Get the plumbing right: Financial integration should support Africa’s trade integration

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By Amadou Sy, Nonresident Senior Fellow, Brookings Institution and Advisor, African Department, IMF1


Learn more about this timely topic at the upcoming
18th International Economic Forum on Africa


Africa-plumbingAfrican countries trade much more with countries outside the continent than with each other within the continent. According to the United Nations Economic Council for Africa, trade between African countries stands at about 16% of the continent’s total trade, the lowest intra-regional trade globally. Compare this with 19% intra-regional trade in Latin America and 51% in Asia.

Policies to reduce obstacles to intra-African trade have been a priority for African policy makers. After forging ahead with stronger trade integration within existing Regional Economic Communities (RECs), African policy makers took an additional step in 2018 with the Continental Free Trade Agreement (CFTA). Signed now by 44 African countries, the CFTA marks a milestone on the road towards a single continental market for goods and services. Continue reading

Data: The first step to improving finance in African cities

By Astrid R.N. Haas, Manager of Cities that Work, International Growth Centre


This blog is part of an ongoing series exploring the intersection between intermediary cities in developing countries and sustainable development


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Hargeisa, Somalia. Photo: Shutterstock.com

Many African cities are urbanising rapidly. Yet, they are unable to adequately service their growing populations with the necessary infrastructure and amenities due to a lack of finance. Furthermore, retrofitting infrastructure on a city that has already grown is significantly more expensive. Improving local government finance is therefore very high on these cities’ agendas.

Cities can improve their finances in various ways. Perhaps one of the most underutilised yet high potential methods is property tax. Why? Rapid population growth is generally accompanied by a construction boom, increasing the number of properties. Furthermore, if demand for properties rises faster than supply, this will also increase property values. And such values will further benefit once public investments in infrastructure as well as improvements in service delivery are made. All these factors have a positive impact on property tax collection, and thus have the potential to unleash a virtuous cycle for local government revenue.
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Who will end global poverty?

By Michael Sheldrick, Vice President of Global Policy and Government Affairs, Global Citizen 1

shutterstock_249974521For the second year in a row, the Trump Administration has proposed slashing U.S. development assistance programs by almost a third. Even though strong support on both sides of the U.S. Congress may prevent many – but not all – of these cuts becoming law, it is clear that the best hope for this period may be maintaining current levels of support. As the largest donor country, U.S. leadership on foreign aid is incredibly impactful. For example, based on our experience at Global Citizen, business leaders and policy makers announced 390 collective commitments in response to campaigns we either led or supported between 2012 and 2017. These commitments totaled more than USD 35 billion with nearly half of that, USD 15 billion, coming from just 5 countries, including the United States. And of the total number of new commitments, the United States makes up a nearly a quarter. In fact, the United States has been one of the largest contributors to many of the causes we champion, be it polio eradication, water and sanitation, or food aid.
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Maximising the public-private investment multiplier

By Alain de Janvry and Elisabeth Sadoulet, Professors at the University of California at Berkeley and Senior Fellows at the FERDI
 

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At the FERDI-IDDRI conference on “Development, Climate and Security” held in Paris on January 15, 2018, Barbara Buchner from the Climate Policy Initiative reported on the state of global climate finance flows for mitigation and adaptation. She made two points. First, finance is under-invested to combat climate change if the COP21 target in temperature increase is to be met. Second, private investment’s role in complementing public investment in climate finance is large, with an estimated 2/3 private for 1/3 public in current total contributions. This stresses the fundamental part private investment can play in meeting the COP21 objectives, particularly at a time when governments face multiple demands on public expenditures.

With public investment targeted to induce private investment, this raises the issue of public investment’s effect as a private investment multiplier. A useful way of thinking about the under-investment issue is consequently how to target public investment to maximise the public-private investment multiplier.

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Promoting innovation: Lessons from the Global Fund

By Guido Schmidt-Traub, Executive Director, Sustainable Development Solutions Network

funding-health

Since its inception in 2001, the Global Fund to Fight AIDS, Tuberculosis and Malaria has become a highly respected pooled financing institution that scores top marks in independent reviews.1, 2

It has disbursed some USD 40 billion in grants for complex disease control and treatment programmes in fragile and non-fragile countries alike.

Success was far from assured in 2001, as developing countries, particularly in sub-Saharan Africa, faced a perfect storm of surging HIV/AIDS, multi-drug-resistant tuberculosis and surging malaria deaths. Control and treatment interventions were available in high-income countries, but no one knew how to tackle the diseases in resource-poor settings. In particular, HIV/AIDS treatment was deemed impossible in Africa and was outside recommended approaches for tackling the disease.3

The Global Fund was designed precisely to tackle the lack of quality programmes and implementation mechanisms in developing countries. All too often, however, it is seen as just another funding mechanism. Many reviews lump it together with other multilateral mechanisms and trust funds.4

This is a mistake. The Global Fund has unique design principles that set it apart from bi- and multilateral financing mechanisms with the notable exception of Gavi.5

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Reflections on scaling up financing for development

By Charlotte Petri Gornitzka, Chair of the OECD Development Assistance Committee

Blended Finance Watering CanSpending last week at the World Economic Forum in Davos and today in the Private Finance for Sustainable Development conference, my head is spinning with financing for development issues.

Chairing the OECD Development Assistance Committee (DAC), I often find myself reminding members to uphold their aid levels and to use their public finance resources to stimulate private capital for sustainable development.

It’s a balancing act. Governments risk being accused of shying away from commitments when we talk too much about the “innovative financing tools” and about involving the private sector for development outcomes. It is true that upholding aid levels and directing them to countries most in need will continue to be important to leave no one behind. However, OECD countries must continue to move from talking to taking action when it comes to stimulating private finance.

Why? Faced with an estimated USD 2-3 trillion annual funding gap for achieving the Sustainable Development Goals, public or philanthropic capital will be able to meet only half of it; opportunities for the private sector, thus, are significant.

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Helping entrepreneurs thrive in Africa

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By Rémy Rioux, Director General of Agence Française de Développement


Learn more about this timely topic at the upcoming
17th International Economic Forum on Africa
Register to attend


Africa-AFDAfrican entrepreneurs are a key driving force for the continent’s emergence. 80% of Africans view entrepreneurship as a good career opportunity. Take African start-ups. They pioneer social innovations. Thanks to the fintech industry, for example, the diaspora can connect with their relatives and directly finance their health expenses, as in the case of Leea. This company benefitted from Digital Africa, an initiative of the Agence Française de Développement (AFD) to help African start-ups through financing, coaching and business training. African entrepreneurs and customers show the way forward and accelerate the continent’s leapfrogging in terms of technology innovation in banking, health, agriculture, urban mobility, education, and more.

However, at a macro level, 80% of Africa’s labour force works in the informal sector. Unemployment is high, especially amongst the youth, who are three times more likely to be unemployed than adults. Development banks can play a role in addressing the macro policy, nurturing job-intensive growth across the continent and financing gaps. How?
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