News UNECA warns USD 1.3tln funding shortfall puts sustainable development goals out of…
November 23, 2024
Africa faces an annual USD 1.3 trillion shortfall in funding in the lead up to the 2030 sustainable development goals deadline, according to the UN Economic Commission for Africa (UNECA).
During the fourth international conference on financing for development in Africa organized in Addis Ababa this week, Claver Gatete, UN under-secretary general and ECA executive secretary, cautioned that the continent’s mounting external debt, exceeding USD 1 trillion, has made it difficult to fund development projects.
“These crises have also brought us to a critical point,” said Gatete. “To put it simply, without immediate action, we risk falling short of achieving the 17 SDGs by 2030.”
He called on African governments to embark on tax reforms, broaden their tax bases, strengthen compliance mechanisms, and embrace digital technologies to streamline revenue collection.
Africa’s current average tax-to-GDP ratio of 15.6 percent lags behind other regions.
Ethiopia’s tax-to-GDP ratio has fallen significantly over the past decade, dropping to eight percent, according to the latest government data, despite high tax rates and the recent introduction of new taxes. Analysts say the ratio shrunk primarily because GDP is inflated.
Ethiopia’s new medium-term revenue mobilization strategy, aspires to raise the ratio to 13 percent in the next five years.
“Increasing this ratio by even a few percentage points could unlock billions for sustainable development,” said Gatete.
The Executive Secretary wants to see the targeted use of tax incentives, with periodic reviews. r
“We must ensure that the incentives offered to companies deliver genuine benefits to communities, jobs and our economies,” he said.
Gatete warned that it is crucial that Africa 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, reports reveal.
“But we must strengthen measures against these practices in order to retain the capital needed for our development,” said Gatete.
He called for immediate relief on debt service for Africa, including a revision of the G20 Common Framework to include fast-tracked restructuring procedures in a bid to enable the sustainable management of debt.
Gatete, a Rwandan diplomat, believes extending the Debt Service Suspension Initiative (DSSI) will offer relief for economies in distress.
Finally, he argued that re-channeling Special Drawing Rights (SDRs) to Multilateral Development Banks (MDBs) would inject much-needed liquidity into African economies, support their growth and help them weather external shocks.
Semerita Sewasew, a state minister of Finance, also stressed that the cooperation of international partners through ODA is crucial, coupled with the need for African states to enhance Domestic Resource Mobilization (DRM).