Increase tax rate,cut budget-IMF urges African countries

As reported by Vanguard

The International Monetary Fund IMF has called on Africa countries to address fuel subsidy, cut 2015 expenditure profile, increase in tax rate and exchange rate flexibly where possible as measures that could help countries tied over the raving global oil price crash.

Speaking at the IMF Africa causes meeting held in Angola Mr. David Robinson, the Vice-Director of the International Monetary Fund (IMF), and one of the speakers at the African Caucus said that the fall in oil prices is a significant negative shock for the oil exporting countries which have had to make marked adjustments.

David Robinson, who presented the theme “Africa: Regional Economic Outlooks”  pointed said that public financial measures countries affected by crash in oil prices can adopt  include “budget cuts  in the 2015 expenditure, above all in investments, fuel subsidies reform, taxation measures, including tax rate increases, and greater exchange rate flexibility wherever possible”.

Robinson noted that the oil producing countries have to tackle issues such as the orderly implementation of spending cuts, prioritise social sectors and infrastructure and mobilise non-oil revenues. It is necessary to address low liquidity in the foreign exchange markets in countries with flexible arrangements and the absence of foreign exchange instruments in countries whose currency is indexed to the Euro.

The forum of Africa caucus of the International Monetary Fund/World Bank Group in its deliberation urged Africa leaders to take immediate action to combat illicit financial flows in Africa. The forum assembles more than nineteen Ministers of Finance and fourteen Governors of the Central Banks of Africa countries.

Speaking at the forum The President of the African Group and Minister of Finance of Angola, Armando Manuel, declared in the welcoming speech to the participants at the Luanda Caucus- 2015 meeting that the development of the continent continues to be affected by insufficient resources.

He said “This obliges us to look for other sources of financing including savings that can be made from restricting illicit financial flows from Africa, especially measures that can be taken to radically reduce these mass monetary outflows and guarantee that they are used for development in the African continent”.

The emphasis of this fell on combating illicit financial flows to improve the mobilisation of internal resources, a topic addressed by Thabo Mbeki, the Ex-President of South Africa. The forum assembles more than nineteen Ministers of Finance and fourteen Governors of the Central Banks representing approximately forty member countries of the African Caucus, including Angola.

Also in his opening speech Manuel Vicente, representing the President of Angola, José Eduardo noted that African countries must have a more comprehensive outlook, integrating the diversification of the economy based on national and regional value chains in potential competitive sectors.

“In truth, we have to add more value to our resources, whether in the directly productive activities, or through infrastructure and additional or supporting activities such as, transport and telecommunications systems, banking and financial systems generating integrated development hubs.”

According to a Report on Competitiveness in Africa, published this year, infrastructure vulnerability is one of the reasons for the poor diversification and weak competitiveness of the economy in Africa. Discussion panels for the opening day include regional economic outlooks, economic transformation and diversification, combating illicit financial flows to improve mobilisation of internal resources, environmental and social safeguards: consultations to the governors.