Closing Africa’s financing gap requires that countries tackle issues such as unproductive tax policies, leakages in revenue collection and underdeveloped capital markets, Vera Songwe, the UN Under-Secretary-General and Executive Secretary of the ECA, stressed on Thursday, May 12.
She spoke out in Dakar, Senegal during the 54th session of ECA Conference of Ministers. It runs from May 11-18.
The annual Conference of African Ministers of Finance, Planning and Economic Development is the UN Economic Commission for Africa’s largest annual event. It provides an opportunity for participants to debate key issues concerning Africa’s development, and discuss the think tank’s performance in delivering on its mandate.
Pre Covid-19, Africa required $200 billion each year to implement Agenda 2030. To implement the SDGs, an additional $150 billion is required each year after a pandemic. According to IMF estimates, $285 billion is needed for Africa’s recovery.
It is important to note that the financing gap is particularly critical in education, health and infrastructure, as well as climate action.
In health, $66 million is needed annually to address key issues on the continent. Africa’s health problems include reducing the disease burden and reducing maternal mortality (542 deaths per 100,000 live-born babies in 2017; highest worldwide). Africa needs to invest in intensive health care units and improve access for skilled health care personnel.
Douglas Kigabo Bitonda is an economist at ECA’s macro-economics division. The New Times that there are two main options when it comes to financing Africa’s recovery, post-Covid-19 and the Ukraine conflict.
He said: “Option one is actually an internal factor; within our continent. This is being serious about domestic resource mobilization. This involves reducing leakages in financial resources flows or illicit financial flows.”
The hybrid event jointly hosted by ECA and the government of Senegal runs on the theme “Financing Africa’s Recovery: Breaking New Ground.”
The programme features high-level ministerial panels as well as round table discussions about how to turn the Covid-19 pandemic threat into an accelerator for growth and global prosperity.
Align SDRs with the continent’s needs
“Second is an external factor. This is all about having a voice to influence or to shape existing global financial instruments such as the SDRs to make them align with the continent’s needs,” Kigabo said.
Last year, a similar meeting held in Ethiopia stressed the need for a swift, bold and positive response on Special Drawing Rights (SDRs) in the range of 500 billion to 650 billion to arrest the devastating impact of the pandemic on the continent.
An SDR is an interest bearing international reserve asset that the IMF has created to complement other reserve assets of member nations.
Kigabo said that although access to the SDRs is restricted for African countries, it is the African countries that most need them.
He said: “In the last SDRs released by the IMF, Africa got only around five per cent ($32.5 billion) of the total amount of SDR ($650 billion).”
Among the resolutions overseen by the Bureau of the Committee of experts at last year’s conference was a call for an increment in SDRs to African countries, finding better ways to tackle Covid-19, and technical support for implementing the African Continental Free Trade (AfCFTA) agreement.
Earlier, Songwe told the Dakar session that the ECA responded with action to the resolutions approved at the 53rd Session and has been working on their implementation.
She said: “The ECA has continued its advocacy and support to member states to implement the AfCFTA in collaboration with the African Union Commission. As part of evidence-based advocacy, the ECA developed a tool called the African Continental Free Trade Area Country Business Index (ACBI), a key instrument through which businesses in Africa can articulate to policymakers their main trade challenges under the free trade agreement.”
Crowd-in private investments
Leonard Rugwabiza, a Senior economist at Rwanda’s Ministry of Finance and Economic Planning, told The New Times that many options are being discussed in terms of closing the gap in financing Africa’s recovery “but, maybe, the most important and the one that has most significant potential impact in the future is the capacity to crowd-in private investment or financing.”
Léonard Rugwabiza, a senior Rwandan economist, speaks at the ongoing 54th session of the Economic Commission for Africa Conference of Ministers being held in Dakar, Senegal on Thursday, May 12, 2022. Courtesy
Crowding occurs when government spending is higher than private sector investment. Crowding in occurs when there is more investment opportunities and higher economic growth.
“For the last eight years or so, when talking about agenda 2030, all recognize the need to mobilize private financing. Trillions of dollars are managed or held by private funds. But very little progress has materialised in mobilising those,” Rugwabiza said.
“As we talk about increased mobilisation of public resources, including advocating for rechanneling of SDRs allocation from developed countries that may not need it, it is important that countries measure their success in using those resources to leverage private investment.”
The current meeting will also feature the launch, on May 14, of ECA’s flagship Economic Report on Africa, an annual publication that provides a comprehensive analysis of developments in African economies over the preceding year and makes predictions about the following year.
Titled, “Addressing the Challenges of Poverty and Vulnerability in the Time of Covid-19,” the report which also gives an overview of the global economy, contains an analysis of the causes and consequences of the increase in poverty during the pandemic.
According to UNECA’s report, the key messages include that poverty in Africa is highly mobile, that poor people move in and out of poverty due to volatile consumption and that their inability or inability to manage risk increases their vulnerability.
jkaruhanga@newtimesrwanda.com
Source: rnewtimes
