By: Nghiinomenwa Erastus

Multilateral institutions/financiers can provide technical assistance to African leaders beyond offering traditional reforms, which ignore domestic dynamics.

Says Ken Opalo, an assistant professor in Georgetown University’s School of Foreign Service, presented in the International Monetary Fund’s Finance and Development Magazine last week.

The magazine was a special feature for the IMF Africa Department titled: Africa at a Crossroads: Learning from the Past and Looking to the Future.

“It is not enough to offer orthodox reforms borne of ignorance of local contexts, watch them fail, and blame “a lack of political will,” wrote.

He said taking politicians’ incentives seriously must be a core part of technical engagements. 

Opalo wrote that multilateral institutions such as the IMF, World Bank, and African Development Bank have a significant role in fostering the democratization of Africa’s public finance management systems.

The assistant professor assessment found that the African state’s weak public finance management levers are a significant threat to economic growth and development.

He said only some of the revenue collected from taxpayers in African states reaches the public in the form of public goods and services.

Much gets lost to spending on poorly planned ‘white elephant’ projects, corruption, and general waste.

Opalo explained that when it comes to revenue, many African countries are underperforming on tax collection.

An assessment was done in 2018 shows that the average tax collection as a share of gross domestic product in Africa was 16,5%-varying from 6,3% in Nigeria to 32,4% in Seychelles. 

For Namibia, revenue as a percentage of GDP has been trending between 30% and 34% since 2017. However, it is expected to fall below 30% for the current financial year (2021/22).

While on the spending side, weak legislative oversight means that budget appropriation, implementation, and oversight often reflect the executive branch’s priorities. 

This resulted in less collected funds reaching the public in public goods and services. 

As for borrowing, recent increases in public debt in a number of African countries have raised concerns about a lack of transparency and accountability.

Opalo also projected things to get worse “given Africa’s demographic and political trajectories, the challenges confronting its public finance management systems will only get tougher”.

He cautioned African leaders that ignoring the public is not an option, so Africa’s public finance management systems can no longer focus solely on macroeconomics or insulate taxation and public spending from popular politics. 

Instead, political bargains- within the guardrails of constitutional order must drive public finance management systems. 

Opalo stated that taxation must be linked to the provision of public goods and services to improve public confidence. 

In the same vein, to ensure that public spending reflects taxpayers’ priorities, legislators at national and sub-national levels must play a leading role in budget appropriation and oversight.

He also repeated the advice of the Institute of Public Policy Research that the policymaking and budgeting process must be participatory and sensitive to country-specific political realities. 

Opalo wrote that it is only through practice that African legislatures and other institutions establish the institutional habits and norms needed to democratize tax administration, public spending, and oversight fully. 

He said that outwitting legislative input into budget processes will stunt the institutional development of public finance management systems in the region – the long-run cost will be enormous, given the emerging public demands for goods and services. 

The demographic and political trends in African states suggest that unresponsive governments will increasingly come under populist pressure and risk popular revolt and removal through coups or mass uprisings if they fail to respond. 

According to Opalo research, addressing these problems will require more than technical fixes to the operations in African treasuries. 

This is because, at their core, public finance management systems reflect societies’ implied fiscal pacts. 

Thus, reforms should reflect the emerging electoral fiscal pact in African states- an important feature of this fiscal pact is the expectation that politicians must invest in visible and attributable public goods and services to stay in power or win elections legitimately.

Additionally, country engagements between multilateral financiers (IMF, World Bank and African Development Bank) must not begin with the executive branch.

In addition to interfacing with treasuries and central banks, multilateral institutions should meet regularly with legislatures and other relevant players in African states. 

He said many African countries have laws mandating legislative input in taxation, budget appropriation, debt procurement, and other public finance management system functions. 

The IMF and other multilateral institutions should leverage these statutory requirements to build solid and meaningful relationships with legislators.

During country visits, it’s not enough to meet only with the legislature’s speaker. The relationships must be broader and more profound, including with members of committees in charge of taxation, appropriation, and core spending sectors such as agriculture, education, healthcare, and infrastructure. 

Opalo added that addressing this will require more than general anti-corruption efforts.

Instead, reforms must target public perceptions and understanding of corruption’s core drivers, including low budget absorption capacity, political cronyism, and the essential features of the electoral exchange between politicians and voters. 

Instead of treating corruption as a moral or legal problem, reformers should recognize the relationship between certain kinds of corruption and distributive politics.

Email: erastus@thevillager.com.na