African Nations urged by the World Bank to embark on economic recovery after the deadly Pandemic Covid-19 changed lifestyle Globally. PHOTO /CORRESPONDENT

African governments challenged to rethink fiscal policy as part of economic recovery




By Donald Kogai





African governments have been challenged to rethink revenue

mobilisation strategies as the impact of the Covid-19 pandemic

continues to exacerbate debt stress levels across the continent. This

was said during the Plenary Session of the African Economic

Research Consortium (AERC) Biannual Research Workshop held

under the theme of “Covid-19 Pandemic and Public Finance in

Africa: Challenges and Opportunities”, on Monday 31st May 2021.






Speaking at the event, World Bank Group Vice President and Chief

Economist Prof. Carmen Reinhart said most economies across the

world, inclusive of several African countries entered the pandemic

when they were at high risk of or in debt distress levels occasioned

by rising debts, slowing growth and weak financial conditions.






“The Covid-19 pandemic has exacerbated the challenges that existed

before the pandemic, worsening the debt situation even further.

The need to spend more on public health and social safety nets

programmes coupled with a slowdown in economic activities are all

exerting considerable pressure on government finances,” Prof.

Reinhart said. “Several governments across the continent are forced

to run wide fiscal deficits that are slowly translating into increasing

debt and debt distress.”






“Covid has been an exceptionally regressive crisis. It’s regressive

within countries and regressive across countries,” she added.






Since 2020, the Covid-19 crisis has deepened and continues to affect

the broader economy and people’s livelihoods. This has forced

various governments across the continent to roll out various

programmes to support the adversely impacted households, whilst

financing its operations and public service. Unfortunately, many

African countries have relatively high levels of debt and that means

that they do not have enough fiscal resources to respond to the

crisis and to help people, leading to debt stress levels.






“We are facing a more protracted downtime as conditions haven’t

normalised tourism, cross-border activities, and other key sectors of

the economy. In Africa, the income per capita Gross Domestic

Product (GDP) is not going to recover to its pre-crisis levels in 2021,

thus the biggest challenge of avoiding debt looms very largely.”





Against this backdrop, Prof. Reinhart highlighted the following

policy priorities going forward:





  • Debt restructuring – borrowing from the historical debt restructuring lessons.


  • Resource mobilisation by tackling fiscal problems through austerity measures.


  • Widening of the revenue base to help reduce the debt levels and finance social services amidst the pandemic.


  • Building safety nets through digital financial platforms to enable effective distribution of the government benefits.


  • Climate financing – Engaging green finance while tackling climate-related risks that have been accumulating over time.





On his part, AERC Executive Director Prof. Njuguna Ndung’u said

the pandemic has exposed the structural vulnerabilities of most

African countries from health financing, health infrastructure,

social safety nets, economic diversification, and public finance.





“The negative effects of the Covid-19 pandemic are visible in all the

African regions, but most affected are in southern and western

Africa,” Prof. Ndung’u said. “Some African countries have fared

better than others depending on their initial conditions. The

countries that were already having debt distress fared even worse,

he added.”





Due to the devastating impact of the pandemic, African economies

are witnessing the reversals in the gains made over the last 20 years

in terms of poverty reduction and employment creation.





Across the continent, millions of people are going without jobs, cost

of living has increased. Interestingly the pandemic has brought out

the capacity of citizens to help each other. Private citizens mobilize

resources to uplift the poor, the needy, and to defray medical

expenses for the sick.





“There’s an opportunity to institute strong social protection

programmes in Africa to ensure support for the poorest and cushion

against those marginalised and future negative shocks- but

dependent on fiscal space,” He noted.





The 54th plenary session of the AERC Biannual Research Workshop

set the context for deliberations on a broad range of issues

including challenges and opportunities in reforming the state of

public finance in Africa.




Special Session in Honour of Prof. Benno Ndulu




Led by Jeffrey Fine, the Founding Executive Director of the AERC,

various speakers made their contributions in the Special Session

that was organized to honor Prof. Benno Ndulu, one of the most

celebrated academic in Africa, policy leader and founder of AERC.





The late Prof. Ndulu, passed away on the 22nd February 2021.

Benno, a celebrated Economist, Mentor and Scholar, was the first

Director of Research and the first African Executive Director of the

AERC. He was also a member of the AERC Board, Chair of the AERC

Programme Committee, founder member of the AERC African

Central Bank Governors’ Forum, thought leader and paper

presenter and discussant at AERC policy workshops. His

commitment and dedication to the AERC and its mandate to build

research capacity in Africa is highly commendable.



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