063.
By digitizing their economies, for example, the report said revenue mobilization by countries on the continent can be enhanced by up to 6%, just as government revenue can be increased by up to 20% of GDP by adopting a policy framework that strengthen revenue mobilisation, including digitalising their economies.
“Digital identification can broaden the tax base by making it easier to identify and track taxpayers and helping taxpayers meet their tax obligations. By improving tax assessments and administration, it enhances the government’s capacity to mobilize additional resources. Digital ID systems yield gains in efficiency and convenience that could result in savings to taxpayers and government of up to $50 billion a year by 2020.”
While analysing and highlighting both challenges and opportunities, the report also recommends comprehensive macroeconomic reforms aimed at building financial resilience, placing emphasis on the need for Africa to accelerate growth to double digits by 2030 and to boost investment from its current 25% of GDP.
While Africa’s economic growth remained moderate at 3.25 in 2018, due to “solid global growth, a moderate increase in commodity prices and favourable domestic conditions”, the report emphasises the need for the continent to work harder towards achieving a fine balance between raising revenue and incentivizing investments, in order to boost growth.
In some of Africa’s largest economies—South Africa, Angola and Nigeria – the Report reveals, growth trended upwards but remains vulnerable to shifts in commodity prices. East Africa remains the fastest growing, at 6.1% in 2017 and 6.2% in 2018, while in West Africa, the economy expanded by 3.2% in 2018, up from 2.4% in 2017. Central, North and Southern Africa’s economies grew at a slower pace in 2018 compared to 2017.
The statement quoted Vera Songwe, the ECA’s Executive Secretary as saying during the launch that “the Report identifies several quick wins in Africa’s pursuit of additional fiscal space to finance its accelerated development.
“[It also] focuses on the instrumental role of fiscal policy in crowding-in investment and creating adequate fiscal space for social policy, including supporting women and youth-led small and medium enterprises.”
But, a decade away from the SDG, she added that “African countries continue to search for policy mixes to help accelerate the achievement of the SDGs. However, for many countries, financing remains the biggest bottleneck with implementing capacity a close second.”
The report lamented Africa’s high debt levels as countries increased their borrowing, to ease fiscal pressures most of which have been precipitated by the narrowing of revenue streams that has gone on since the commodity price shocks of 2014.
While the Committee of Experts commenced on Wednesday, March 20 and ended Friday, March 22, 2019, the 20th session of the Regional Coordination Mechanism for Africa (RCM-Africa) and side events were held Saturday and Sunday, while the Ministerial segment follows on Monday and Tuesday, March 25 and 26, 2019.