Addis Ababa, November 17, 2024 (FBC) – During the Second Session of the Committee on Economic Governance in Addis Ababa, experts emphasized the need for modifications to the global financial system to better cater to Africa’s specific financial requirements, including improved access to concessional financing.
Amid ongoing multifaceted global crises, experts warned that Africa will continue to require various fiscal support measures in the coming years. Zuzana Schwidrowski, Director of the Macroeconomics, Finance & Governance Division at ECA, stated at the committee meeting that Africa must present a unified voice in global financial governance to tackle structural challenges limiting financial resource mobilization.
Schwidrowski highlighted the urgency for Africa to strategize, advocate, and actively engage to ensure that its unique challenges—including the repercussions of the post-COVID-19 pandemic, climate change, and geopolitical conflicts—are adequately addressed.
This committee meeting serves as a precursor to the regional review of the Fourth International Conference on Financing for Development, scheduled for November 18-19, 2024, in Addis Ababa. The committee aims to provide evidence-based guidance on economic governance, promoting sound macroeconomic management, inclusive development strategies, and the enhancement of financial integrity in combating illicit financial flows.
Gamal Ibrahim, Chief of the Economic Governance and Public Finance Section at ECA, pointed out that historical inequalities embedded in international taxation laws disproportionately benefit corporations from the Global North. He noted that multinational companies exploit these laws to reduce tax liabilities through practices like transfer pricing, which poses significant challenges for African nations in terms of capacity and negotiation.
Ibrahim called for increased capacity building and monitoring to effectively implement the UN Framework Convention on International Tax Cooperation—essential for helping developing countries expand their fiscal space. Key focuses include ensuring fair tax rights allocation, tackling tax-related illicit financial flows, and enhancing tax information exchange.
In her presentation regarding financing for sustainable development in Africa, Schwidrowski underscored the deteriorating circumstances for millions in Africa who lack basic needs and quality of life. She remarked that the number of food-insecure individuals is back to mid-2000s levels and that the average tax-to-GDP ratio remains below pre-pandemic figures, advocating for reforms through wealth and property taxation.
Schwidrowski urged consistent advocacy from Africa to avoid being sidelined in global development assistance. She also identified potential funding sources, including public funding, private investment, remittances, and loans, while highlighting the untapped potential of public-private partnerships.
Furthermore, she stressed the critical importance of effective debt management and political commitment to bolster domestic resources, noting that digital tax collection systems and taxing the digital economy present new opportunities for the continent.