Speaking at regional consultation for the fourth international Conference on financing for development in Africa on Monday, Gatete said as of 2023, the continent’s external debt exceeded $1 trillion with extremely high annual interest payments, limiting the continent’s ability to fund essential development.
“Over the last few years, the number of impoverished people on the continent has risen sharply and expected to reach 476 million this year, as 149 million of them who previously were non-poor people, have slipped into poverty, largely due to the escalating impact of climate disasters,” Gatete said.
Gatete said current global financial system, unfortunately, is failing to meet Africa’s needs and geopolitical tensions and economic downturns continue to stretching the continent’s limit.
“To put it simply, without immediate action, Africa risks falling short of achieving the 17 SDGs by 2030,” he said.
According to the UNECA chief, the time has come to overhaul Africa’s financial architecture and reform it into one that fairly represents and responds to the needs of developing nations, and champions financial stability for Africa’s development.
He said Africa needs a financial system that prioritizes the Sustainable Development Goals, AU Agenda 2063 and climate action, and leverages both concessional finance and robust domestic resource mobilization to chart a new path forward.
To this end, the excusive secretary proposed the following five actionable steps to help Africa to realize the Sustainable Development Goals.
Africa needs tax reform for resilience
First Africa must broaden our various countries’ tax base, strengthen compliance mechanisms, and embrace digital technologies to ensure revenue collection is both efficient and effective. Africa’s current tax-to-GDP ratio, at 15.6 percent, lags behind other regions.
However, increasing this ratio by even a few percentage points could unlock billions for sustainable development.
Second, the use of tax incentives must be targeted and reviewed periodically. Africa must ensure that the incentives offered to companies deliver genuine benefits to communities, jobs and our economies.
Third, it is crucial that we combat revenue leakages through better controls on illicit financial flows. Recent trends in digital assets and crypto-assets are creating new avenues for tax evasion. Africa must strengthen measures against these practices in order to retain the capital needed for our development.
Fourth, it is essential for Africa to have immediate relief on debt service. Revising the G20 Common Framework to include fast-tracked restructuring procedures will go a long way to enable African countries to manage debt sustainably. Additionally, extending the Debt Service Suspension Initiative (DSSI) will offer breathing space for economies in distress.
Finally, rechanneling Special Drawing Rights (SDRs) to Multilateral Development Banks (MDBs) would inject the much-needed liquidity into African economies, support their growth and help them weather external shocks.
With Africa’s debt-to-GDP ratio among the highest globally, and growing poverty exacerbating this, Africa must approach the Fourth Financing for Development Conference in Spain next year with a united voice and a clear agenda.
MG/abj/APA