Africa primarily finances its development through domestic resources

Rado Ratovonarivo — Wed, 07 Dec 2022 21:45:00 +0000

New York, 29 November 2022 – The UN Office of the Special Adviser on Africa (OSAA) released its latest report, “Financing for Development in the Era of COVID-19: The Primacy of Domestic Resources Mobilization in Africa” at a special event chaired by Ambassador Pedro Comissário Afonso, Permanent Representative of the Republic of Mozambique to the UN and Chair of the African Group in New York.

The report shows that Africa’s development is financed through domestic resources, defying the notion that the continent relies heavily on external support. This funding, however, is inadequate to close a widening financing gap, which the sluggish recovery from COVID-19 and the impact of the war in Ukraine have exacerbated.

To bridge this gap, African countries need to boost domestic resource mobilization (DRM) by increasing revenue, improving public spending efficiency, leveraging large pension fund markets and sovereign wealth funds, curbing illicit financial flows out of the continent, and harnessing partnerships.

The publication also calls for putting the continent in the driver’s seat when it comes to its development, subsequently strengthening its resilience against future shocks. When it comes to external sources of financing, Official Development Assistance (ODA) and Foreign Direct Investments (FDI) play a key, albeit complementary, role in financing Africa’s development.

In a panel discussion that followed the launch event, senior UN and Member State officials joined subject matter experts to share knowledge about the role of domestic resource mobilization in Africa and propose solutions to the challenges it is facing.

Ambassador Claver Gatete, Permanent Representative of Rwanda to the UN, highlighted his country’s approach, which focused on streamlining tax administration and bringing the informal sector into the tax system, while Paul Akiwumi, Director of the Division for Africa, Least Developed Countries and Special Programmes at the UN Conference on Trade and Development (UNCTAD) said that to boost DRM, African countries should provide the same tax incentives to foreign and domestic companies.

For his part, Fodé Ndiaye, former UN Resident Coordinator in Rwanda, echoed the report’s messages that African countries need to invest pension funds domestically to boost revenues, while Irene Ovonji-Odida, member of the UN High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda, focused on tackling illicit financial flows (IFFs) enabled by international systems that are often unfair to Africa. The panelist raised the alarm that these IFFs are depriving the continent of key financing.

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La Oficina del Asesor Especial para África - COVID-19

Africa primarily finances its development through domestic resources