Africa’s full economic potential hindered by external pressures, domestic factors – Elsie Addo Awadzi

Africa’s full economic potential hindered by external pressures, domestic factors – Elsie Addo Awadzi

Second Deputy Governor of the Bank of Ghana (BoG), Elsie Addo Awadzi, has noted that the realisation of Africa’s full economic potential is being hindered by the continent’s exposure to external environment as well as certain domestic economic factors.

Delivering the keynote speech at the Money Summit 2022 themed Africa’s Economic Growth – Facilitating Investment, Payments and Settlement Systems, the Deputy Governor noted external pressures such as commodity price shocks and volatile global financial conditions coupled with domestic pressures such as budget deficits and high debts have been a challenge to the continent realising its full economic potential.

Regarding external pressures affecting and hindering the continent’s economies, the Deputy Governor’s assertion was on the back of the Covid pandemic and the recent Russia-Ukraine war that have led to sharp rise in energy and food prices in countries on the continent as well as heightened uncertainty and increased the economic fragility of most African countries, further complicating the recovery process.

According to the Second Deputy Governor, the IMF estimates that African economies will need some $285 billion additional financing from 2021-2025 to effectively respond to the effects of the COVID-19 pandemic.

Whereas, the African Development Bank also estimated at the peak of the pandemic, that African economies were going to need some $484 billion from 2020-2022 to address the socioeconomic impacts of the pandemic and to support economic recovery alone.

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Speaking further at the event, she noted that the existing financing gap for a robust macroeconomic recovery with medium-to-long term investments must be  closed by African governments through the introduction of tough reforms, including measures to improve public finances through mobilizing additional domestic revenue (tax and non-tax) and enhancing the efficiency of public spending (especially on health and investments); as well as measures to promote competitive investment climates and thereby attract private investments.

Touching on the African Continental Free Trade Area (AfCFTA), the Deputy Governor stated intra-regional trade presents another big opportunity for the continent’s economic growth prospects, which must be fully activated.

According to her, for the AfCFTA to change the economic fortunes of the continent, concerted efforts from all stakeholders – national and regional authorities, public sector and private sector will be needed.

Adding that among other things, stakeholders should work towards the following:

• Enhancing private and public sector savings by rationalising spending to create space for resources to fund critical investment needs;

• Improving the business operating environment to attract private capital – both national, regional and international – into key infrastructure to support critical value chains. To do this, we need to promote the rule of law and a compliance culture, protect property rights through enforcement of contracts, and promote transparency, accountability, political and macroeconomic stability;

• Leveraging technology to improve remittance flows and tapping into other diaspora resources to help close the financing gap;

• Promoting increased digitalisation of economic activity, and empowering marginalized segments such as the youth, women, and persons who are differently abled, to unleash their full contributions to our economic growth;

• Paying attention to climate change and environmental degradation and their growing adverse impacts on agriculture, other key sectors of African economies, and our water bodies, while devising effective derisking mechanisms to promote sustainable and resilient growth in the longer-term.