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The New Times – Rwanda
By: James Karuhanga
The 2019 Economic Report on Africa, which was released yesterday states that Africa can meet the Sustainable Development Goals (SDG) challenge and Agenda 2063 through adequate and sustained efficient fiscal policy.
Vera Songwe, Under-Secretary General of the United Nations and Executive Secretary of the ECA says that by improving “our tax collection efforts we can actually, essentially, ensure that every woman on our continent can have access to good health care.”
One sure way to become that ambitious, she said – citing Rwanda, is through the digital era.
“The beauty of the report is that it uses African examples.”
Songwe warned that: “If we don’t improve our revenue collection on the continent, we shall not meet the Sustainable Development Goals.”
The good news of the report, Songwe noted, is that “we can do it, we know how to do it, and we have the necessary support.”
In 2015, African countries signed up to two key development agendas: the global 2030 SDGs, which aims to leave no one behind as countries develop, and the African Union’s Agenda 2063, which sets out a blueprint for the “Africa we want”.
But 10 years away from the SDG endpoint, countries continue to search for policy mixes to help hasten the achievement of these targets, with financing and implementing capacity remaining the biggest bottlenecks.
The report examines institutional and policy reforms required to enable African countries to maximize domestic resource mobilization.
It 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.
It is noted that while African governments have chosen several country specific policy options, there are a number of lessons from successful implementation of reforms such as the introduction of electronic tax filing and payment automation in Rwanda, South Africa, Mauritania, Uganda, Kenya, Burkina Faso and others that all African countries can learn from to boost revenue collection.
However, Songwe noted, key to achieving this objective will be effective leadership, prudent public sector management and good governance.
She urged African governments to make the pledge and commitment and make things happen. The ECA, she reiterated, is ever ready to support pertinent moves.
The report notes that to meet the SDGs Africa will need to raise an estimated 11 per cent of GDP per year for the next 10 years to close the financing gap.
Today, it is noted, Africa’s average tax revenue to GDP is below 16 per cent. Efficient and effective domestic resource mobilization can address a substantial portion of this financing shortfall. The ECA has consistently highlighted this position culminating in the position paper for the 2015 Addis Ababa Action Agenda on Financing for Development.
Adam Elhiraika, Head of ECA’s Macroeconomics and Governance Division, told The New Times that the report presents a few key messages for African countries to mobilize domestic resources to finance their development.
He said: “We have a huge financing gap estimated at 11 percent of GDP. We have the potential to raise domestic revenues and build the financing gap; with carefully designed and implemented policies Africa has the potential to increase tax revenue-GDP ratio significantly.
“Currently, the tax-GDP ratio is 15.4 percent. Government revenue accounts for 20.4 percent of GDP. African countries have the potential, with carefully designed and implemented policies, to increase government tax revenue-GDP ratio by about 12 to 20 percent.”
To do so, Elhiraika explained, countries in Africa need to have counter fiscal policies that help them build reserves when the economy is booming and to use it to invest even when the economy is not doing so well.
He said countries can do so by increasing the tax base and improving tax administration and lowering collection costs and improving management.
“They also have opportunities to increase tax revenues through non-tax revenue collection and management which needs institutional reforms that improve tax policy and administration at national and sub-national levels. And, countries need better debt management and overall fiscal management strategies.”
“In all the key areas we looked at, in the report, you can find good examples of African countries; for example, Rwanda and South Africa benefited a lot from use of IT and automation.”