ADDIS ABABA – Stronger international cooperation required to tackle economic challenges and facilitate seamless transition towards sustainable future, UN World Economic Situation and Prospects (WESP) report indicated.
The report urged governments to avoid counterproductive fiscal consolidation measures and instead expand fiscal support to stimulate growth.
Despite the fact that persistence of high inflation rates in many countries, the report advocates for a robust Keynesian approach that prioritizes growth drivers.
The report highlights that African countries are currently facing numerous challenges in terms of monetary and fiscal policies, industrial development, and debt sustainability.
It acknowledges the efforts of African central banks in striving to strike a balance between inflation, growth, employment, and financial stability.
Governments are urged to improve their tax systems and introduce progressive reforms to enhance fiscal revenue and meet developmental needs while safeguarding lives and livelihoods.
The report emphasizes the significance of industrial policies that incorporate technological advancements, innovation, and green transitions.
It underscores the crucial role of international cooperation in addressing these challenges and ensuring stable economic growth.
Africa also tackles obstacles such as high debt burdens, the impacts of climate change and political instability. Debt sustainability is a significant concern, with several countries having debt-to-GDP ratios exceeding 70%, thereby limiting their capacity to address developmental challenges, according to the report.
The report calls for international support to improve debt sustainability and enhance investment and industrial capacity.
Based on WESP report, developing countries face the weakest prospects due to tight financial conditions, limited fiscal space, and sluggish external demand.
Particularly vulnerable, according to the report, are the least developed countries, as slow growth hampers poverty alleviation efforts and risks the achievement of sustainable development goals.
Rising interest rates and tight credit conditions pose risks to countries, particularly in Africa, affecting their balance of payments and debt sustainability. Moreover, trade performance has weakened, and investment remains subdued, particularly in developing economies, the report noted.
To mitigate the adverse effects of monetary tightening, the report suggested central banks in developing countries to utilize various macroeconomic and macro-prudential policy tools.
The report further emphasizes the need for effective global cooperation initiatives to prevent debt crises and ensure adequate financing for developing nations.
It highlighted the importance of revitalizing and transforming industrial policies worldwide as countries adapt to technological advancements and promote innovation, productivity, and clean transitions.
BY FIKADU BELAY
THE ETHIOPIAN HERALD FRIDAY 26 JANUARY 2024
