Africa’s resilience to economic shocks requires national solutions—Prof Urama

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Professor Kevin Chika Urama, Vice President of the Economic Governance and Knowledge Management Complex at the African Development Bank (AfDB), called on African governments to focus on strengthening their economic fundamentals through country-based solutions.

This includes increasing domestic revenue mobilization, building strong internal relationships and exchanges, and promoting African-made products.

In addition, African countries need to increase their productivity and stop being primarily commodity producers, create an indigenous stabilization fund and address the leaks in their public financial management systems.

Professor Urama, who is also acting chief economist at the AfDB, said this would make African economies resilient to global shocks such as the COVID-19 pandemic, the Russian-Ukrainian conflict and future shocks.

It would also enable Africa, which is the second largest and second most populous continent in the world, to have sustainable development, create jobs, especially for its youth and reduce poverty and inequality. .

He said this in an exclusive interview with the Ghana News Agency on the sidelines of the just-concluded AfDB Annual Meetings hosted by Ghana.

He said: “The fundamentals of our macroeconomic policy management are the ones we need to look at. If you look at our economy, it is structured in such a way that global shocks affect us significantly.

Therefore, Africa needs to increase its domestic revenue mobilization and not depend more on external financing.

The continent is also expected to boost intra-African trade through the African Continental Free Trade Area (AfCFTA).

“We also need to build more inter-African relations. Nigeria trades with Ghana, and Ghana trades with Kenya, and so on, and so on,” the Acting Chief Economist added.

Professor Urama said the implementation of the African Continental Free Trade Area was crucial to ensuring sustainable intra-African trade as it would serve as a means of opening up African economies to internal and external traders.

“We need to make sure we have an industrial policy that allows Africa to produce the goods we need. As Africans, we need to start consuming African products; buy the clothes of Africans and redirect our tastes towards the things we produce locally,” he said.

He indicated that when such things are done: “That way when there is a global shock, we don’t have the impacts as severe as we have seen now.”

He also said there was a need for a Stabilization Fund, which would help expand Africa’s fiscal space by providing enough liquidity to countries when hit by a crisis.

“Africa is the only region that does not have this…which is why the African Development Bank has proposed an African Financial Stabilization Mechanism, to manage debt and re-engage growth-enhancing investments through financial buffers,” Professor Urama said.

The United Nations Conference on Trade and Development (UNCTAD) in a 2020 report showed that Africa loses an estimated US$88.6 billion to illicit financial flows including trade misinvoicing, fraud taxation and corruption.

Commenting on this, Professor Urama said, “If we are able to improve transparency and accountability in our financial mechanisms and financial systems, we will be able to address some of these issues.

Before COVID-19 hit, the International Monetary Fund (IMF) observed in 2019 that four of the 10 fastest growing economies were African and estimated it would rise to six by 2020.

The African Union (AU), however, has reported that due to the pandemic, some key sectors of the African economy have experienced a downturn, including tourism, air transport, the oil sector and loss of jobs.

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