26 June 2018

Africa: Sub-Saharan Africa Could Raise Revenue to $80bn

The IMF has said that sub-Saharan Africa could increase its domestic revenue up to $80 billion, but mobilisation remains a pressing policy challenge.

In its latest Regional Economic Outlook 2018 report for sub-Saharan Africa, the IMF cites three aspects of domestic revenue mobilisation.

First, SSA countries need to increase their resources to invest in programmes that support sustainable development goals, including reducing poverty and inequality, ensuring adequate health and education, and developing basics to support more inclusive growth.

"Despite recent progress, the region still faces massive development challenges. Countries could mobilise about three to five per cent of GDP, on average, in additional revenues.

"This would represent about $50-$80 billion, substantially more than the estimated $36 billion in official development assistance received by sub-Saharan African countries in 2016," the IMF said.

Second, the IMF says, now that public debt has risen rapidly, domestic revenue mobilisation should be a key component of any fiscal consolidation strategy.

In the absence of adequate efforts to raise domestic revenues, fiscal consolidation relies heavily on reductions in public spending, which can have a negative impact on growth and can become more difficult to implement and sustain.

Third, developing tax collection can strengthen institutions and build state capacity and support institutional development, the report said.

The IMF further states that SSA still has the lowest revenue-to-GDP ratio in the world.

"The good news is that there are signs of convergence. Over the past decades, the increase in sub-Saharan Africa's revenue ratio has been double that of for all emerging market and developing economies," the report added.

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