Experts at the Second Session on the Committee on Economic Governance in Addis Ababa, Ethiopia, have called for adjustments to the global financial system to better address Africa’s specific financial needs, including better access to concessional financing.
Continued multifaceted global crisis in coming years, the experts say, “implies a continued need for various fiscal support measures for the continent.”
In her opening remarks at the committee meeting, Zuzana, Schwidrowski, ECA Director of the Macroeconomics, Finance&Governance Division said Africa needs to have a unified voice in the global financial governance to address the structural issues that hinder the mobilization of financial resources.
She emphasized the need for Africa to strategize, advocate and engage actively to ensure unique needs are addressed, such as the complex crises Africa is facing, including the impact of the post-COVID-19 pandemic, climate change, geopolitical tensions and conflicts.
The committee meeting is being held ahead of a regional review of the Fourth International Conference on Financing for Development to be held on 18-19 November 2024 in Addis Ababa, Ethiopia.
The Committee is expected to provide evidence-based advice and guidance on economic governance issues related to the promotion of sound macroeconomic management and inclusive development strategies and the enhancement of financial integrity issues, such as combating illicit financial flows in Africa. Discussions at the meeting will also help in the preparations towards the Fourth International Conference on Financing for Development set for 30 June to 30 July 2025 in Serville, Spain.
Yanic Kenhoung, Cameroon representative and outgoing Chair of the Committee’s Bureau noted the need for Africa to raise financial resources to accelerate the implementation of the 2030 Agenda for Sustainable Development and Agenda 2063.
“The financing gap between the current status and the targets of the 2030 Agenda is huge and limits opportunities for industrialization in Africa, said Mr. Kenhoung.
He noted that for Africa to take charge of its recovery and development aspirations, more needs to be done to bridge the widening financing gap.
Gamal Ibrahim, Chief, Economic Governance and Public Finance Section Macroeconomics, Finance and Governance Division, ECA, noted the historical inequalities in the international taxation laws, which favor international corporations based in the north with outdated principles.
“Multinational corporations have manipulated financial growth to minimize tax liabilities through mechanisms like transfer pricing. An inclusive framework was introduced in 2015 aimed to address these issues, but African countries face challenges in capacity and negotiation complexity,” said Mr. Ibrahim.
He stressed the need for capacity building and monitoring, which are crucial for the effective implementation of the UN Framework Convention on International Tax Cooperation – aimed at enhancing the efforts of developing countries to expand their fiscal space. Areas of attention would include provision for fair allocation of tax rights, addressing tax-related illicit financial flows and effective tax information exchange.
In her presentation on Issues and Challenges of Financing for Sustainable Development in Africa: Priorities for Africa for the Fourth International Conference on Financing for Development, to be held in 2025, Schwidrowski highlighted the worsening situation of Africa’s development with millions of people deprived of basic needs and quality of life.
“The number of food insecure people in Africa is as large as it was in the mid-2000s; and the average tax to GDP ratio is still below the pre-pandemic levels, with a proposal to raise it through wealth and property taxation,” she said.
According to Ms. Schwidrowski, public debt in Africa is alarmingly high, with levels between 67% and 70% of GDP consisting mostly, of non-concessional debt. The overall financing gap in Africa is estimated at $ 1.7 trillion to $2.1 trillion annually, with a realistic need of $ 700 billion per year.
Development aid to Africa has declined from 33% to 27% partly due to some countries graduating to middle-income status and increased urgent needs in other regions.
Ms. Schwidrowski emphasized the importance of Africa “advocating consistently to avoid being left behind in global development aid.”
Public funding, private investment, remittance and borrowing are the other potential sources, with underutilized public-private partnerships and their potential benefits.
She also stressed the importance of effective debt management and the importance of political commitment to enhance domestic resource mobilization, noting, “Digital tax collection system and taxing the digital economy are seen as the opportunities for Africa.”
The session discussed fair taxation rights and the important role of the High-level Working Group on Global Financial Architecture in advocating for the Continent. In addition, the discussions called for a special session on debt for climate swaps and green bonds, acknowledging their role as supporting instruments but not a comprehensive solution.
The second session of the Committee elected Egypt as the new Bureau for the period 2024–2026 to review and endorse the work programme of the subprogramme on macroeconomic policy, finance and governance of ECA.
Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).