Dakar, 05 October 2023 - The African Institute for Economic Development and Planning (IDEP) brought together experts from African Member States, IDEP Alumni, ECA Young Economists Network members, Inter-governmental and International Organizations, academia and Civil Society Organizations to discuss innovative fiscal policies to respond to current and future shocks towards achieving the implementation of the Sustainable Development Goals (SDGs).
As part of its mandate of capacity building and advisory services to Member States, and drawing lessons from the impacts of recent external shocks on the continent's economies, IDEP is placing greater emphasis on integrating risk management and strengthening socio-economic resilience in its programs on Macroeconomic and Sustainable Development Planning.
Fiscal policies involve the use of government spending, taxation, and borrowing to influence the economy. Fiscal interventions can have various rationales, such as macroeconomic benefits, equity, or efficiency. Fiscal policies can also be used to promote health through taxes and subsidies. Basically, fiscal policy plays a stabilizing role in the business cycle to establish a healthier economy and can also be used as a tool to redistribute wealth in a context of widening inequality gap in the country.
“IDEP mandate is to support its Member States in economic management and efficient planning. In the current global scenario, efficient, agile, and innovative financing for economic resilience and development is at the core of macroeconomic management”, said Bakary Dosso, Head of Training and Research Division of IDEP, in his introductory remarks.
Mitigating the effects of the economic shocks
Fiscal policy tries to direct the economy in different ways, either expansionary or contractionary. The International Monetary Fund (IMF) and other multilateral organizations are at the forefront of calls for governments across the world to design appropriate fiscal policy responses to issues of economic stabilization.
Expansionary fiscal and monetary policies have been adopted to mitigate the economic shocks and to increase the prioritization of health expenditures: the interest rate cuts and both tax/debt reliefs seem to come across debt vulnerabilities as a way of smart management of debt and unexpected government expenditures in times of crisis.
“Countries should be able to carry out a trend analysis of their past fiscal realities and forecast their future fiscal operations based on the existing realities. Realistic projections help countries to reduce the likelihood of incurring unplanned fiscal deficits because of shortfalls in revenue generation as against planned expenditure within the fiscal year”, said, in his presentation, Uzochukwu Amakom, Economist, Professor and Researcher at the Institute for Development Studies (IDS) at the University of Nigeria.
While economies were dealing with recovery for the health outbreak, the implications of another negative scenario – i.e. Russia-Ukraine war- with the boost in energy prices and more persistent supply-chain problems affected mainly countries depending on importations of basic commodities. This shows that distinction should then be drawn between crisis mitigation, crisis resolution and resilience building. Governments need to plan for the longer-term for greater socio-economic resilience.
To help address fiscal issues in the current context, Lassana Cissokho, Economist, Professor and Researcher, University Cheikh Anta Diop, proposed to consider two policy actions : “Consolidating public finances and to strengthening public financial management amid difficult funding conditions ; and containing inflation, and exchange rate depreciation”.
The African Union Commission recommended increased social protection programs, especially towards the labour market, vis-a-vis the current economic threshold of each government. This should be complemented through optimal fiscal, monetary, and financial policies responses. There is a need for concise and well targeted measures to address the respective issues of households, workers, and businesses in time of crises.
Issued by:
African Institute for Economic Development and Planning
E-Learning – Knowledge & Management Division
Rue du 18 Juin (behind the National Assembly)
Dakar
Senegal
Tel.: (+221) 33 829 55 00 / 33 829 55 27
Website: www.uneca.org/idep