Harare – 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 proposed during 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”.
COVID-19 has negatively affected economies and prompted governments to roll out programmes to support households. However, many African countries have relatively high levels of debt and that means that they do not have enough finances to respond to the crisis and to cushion citizens.
At the AERC workshop, World Bank Group vice-president Professor Carmen Reinhart said, “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.
“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.”
AERC executive director Prof Njuguna Ndung’u said the pandemic had exposed the structural vulnerabilities of African countries in health financing, health infrastructure, social safety nets, economic diversification and public finances.
“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 said African economies were witnessing reversals of gains made over the last 20 years in terms of poverty reduction and employment creation.
“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,” Prof Ndung’u noted.