African Union Member States Ministers of Finance, Monetary Affairs, Economic Planning, and Integration concluded their deliberations focused on “Improving Africa’s access to Capital: Debt Management and the Rising Influence of Credit Rating Agencies”. The meeting convened under the 5th Ordinary Session of the Specialized Technical Committee made far-reaching recommendations on assessments by Member States, on the state of debt crisis in their respective countries as way of promoting transparency and accountability, which in turn facilitates debt restructuring and reduces vulnerabilities. The Ministers of Finance and Central Bank Governors further recommended for the establishment of a regulatory institution in Africa in order to strengthen mechanisms on tax transparency, effective and prudential fiscal management, and combating illicit financial flows.
The Ministers reiterated the need to establish an African Credit Rating Agency on the basis of self-sustainability, political and financial autonomy, and adopted the Tax Strategy and the Strategy on curbing Illicit Financial Flows (IFFs). The STC meeting accepted the proposal of Afreximbank and ATIA to be designated as Specialized Agencies of the African Union. The STC requested African Union Member states to ensure a significant proportion of their annual budgets are committed to the financing of industrialisation projects, supported by prudential taxation policies and practices to enhance domestic resource mobilization, to minimise rigidities in credit creation.
H.E. Hichilema Hakainde, President of the Republic of Zambia, in a statement read on his behalf by Hon. Situmbeko Musokotwane, Minister for Finance and National Planning of Zambia observed that the national incomes for African countries have remained low, coupled with high inequality and poverty rates which he noted as partly due to huge infrastructure deficits, low levels of human development, and low levels of private investment. To address this the President underscored the need for Africa to access to low-cost capital and establishing a predictable, competitive, and stable economic policy environment. “I am greatly convinced that, the importance of the African Union Financial Institutions has been well established and very well-articulated in a way that it has now become common knowledge amongst the wide variety of stakeholders involved in this inspiring and expected ground-breaking journey. To address longer-term challenges and achieve financial stability and autonomy, there is need to speed up the operationalization of African financial institutions as indicated in Article 19 of the Constitutive Act of the African Union”.
According to the Tax Transparency in Africa 2021: Africa Initiative Progress Report, Financial resources available for Africa’s development are limited, and have been decreasing since 2010 with the sharp decline of commodity prices after the global financial crisis. The amount of financing per capita decreased significantly during the period 2010-18 for both domestic revenues and external financial flows, by 18% and 5% respectively.
African Union Commissioner for Economic Development, Trade, Tourism, Industry and Minerals, Amb. Albert Muchanga reiterated the need to accelerate domestic resource mobilization to reduce reliance on foreign capital. Agenda 2063 stipulates that for it to be fully and effectively implemented, 75-90% of financial resources must be mobilized domestically across Africa. He added, “as we harness the spirit of innovation, one key issue that we need to realize is that the African Union is a source of value creation. It is a brand that is lucrative politically, diplomatically, strategically; and, inter-alia, commercially. Therefore, African Union policy organs like this Specialized Technical Committee need to come up with ways and means of transforming this source into value capture to drive our progress as a continent, and in this way, relying on our own resources.”
Chair of the Bureau of the STC and Deputy Minister for Finance of the Republic of Ghana, Hon. Dr. John Ampontuah Kumah noted that additional structural reforms such as debt restructuring and reprioritizing public spending are required to ensure long-term debt sustainability. “We need to collectively work together to transform Africa into a global powerhouse of the future. Reconfiguring the global debt relief architecture, including reinstating the Debt Service Suspension Initiative (DSSI), will be crucial in supporting debt-ridden African countries’ transition towards a path of sustainable debt in the medium to long term”.
Learn more about the 5th Ordinary Session of the STC took place on 18-20 July 2022 in Lusaka, Zambia here.