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ECA recommends aligning fiscal policies with the economic cycle

The Economic Commission for Africa (ECA) highlighted in its Economic Report 2019 that African countries must align their fiscal policies with the economic cycle to preserve macroeconomic stability and ensure accelerated and sustained growth.

Presented in the margins of ECA’s 52nd Conference of African Ministers of Finance, Planning and Economic Development (COM2019), which ends today in Marrakech, this report, entitled “Fiscal Policy for Financing sustainable development”, identifies six key areas for increasing government revenue.

It therefore advocates anchoring fiscal policy in national medium-term financing strategies, which could enable these countries to take full advantage of the potential of all government revenue (tax and non-fiscal), reports the report. In fiscal policy, governments need to broaden the tax base by taxing sectors that are difficult to tax, including agriculture, the informal economy, the digital economy and the natural resources sector, says ECA noting that tax incentives need to be re-evaluated or even removed by states if they do not meet the target and their limitation could stem tax evasion and improve revenue collection.

In addition, investing in better data collection methods and techniques could strengthen monitoring of non-tax revenue collection and non-reporting, the source added.

ECA also advocates the reform of tax administration systems through digitization and other information technologies as a solution to increase revenue mobilization, emphasizing that the deployment of digital technologies must be accompanied by the capacity of policymakers and tax collectors on how to leverage the data generated by digitization for more effective assessments.

This report presents a factual assessment of the nature and results of fiscal policies in Africa, including an analysis of challenges, opportunities and best practices.

As a reminder, COM2019 is held under the theme “Fiscal Policy, Trade and the Private Sector in the Digital Age: A Strategy for Africa”.

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