2018 - 2019 Edition of Citi Perspectives for the Public Sector

Citi Perspectives for the Public Sector |  2018-2019 55 Manage risks — Many African economies derive a significant portion of their revenues from commodity exports such as oil and gas and mining and minerals. The period of low commodity prices was therefore difficult. While the recent rise in commodity prices has given some breathing space to these countries, both budget revenues and expenses will suffer when the cycle turns, unless governments take early action to protect against volatility. Embedding appropriate commodity risk mitigation strategies in the budgetary process will give governments more certainty over commodity- related revenues and expenditure. In addition, these strategies can assist governments in the implementation of commodity-related subsidy reforms, such as fuel or food, by enhancing the predictability and consistency of price rises associated with the removal of the subsidies. Conclusion Debt levels in Africa have clearly risen over the past decade. What is less clear is whether the use of the debt proceeds has been properly invested or deployed in driving economic growth, reducing poverty and progressing the UN’s Sustainable Development Goals. The consistent economic growth rates and development advances in such countries as Ethiopia, Senegal and Rwanda suggest this has occurred in some countries. However, managing sustainable debt through growth alone is fraught with risks and complications. African sovereigns must continue to strengthen their fiscal resilience through economic diversification, structural reforms and resource mobilization. They must continue to be fiscally responsible by building and reinforcing their institutional capacity and knowledge. African sovereigns must also continue to develop and implement the appropriate strategies and processes to manage the risks inherent in their budgets and debt portfolios, and to maximize the volume and value of domestic resources. If they can continue on this path then debt distress and debt relief can be confined to the last century while the clarion call for poverty reduction and sustainable development can be met in this century. Many African economies derive a significant portion of their revenues from commodity exports such as oil and gas and mining and minerals.