The International Monetary Fund (IMF) has disclosed that about 90 per cent of African Union (AU) economies will require mobilizing greater tax revenues, among other reforms, to experience growth.
This was disclosed in the IMF’s “G2O REPORT ON STRONG, SUSTAINABLE, BALANCE, AND INCLUSIVE GROWTH,” dated November 2024.
The IMF report states that economic activity in the African Union (AU) is forecast to accelerate, with growth increasing from 3.3 per cent in 2023 to 4.4 per cent in 2029, thereby returning close to pre-pandemic average levels (4.4 per cent in 2000-2019).
Structural reforms for AU
- For the AU, a union of which Nigeria is a part, the IMF maintained that reforms targeting fiscal policies, governance, and education and skills rank highest.
- The report stated that in about three-quarters of AU economies, governance reform needs rank very high, often with the aim of strengthening the rule of law, fighting corruption, improving public financial management (PFM) and anti-money laundering/countering the financing of terrorism (AML/CFT) frameworks, and enhancing transparency, efficiency, and accountability of the government and state-owned enterprise sector.
- The report advised African governments to not just mobilize greater tax revenues but also control public spending while ensuring transparency.
“Almost 90 per cent of AU economies require high-priority reforms of fiscal policy, including mobilizing greater tax revenues, controlling public spending, and enhancing transparency, while also maintaining essential social spending.
“For about half of AU countries, high priority is also assigned to reforms aimed at improving education and skills, with frequent references to the need to increase the quality and access to primary, secondary, and tertiary education, reduce skill mismatches, and bolster skills and vocational training.
“For about 40 per cent of AU countries also, reforms to business regulation, credit markets, and the green sector are assigned high importance,” the report noted.
IMF, in a statement on its website on November 21, 2024, projected that growth is more robust across the African Union, which joined the G20 last year, but added that the continent’s booming populations mean their economies also must create jobs for millions of young people entering the labor market.
More insights
- Moreso, the IMF stated that economic growth is likely to be less sustainable over the medium and long term because public debt ratios remain high across several G20 countries and the AU, adding that rising debt service costs constrain fiscal space.
“In addition, frontier markets in Africa are still grappling with high borrowing costs, despite some moderation in spreads so far in 2024, and some emerging markets may have trouble refinancing debt maturing on the horizon at sustainable interest rates, as borrowing costs have become sensitive to countries fiscal buffers,” the report added.
What you should know
- Nigeria’s economy in the first and second quarters of the year grew by 2.98% and 3.19%, respectively, amid a surge in inflation and further depreciation of the naira.
- The GDP growth rate in the first two quarters of 2024 surpassed the figure for 2023, representing resilience despite severe macroeconomic shocks with a spike in gasoline prices and a 28-year high inflation rate.
- Nigeria’s inflation rate only began to slow down in July 2024 after 19 months of consistent increase dating back to January 2023.
- However, after two months of a slowdown hiatus, inflation continued to rise on the back of an increase in petrol prices by the NNPCL in September.
- In a recent interaction with the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, President Bola Tinubu said that his government is already engaging stakeholders and sensitizing Nigerians to expand the country’s economy’s tax base for inclusive developmental growth.
- He said the federal government is doing this without necessarily increasing the tax burden on Nigerians, who have already contributed a lot.
