ADDIS ABABA- In order to meet development goals, Africa will need to raise an estimated 11 percent of GDP per year for the next 10 years to close the financing gap, Economic Commission for Africa (ECA) announced.
ECA’s 2019 report on Fiscal Policy for Financing Sustainable Development in Africa, examined the institutional and policy reforms required to enable African countries to maximize domestic resource mobilization.
The report 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. Indicating that Africa’s average tax revenue to GDP is below 16 percent, ECA Executive secretary, Vera Songwe said on the report adding, efficient and effective domestic resource mobilization can address a substantial portion of the financing shortfall countries are facing.
African governments could increase fiscal space, particularly through increased government revenues by 12-20 percent of GDP annually by implementing fiscal reforms in six key areas, according to the report. The areas include adopting the right fiscal policy stance, reviewing and updating tax policy, expanding and deepening the tax base, improving tax administration, tackling tax avoidance, enhancing non-tax revenue collection and improving natural resources governance to combat tax evasion.
The Report identifies several quick wins in Africa’s pursuit of additional fiscal space to finance its accelerated development and meet the SDGs and Agenda 2063.
Among other tools, rapid digitization offers especially promising opportunities for African countries to increase revenue generation, reduce collection costs and extend taxation to some hard to tax sectors, such as the agribusiness sectors, real estate and services sectors, while improving the enabling environment for the private sector and in particular small and medium enterprises, it said.
The Ethiopian Herald, May 9/2019
BY GIRMACHEW GASHAW
