African governments must find innovative financing models to overcome the Covid-19 crisis

African governments must find innovative financing models if they are to turn the economic challenges caused by the Covid-19 pandemic into opportunities.

Speaking on the first day of the 2021 African Economic Conference (ACS) to be held in Cabo Verde, at least two finance ministers said there was a need for African governments to expand the tax base by tackling illicit financial flows and reducing the growing debt burden to overcome the challenges of the pandemic.

“We are defining new financial mechanisms. We must use unconventional models and think outside the box, even without the beaten track ”, declared Nicolas Kazadi, Minister of Finance of the Democratic Republic of Congo.

Finance ministers said Africa has the opportunity to attract massive foreign direct investment (FDI) by strengthening its institutions and minimizing negative publicity, which has pushed up the continent’s risk ratings.

African governments, the ministers said, must create a society governed by principle, ethics and law.

The 2021 edition of the African Economic Conference, which was opened Thursday, December 2 by President José Maria Neves, is taking place amid the dark cloud of the Covid-19 pandemic which has negatively affected African economies by reducing incomes and by triggering a debt crisis.

With these rising debt levels, ministers called for debt reorganization, especially external debt, in order to free up resources for other essential public services such as health and education.

“Public debt is an atomic bomb headed for the African continent,” said Dr Olavo Avelino Garcia Correia, Deputy Prime Minister and Minister of Finance of Cape Verde.

“We cannot have an economy that only works to pay off debts,” Garcia added.

The Minister presented the case of Cape Verde where 60% of revenues are devoted to debt service.

“It is not sustainable, not only for Cape Verde, but also for African countries.”

Beyond a debt moratorium, African countries must restructure and reorganize their external debts.

Garcia added that the debt problem is best solved internally through increased tax collection, while citizens need to be guaranteed transparent use of the resources collected.

Kazadi highlighted the role of the private sector in setting up new financing models which, in addition to FDI, also include remittances.

“We must not ignore the role of the private sector in poverty reduction and development,” Kazadi said.

He added that African governments must create strong, transparent and accountable institutions.

Garcia also cited better governance as the panacea against illicit financing and corruption. “It’s up to Africans to build strong institutions that will stop illicit funds and money laundering,” he said.

There was general agreement that African countries should diversify to better cope with future challenges. The continent also needed a voice in global and international financial institutions. “Our institutions cannot defend only peace and security, but also growth and development,” Kazadi said.

“Finding solutions to the debt is up to Africans, we just have to do our homework, but partnerships with international partners are important.”

Kazadi said the technology is also there to help Africa.

“I can’t have an inspector behind every taxpayer, but profile their movements, their purchases, their income, everything is recorded and the state can intelligently manage the information and reduce tax evasion.”

The panel agreed that it is also necessary for African states to dialogue with each other and integrate solutions. This will allow them to reduce poverty.

There is also an opportunity to use international solidarity to overcome Africa’s problems and challenges, but this requires daily commitment and commitment.

Regarding recent allocations of Special Drawing Rights (SDRs) by the International Monetary Fund (IMF), Kazadi encourages countries, especially rich and developed countries, to redistribute their shares to poor countries that are in desperate need of help.

The ACS, which takes place both physically and virtually, has been organized by the African Development Bank, ECA and UNDP.

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