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African countries can do better with improved fiscal policy, says Songwe

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The 38th meeting of the Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development opened in Marrakesh, Morocco, Wednesday with a clarion call for African countries to improve their fiscal policy and expand their tax base so they can ably fund their developmental processes.

In opening remarks to the meeting, Economic Commission for Africa (ECA) Executive Secretary, Vera Songwe, said the ability to increase revenue collection was key to the continent’s capacity to finance its development, in particular Agenda 2030 for sustainable development and Africa’s Agenda 2063.

A typical economy on the continent, she said, collects just about 16 percent of GDP in taxes, with the exception of countries like Morocco which collect at least 25 percent. South Africa and Rwanda, Ms. Songwe said, are some of the countries that have been able to leverage new technologies to expand revenue collection.

“The potential of Africa is, and has always been, promising. With a growing working-age population; abundant arable land and a multitude of other resources, the continent has all the pre-requisites for rapid economic transformation in the next decade,” she said.

“However, ensuring the availability of adequate public resources and quality investments to drive structural change requires responsive policies that promote fiscal sustainability, optimize returns from economic activity, and enable economies to fully participate in an increasingly interconnected and globalised world.”

She said the meeting of experts will discuss possible solutions.

“We are looking for how we can finance better, faster and more equitably our growth and how we can ensure that our young populations can participate in this growth that we are talking about. We can do that by ensuring that we have good fiscal policy. We would want to be like Morocco at 25 percent so we can actually power growth.”

She said Africa can do better if it is able to improve on tax collection.

“Africa could boost revenues by 3 percent of GDP by addressing its capacity tax constraints. In addition, by better aligning tax rates and revenues with business cycles, countries can boost government revenue by 5 percent,” Ms. Songwe said, adding the medium-term growth outlook of between 3 – 4 per cent for Africa was insufficient to stimulate quality investments that will generate jobs and accelerate inclusive growth.

“With just over a decade remaining to achieve the sustainable development goals, it is imperative that the scope and mechanisms of domestic resource mobilization be revolutionized to bridge the financing gap, promote macroeconomic stability and limit external borrowing,” she said.

Ms. Songwe also spoke of the importance of digitalization and the digital economy in driving growth as well as optimizing fiscal performance on the continent. The continent will need to re-skill its youth to ensure the digital age is used to Africa’s full advantage. But, she added, it was important to protect citizens and the continent’s data.

“We are going through a new age where we will become vulnerable to our data if we do not know how to manage it and manage it well. We will have to make sure that we have the right institutions to protect individuals and sovereign states as we move forward,” the ECA Chief said.

For his part, the outgoing chair of the bureau of the committee of experts, Elsadig Bakheit Ilfaki Adballa of Sudan, also urged the continent to embrace the digital age to expand its revenue base, create employment for the youth and deal with most of its challenges.

“With the advent of the digital age, Africa can use the new technologies to push for sustainable development on the continent,” he said.

Incoming Chair, Zouhair Chorfi, Morocco’s Economic and Finance Ministry’s Secretary General, said digitization was a great opportunity for Africa.

“Our continent is ripe for transformation and Morocco is ready to play its part in making sure we optimize digital tools as Africa into real tools that can power the continent’s development,” he said.

Technology can transform Africa by increasing competitiveness, promoting strong integration, reducing the cost of doing business and strengthening trade, among other things but safeguards and a solid foundation needed to protect the continent and its people, added Mr. Zouhair.

The Conference of Ministers is focusing on the theme; “Fiscal policy, trade and the private sector in the digital era: A strategy for Africa”.

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