Overview V: Economic Report on Africa 2007
Overview V: Economic Report on Africa 2007
have committed themselves to better harmonize their policies and practices on aid
to enhance the development impact of aid in recipient countries. This has been
reflected in a number of international declarations, including the Monterrey Consensus,
Rome Declaration, Paris Declaration and, recently, the G-8 summit in Gleneagles.
All these declarations call for scaling-up more financial resources to developing
countries and improving the delivery and management of aid to enhance its
development impact in recipient countries.
Aid disbursements remain much below the 0.7 per cent ODA to GNI target donors
have set themselves to achieve. The average ratio for DAC members was 0.26 per
cent in 2004. However, a handful of countries have met the target.
With respect to aid effectiveness, donors have made considerable progress in untying
aid to African countries. The percentage of aid from Development Assistance
Committee (DAC) member countries to Least Developed Countries (LDCs) that
was untied rose from 55 per cent in the period 1999-2001 to 68 per cent in 2004.
However, there are considerable variations in performance across DAC countries.
Some countries including Finland, Ireland, Luxembourg, Norway and the United
Kingdom have successfully moved away from tied to untied aid, while others still
have very high ratios of tied aid to total aid. Similarly, DAC countries have made
substantial progress in increasing the proportion of grants in total ODA with the
share of grants in aid rising from 49 per cent over the period 1980-1984 to 90 per
cent in the 2002-2004 period.
Donor countries have also made considerable progress in meeting their commitments
in the area of debt relief. African countries benefited from the MDRI announced at
the G-8 Summit in Gleneagles. While this debt relief is a welcome development, it
is, however, not sufficient to finance Africa’s myriad development priorities.
Domestic development financing
As witnessed in other developing regions, particularly in East Asia, the mobilization
of domestic resources plays a key role in financing investments in economic and
social infrastructure, and hence, in tackling poverty.
However, the level of savings in SSA has been historically less than 20 per cent of
GDP, which is considerably below the average of East Asia and the Pacific (35 per
cent), Latin America and the Caribbean (21 per cent) and the Middle East and
North Africa (26 per cent). At the same time, it is promising that there are a number
of SSA countries, which have mobilized domestic savings. In fact, five countries,
Algeria, Botswana, Republic of Congo, Gabon and Nigeria, have reached a savings
ratio of more than 30 per cent. A key challenge facing these countries is how to
translate these high savings into productive investment, especially in non-oil and
non-mineral activities, to achieve sustained economic growth. Other African governments
need to focus efforts on mobilizing both public and private savings.
As a consequence of low levels of savings in addition to limited private capital flows,
investment ratios in SSA countries are lower than in other developing regions. For
example, over the period 2000-2004, domestic investment as a proportion of GDP
was 18 per cent in SSA compared to 31 per cent in East Asia and the Pacific.
In response to this challenge, African governments need to develop domestic capital
markets, including bond markets and stock exchanges, which can play an important
role in increasing both the quantity and productivity of investment. There are
currently 21 stock exchanges in Africa, though these markets are still characterized
by low levels of liquidity, lack of integration with regional and global markets, and
a range of capacity and technology constraints. The regional integration of capital
markets in Africa offers a solution to this situation, especially for the smaller
economies. Overall, to accelerate capital market development, governments need to
improve the capacity of all stakeholders, invest in infrastructure, and promote good
governance.
Overview V Economic Report on Africa 2007 - To learn more about this author, visit United Nations Economic Commission for Africa's Website.
Like this article? Share it with your friends
Recognizing the impact of their policies and practices on aid effectiveness, donors
have committed themselves to better harmonize their policies and practices on aid
to enhance the development impact of aid in recipient countries. This has been
reflected in a number of international declarations, including the Monterrey Consensus,
Rome Declaration, Paris Declaration and, recently, the G-8 summit in Gleneagles.
All these declarations call for scaling-up more financial resources to developing
countries and improving the delivery and management of aid to enhance its
development impact in recipient countries.
Aid disbursements remain much below the 0.7 per cent ODA to GNI target donors
have set themselves to achieve. The average ratio for DAC members was 0.26 per
cent in 2004. However, a handful of countries have met the target.
With respect to aid effectiveness, donors have made considerable progress in untying
aid to African countries. The percentage of aid from Development Assistance
Committee (DAC) member countries to Least Developed Countries (LDCs) that
was untied rose from 55 per cent in the period 1999-2001 to 68 per cent in 2004.
However, there are considerable variations in performance across DAC countries.
Some countries including Finland, Ireland, Luxembourg, Norway and the United
Kingdom have successfully moved away from tied to untied aid, while others still
have very high ratios of tied aid to total aid. Similarly, DAC countries have made
substantial progress in increasing the proportion of grants in total ODA with the
share of grants in aid rising from 49 per cent over the period 1980-1984 to 90 per
cent in the 2002-2004 period.
Donor countries have also made considerable progress in meeting their commitments
in the area of debt relief. African countries benefited from the MDRI announced at
the G-8 Summit in Gleneagles. While this debt relief is a welcome development, it
is, however, not sufficient to finance Africa’s myriad development priorities.
Domestic development financing
As witnessed in other developing regions, particularly in East Asia, the mobilization
of domestic resources plays a key role in financing investments in economic and
social infrastructure, and hence, in tackling poverty.
However, the level of savings in SSA has been historically less than 20 per cent of
GDP, which is considerably below the average of East Asia and the Pacific (35 per
cent), Latin America and the Caribbean (21 per cent) and the Middle East and
North Africa (26 per cent). At the same time, it is promising that there are a number
of SSA countries, which have mobilized domestic savings. In fact, five countries,
Algeria, Botswana, Republic of Congo, Gabon and Nigeria, have reached a savings
ratio of more than 30 per cent. A key challenge facing these countries is how to
translate these high savings into productive investment, especially in non-oil and
non-mineral activities, to achieve sustained economic growth. Other African governments
need to focus efforts on mobilizing both public and private savings.
As a consequence of low levels of savings in addition to limited private capital flows,
investment ratios in SSA countries are lower than in other developing regions. For
example, over the period 2000-2004, domestic investment as a proportion of GDP
was 18 per cent in SSA compared to 31 per cent in East Asia and the Pacific.
In response to this challenge, African governments need to develop domestic capital
markets, including bond markets and stock exchanges, which can play an important
role in increasing both the quantity and productivity of investment. There are
currently 21 stock exchanges in Africa, though these markets are still characterized
by low levels of liquidity, lack of integration with regional and global markets, and
a range of capacity and technology constraints. The regional integration of capital
markets in Africa offers a solution to this situation, especially for the smaller
economies. Overall, to accelerate capital market development, governments need to
improve the capacity of all stakeholders, invest in infrastructure, and promote good
governance.
Overview V Economic Report on Africa 2007 - To learn more about this author, visit United Nations Economic Commission for Africa's Website.
Like this article? Share it with your friends
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