Economy

AfDB Forecasts Slight GDP Rise in West Africa for 2023 Despite External Pressures

The GDP is expected to rise to 3.9 percent, up slightly from the 3.8 percent recorded in 2022

Published

2 months ago

August 10, 2023

African Development Bank - Investors King

The African Development Bank (AfDB) has released an optimistic economic forecast for West Africa in 2023, predicting a marginal increase in the region’s Gross Domestic Product (GDP).

Despite challenges posed by the resurgence of COVID-19, geopolitical events, and tightening monetary policies, the AfDB’s projection offers a glimmer of hope for the West African economic bloc.

According to the AfDB’s 2023 West Africa Economic Outlook report titled “Mobilising Private Sector Financing for Climate and Green Growth in West Africa,” the GDP is expected to rise to 3.9 percent, up slightly from the 3.8 percent recorded in 2022. This growth, while modest, reflects the resilience and potential of the region.

The report acknowledges the difficult path West Africa has navigated over the past years, with the COVID-19 pandemic causing disruptions and the geopolitical landscape adding to uncertainties. The slowdown in growth is attributed to the successive shocks from the resurgence of COVID-19 in China, a major trade partner for West African countries.

Also, the report highlights the adverse impact of the Russian invasion of Ukraine, particularly on driving inflation in essential commodities such as food, fuel, and fertilizer. These price hikes have made these necessities more expensive than they were a year ago, affecting the purchasing power of consumers in the region.

Despite these challenges, the AfDB report paints a hopeful picture for the future. It suggests that the positive growth outlook could lead to a more robust GDP rise of 4.2 percent in 2024. This optimistic scenario is contingent on increased private sector funding in the green economy and sustainable energy, which aligns with the report’s emphasis on transitioning to a green economy.

The AfDB’s call for West African countries to mobilize more resources for the green sector comes at a crucial time when the negative impact of global warming is worsening climate conditions worldwide. With heatwaves setting record numbers, the urgency for a green growth transition is underscored, offering both economic and environmental benefits.

Professor Kevin C. Urama, African Development Bank Chief Economist and Vice President for Economic Governance and Knowledge Management, expressed concern about the challenges the continent faces, including rising interest rates and compounding debt service payments.

Urama highlighted the need for increased efforts to mobilize domestic resources and private sector financing to support climate and green growth transitions in Africa.

As West African countries navigate these complex external pressures, the AfDB’s forecast, albeit cautious, provides a roadmap for economic recovery and sustainable growth.

The report’s focus on the potential of green industrialization and optimizing natural capital demonstrates a forward-looking approach, aiming to unlock West Africa’s economic potential while addressing pressing climate and environmental concerns.

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Economy

August 2023 Witnesses Highest Revenue Allocation of the Year – N1.1 Trillion Shared

The driving force behind this boost in revenue can be attributed to foreign exchange gains that have contributed significantly to the government’s income stream.

Published

2 days ago

September 30, 2023

Temitayo Olukoya

The Federation Account Allocation Committee (FAAC) unveiled its allocation of N1.1 trillion to the three tiers of government for the month of August 2023, Investors King reports.

This substantial increase was detailed in a communiqué following the committee’s latest meeting. August allocation was the highest so far with an increase of N133.99 billion when compared to the N966.11 billion shared in July 2023.

The driving force behind this boost in revenue can be attributed to foreign exchange gains that have contributed significantly to the government’s income stream.

Breaking down the N1.1 trillion total distributable revenue, the statement reveals that it consists of distributable statutory revenue amounting to N357.4 billion, distributable Value Added Tax revenue totaling N321.94 billion, Electronic Money Transfer Levy revenue at N14.10 billion, Exchange Difference revenue of N229.57 billion, and an augmentation of NN177.09 billion.

Of this impressive sum, the Federal Government is set to receive N431.25 billion, while the State governments will be allocated N361.19 billion, and the local government Councils will obtain N266.54 billion.

However, it’s essential to note that the total revenue available for August stood at N1.48 trillion, marking a 14% or 0.26 trillion decrease from the preceding month’s figure of N1.74 trillion.

The FAAC communiqué further underscores that various deductions were made, including N58.76 billion for the cost of collection, N254.05 billion for total transfers and refunds, and N71 billion allocated to savings. Additionally, the Excess Crude Account maintained a balance of $473,754.57.

The statement elaborated, “Gross statutory revenue of N891.934 billion was received for the month of August 2023. This was lower than the N1,150.424 billion received in July 2023 by N258.490 billion. The gross revenue available from the Value Added Tax was N345.727 billion. This was higher than the N298.789 billion available in July 2023 by N46.938 billion.”

Economy

Zambia’s Finance Minister Faces Dual Challenge in Upcoming Budget Address

Published

3 days ago

September 29, 2023

Samed Olukoya

As Zambia’s Finance Minister, Situmbeko Musokotwane, prepares to present the nation’s budget, he finds himself at a pivotal crossroads.

The second-largest copper producer in Africa is grappling with two pressing concerns: debt sustainability and soaring living costs.

Debt Restructuring Dilemma: Musokotwane’s foremost challenge is finalizing the $6.3 billion debt-restructuring deal with official creditors, led by China and France.

Delays have hindered disbursements from the International Monetary Fund (IMF) and left private creditors in limbo.

To reassure investors, a memorandum of understanding with the official creditor committee is urgently needed.

President Hakainde Hichilema emphasizes the importance of sealing these transactions to signal closure on this tumultuous chapter.

Plummeting Tax Revenue: The key copper-mining industry, which accounts for 70% of Zambia’s export earnings, is in turmoil.

First-half mining company taxes and mineral royalty collections have nosedived, adding to economic woes.

This, in turn, has depreciated the local currency, exacerbating imported inflation, particularly in fuel prices.

Rising Food Inflation: Musokotwane faces mounting political pressure to combat soaring living costs, with annual inflation reaching an 18-month high of 12%. Corn meal prices, a staple in Zambia, have surged by a staggering 67% in the past year.

Neighboring countries’ demand for corn has led to smuggling and further price spikes, raising concerns about food security.

Currency Woes: The kwacha’s value has been a barometer for the nation’s economic health. It depreciated by 16% since June 22, the worst performance among African currencies, reflecting the ongoing debt-restructuring uncertainty.

In his budget address, Musokotwane faces the daunting task of striking a balance between debt management, economic stability, and alleviating the burden on Zambia’s citizens.

The international community will keenly watch to see if his fiscal measures can steer the nation toward a path of recovery and prosperity.

Economy

IMF Urges Sub-Saharan African Nations to Eliminate Tax Exemptions for Fiscal Health

Published

4 days ago

September 28, 2023

Samed Olukoya

Sub-Saharan African countries have been advised by the International Monetary Fund (IMF) to tackle their fiscal deficits by focusing on eliminating tax exemptions and bolstering domestic revenue rather than resorting to fiscal expenditure cuts, which could hamper economic growth.

The IMF conveyed this recommendation in a paper titled ‘How to avoid a debt crisis in Sub-Saharan Africa.’

The IMF’s paper emphasizes that Sub-Saharan African nations should reconsider their overreliance on expenditure cuts as a primary means of reducing fiscal deficits. Instead, they should place greater emphasis on revenue-generating measures such as eliminating tax exemptions and modernizing tax filing and payment systems.

According to the IMF, mobilizing domestic revenue is a more growth-friendly approach, particularly in countries with low initial tax levels.

The paper highlights success stories in The Gambia, Rwanda, Senegal, and Uganda, where substantial revenue increases were achieved through a combination of revenue administration and tax policy reforms.

The IMF also pointed out that enhancing the participation of women in the labor force could significantly boost Gross Domestic Product (GDP) in developing countries.

The IMF estimates that raising the rate of female labor force participation by 5.9 percentage points, which aligns with the average reduction in the participation gap observed in the top 5% of countries during 2014-19, could potentially increase GDP by approximately 8% in emerging and developing economies.

In a world grappling with the weakest medium-term growth outlook in over three decades, bridging the gender gap in labor force participation emerges as a vital reform that policymakers can implement to stimulate economic revival.