UN urges Africa to find new revenue sources to fund development projects

The United Nations has called on African governments to find new revenue sources to finance various development projects instead of relying on external debts.

A report launched on the sidelines of the UNCTAD conference in Nairobi calls on the African governments to take action and prevent rapid debt growth from becoming a crisis as experienced in the past three decades.

"Between 2006 and 2009, the average African country saw its external debt stock grow 7.8 percent per year, a figure that accelerates to 10 percent per year in the years 2011-2013 to reach 443 billion U.S. dollars or 22 percent of gross national income by 2013," says the report.

This year's UNCTAD report, Economic Development in Africa 2016 finds that the continent's external debt ratios appear manageable, but warns that debt looks unsustainable in some countries.

It says the governments should consider remittances, public-private partnerships, and a clampdown on illicit financial flows as revenue sources to finance development.

UNCTAD Secretary-General Mukhisa Kituyi said majority of African countries have begun to shun a dependence on official development aid, looking to achieve the Sustainable Development Goals with new and innovative sources of finance

"Borrowing can be an important part of improving the lives of African citizens. But we must find a balance between the present and the future, because debt is dangerous when unsustainable," Kituyi said.

The report argues that African countries should look for complementary sources of revenue, including remittances, which have been growing rapidly, reaching 63.8 billion dollars to Africa in 2014.

The report discusses how remittances and diaspora savings can contribute to public and development finance.

According to the report, at least 600 billion U.S. dollars will be needed each year to meet the Sustainable Development Goals in Africa.

This amount, the report says, equates to roughly a third of countries' gross national income. Official development aid and external debt are unlikely to cover these needs, the report finds.

The report says Africa in partnership with the international community must also tackle illicit financial flows, which can be as high as 50 billion dollars per year.

"Between 1970 and 2008, Africa lost an estimated 854 billion dollars in illicit financial flows, roughly equal to all official development assistance received by the continent in that time," it says.

It calls on governments to be vigilant of the borrowing risks as public-private partnerships have also started to play a more prominent role in financing development.

"In Africa, public-private partnerships are being used especially to finance infrastructure. Of the 52 countries considered during the period 1990-2014, Nigeria tops the list with 37.9 billion dollars of investment, followed by Morocco and South Africa," it says.

The report finds that several African countries including Kenya, Ghana, Nigeria, Tanzania and Zambia have also borrowed heavily on domestic markets.

"In some countries, domestic debt rose from an average 11 percent of GDP in 1995 to around 19 percent at the end of 2013, almost doubling in two decades," finds the report. Endit