Use public money efficiently — IMF, European Commission
THE International Monetary Fund (IMF) and the European Commission (EC) has urged African states to use public funds efficiently.
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They said prudent spending of public funds would help to maximise its impact and build more resilience for the benefit of the whole economy.
In a joint statement issued Tuesday, the two institutions said transparent and reliable public financial management (PFM) systems were key.
According to them, robust medium-term budgeting frameworks would help policymakers manage competing spending priorities to best achieve their development goals.
“In addition, digitalisation, including in the delivery of social assistance, can play a critical role in improving the efficiency and robustness of the management of public money.
“And climate-focused PFM and public investment management practices can ensure that countries manage the climate adaptation and transition challenges most effectively within their available resource envelope,” the statement said.
It was jointly signed by the Managing Director of the IMF, Kristalina Georgieva, and the European Commissioner for International Partnerships, Jutta Urpilainen,
It followed the conclusion of the 11th African Fiscal Forum on the theme: ‘Building a Resilient Africa,’ which was held virtually from March 21 to March 22:
Sharp deterioration
The statement said over the past three years, sub-Saharan African countries have confronted large adverse shocks that have led to a sharp deterioration in living conditions.
It said the COVID-19 pandemic, food and energy price increases, were significant challenges worsened by Russia’s war in Ukraine, and climate change.
“In the face of such shocks, many countries have been compelled to turn to short-term support measures, such as tax cuts, untargeted food or fuel subsidies, and price controls on specific goods.
These measures, while necessary, have added to fiscal pressures amid growing debt vulnerabilities, forcing governments into difficult tradeoffs.
“While such shocks do require governments to step in and protect the most vulnerable, actions to gradually reduce fiscal deficits will be crucial in most countries to rebuild buffers, protect debt sustainability, and ensure macroeconomic stability,” the statement said.
Responding to shocks
The statement said the forum focused on three ways to reconcile the need to effectively respond to shocks with the goal to rebuild fiscal space, thereby contributing to building a more resilient Africa.
It also advised African statements to shift from broad-based subsidies to more targeted support to save valuable resources for financing development plans and investment.
It noted that social spending provided a solid foundation for inclusive growth, with significant impact on human capital development by boosting school enrollment, attendance, and learning, improving health care and outcomes, and laying the foundation for increased economic productivity.
“Well-designed and targeted social safety nets will ensure that countries’ scarce resources get to the most vulnerable, where they can do the most good,” it said.