African government that are struggling with low commodity prices have been urged by the International Monetary Fund (IMF) and the African Development Bank (ADB) to diversify their economies, control spending and raise tax revenues in order to make up for lost earnings.
Sub-Saharan economic growth is likely to slow to 3% in 2016, its weakest in nearly two decades, also hurt by drought and the after-effects of last year’s Ebola outbreak in West Africa, the IMF said this month.
“We have to presume that the low (commodity) prices will be around for a long time,” IMF First Deputy Managing Director David Lipton told a news conference at the World Economic Forum on Africa which is going on in Kigali, Rwanda.
“It makes sense for countries to begin to adjust … which means controlling spending, finding ways to diversify the economy, finding ways to raise other forms of government revenue through the tax system,” he said.
Oil producers including Nigeria, Cameroon and Gabon have been among the hardest hit, while mineral exporters such as Zambia and South Africa have also suffered.
Many African currencies have tumbled in value. In Nigeria’s case, the government has responded by fixing the dollar rate, a move that has scared off investors. In other nations, trade deficits have ballooned.
We’ve witnessed a number of the countries are facing balance of payment deficit and some of them are also facing domestic fiscal imbalance,” African Development Bank President Akinwumi Adesina said on the sidelines of the conference.
He said it was vital for African nations to establish sources of income that ran counter to the cycle of commodity prices.
