Africa: IMF calls on African leaders to rethink fiscal policy in the region
At the 12th African Forum focusing on budgetary strategies amidst Africa’s escalating debt, speakers, including various institution departments and invited African ministers, emphasized the urgent need for African leaders to reevaluate budgetary policies to expedite economic growth.
Acknowledging the mounting debt vulnerabilities due to internal and external shocks, stakeholders underscored the necessity of rethinking fiscal policies to prevent a continual rise in the region’s public debt-to-GDP ratio, which could hamper private investment and limit countries’ ability to invest in vital resources.
To address future shocks, stakeholders advocate for the development of credible medium-term budgetary strategies to safeguard fiscal sustainability while advancing regional development goals.
Discussions at the forum also centered on setting fiscal targets, adjusting the pace and composition of potential adjustments, and enhancing institutional capacity.
A recent report titled “Strengthening Fiscal Capacity in Developing Countries,” published by an institution fostering intellectual discourse, highlighted taxation trends in low-income developing countries (PDFRs).
While tax revenues in PDFRs witnessed steady growth from the early 1990s to 2010, a decline has been observed since, contrasting with emerging countries where tax-to-GDP ratios increased significantly over the same period.
The report underscores the importance of PDFRs evolving to increase their tax revenue levels, considering the critical threshold of the tax/GDP ratio and aligning with emerging countries’ taxation standards.
Despite variations, countries with stronger economic output and institutional frameworks tend to generate higher tax revenues, indicating the need for continuous improvement in PDFRs’ tax collection systems.
