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‘Africa needs innovative instruments for economic growth’

by Haruna Gimba
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By Muhammad Amaan

Government and Institutional representatives have called for innovative instruments that would foster climate action and address African current debt crisis, for the continent to benefit from the transition to sustainable green economies.

In a statement by the Economic Commission for Africa (ECA), the participants made the call during a Ministerial segment at the ongoing 56th Session of the Conference of Ministers of Finance, Planning and Economic Development in Victoria Falls, Zimbabwe.

Participants called for a broad range of innovative instruments, such as debt-for-nature swaps, regional blue bonds, regional carbon markets, and the use of natural capital accounting among others.

At a session on Tuesday, President Emmerson Mnangagwa of the Republic of Zimbabwe said, “the effects of climate change are increasingly constraining African countries from exploiting their rich natural resource endowments sustainably.”

According to Mnangagwa, this leads to diminishing returns along economic value chains, “and adopting multi-pronged pathways is thus crucial for inclusive green economies.

“These must not only aid in poverty eradication but also safeguard ecological thresholds that support human development, health, and well-being.

“African countries should, therefore, innovate ways climate financing mechanisms, proactive mobilise financial resources from domestic and international sources to facilitate the adaptation,” he said.

The president said that there was the need for cooperation and partnership between governments and the private sector to forge growth investment strategies for inclusive green economies that would benefit our communities.

According to him, there is need to focus on a people-centred development philosophy that leaves no one and no place behind, one that builds synergies among nations and promotes balanced development across Africa.

Similarly, Claver Gatete, ECA’s Executive-Secretary, said Africa stood at a pivotal moment, facing many obstacles like food insecurity, fiscal constraints, escalating debt burdens, and the adverse effects of climate change.

“It is important for countries to accelerate their regional integration initiatives by fully implementing the African Continental Free Trade Area (AfCFTA).

“And the Single African Air Transport Market to drive competitiveness and reduce the cost of doing business across the continent,” Gatete said.

The executive-secretary said that African debt had increased by over 180 per cent since 2010, saying twenty-one countries were now at risk of or in debt distress.

According to him, this is notwithstanding the annual loss of at least five per cent of Gross Domestic Product (GDP) because of climate change.

“The global financial architecture needs to be fixed. It is to work for everyone and reflect the new dynamics, and hopefully, the recent membership of the African Union in the G20 will resolve this.

“The conversations on governance and conditionalities must be a top priority, no matter how difficult.

“The ambitious $500 billion Sustainable Development Goals (SDG) Stimulus call by the United Nations Secretary-General is a recognition of how far we must go for justice and equity.

“And the issue of unfair risk perceptions and credit ratings that offer Africa limited borrowing options must be addressed,” Gatete said.

According to him, we should not accept that only two African countries have an investment grade rating, and 22 countries are unrated.

The ECA executive-secretary said countries should focus on deepening domestic resource mobilisation for sustainability.

“External borrowing has become costly, unreliable, and untenable. Therefore, reforming our tax systems and de-risking the business environment are unavoidable imperatives.

“There is a need to invest in capital market development to provide long-term resources for private sector investment,” he said.

Meanwhile, Monique Nsanzabaganwa, Deputy Chairperson of the African Union Commission said Africa was navigating the delivery of its blueprint Agenda 2063 in global environments.

According to Nsanzabaganwa, this is causing tremendous challenges to African economies, with ripple effects on social and political spaces.

“We need to continue to explore synergies that will pull national, regional, and continental resources through investment in Africa and the Stock Exchange to secure long-term financing of agenda 2063.

“Countries should enhance the role of the private sector as a source of green financing.

“Our policies must amplify the impact of capital to ensure that Africa’s private stock of assets contributes to green transition and inclusive development,” she said.

Also, Mthuli Ncube, Minister of Finance and Investment Promotion, Republic of Zimbabwe, reiterated some of the continent’s challenges.

He said they included limited fiscal space, increasing public debt, economic fragility, conflict, insecurity in some parts of Africa, and the negative impact of climate change.

“Domestic resource mobilisation is a crucial source of finance for progress toward establishing the single African Air Transport market to promote the movement of people and goods across Africa.

“Countries should implement the African Continental Free Trade Area Agreement (AfCFTA) to stimulate manufacturing and increase trade on the continent.

“Resource mobilisation and economic strategies emanating from the conference will help countries strengthen their policies and minimise the negative impact of climate change,” Ncube said.

Rebecca Amuge, Ambassador of the Republic of Uganda to Ethiopia and Chair of the outgoing Bureau, said to fund sustainable development objectives, countries must invest in inclusive green transition priorities.

Amuge said they must also invest in harnessing innovative financing mechanisms and leveraging Africa’s abundant natural resources.

He said, “this necessitates the adoption of green policies and the reform of the global financial architecture to reduce Africa’s debt burden and facilitate inclusive economic growth.”

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