A latest report by the Africa Center for Economic Transformation (ACET) has said there is the need for governments to take advantage of the new players in global finance as traditional official development assistance (ODA) to Africa is dwindling.
“The external development finance (EDF) landscape is changing, the sources, nature and mechanism are rapidly evolving. The traditional official development assistance to Africa is dwindling. China, India and Brazil are emerging as important state players in global finance.
“Philanthropic and other private organizations are also emerging as major players in their own right with new vehicles of development assistance. For developing countries, this emerging landscape brings new opportunities as well as challenges and risks in meeting their development priorities,” ACET said in its report on Mobilising and Managing Financial Flows for Development.
The report, which studied six countries–Burkina Faso, Ghana, Rwanda, Tanzania, Uganda and Zambia– reviewed and assess recipient-country experiences in the emerging external development finance landscape.
The report aims more broadly to analyze how they mobilize, allocate and manage the variety of external resource inflows and how they manage relations with providers.
The report found that there is an increase shift from traditional development assistance to other financial flows, to which international private capital flows are making the largest contribution, saying by 2014, the share of international private capital flows in total external development finance (EDF) had exceeded that of traditional ODA, as it constitutes 82 percent in Ghana, 63percent in Zambia and 53 percent in Uganda.
“ODA remains a critical source of funding, but it is on the decline, constituting an increasingly smaller portion of total financial flows in all six study countries. For example, in Ghana, net ODA as a percentage of GNI declined from 10.9 percent in 2005 to 5.3 percent in 2010 and to 2.8percent in 2013.
“In Zambia, net ODA fell from 15.2 percent of Gross National Income (GNI) in 2005 to 4.9percent in 2010 and dropped further to 3.9percent by 2014,” the report said.
On how government systems are adapting, the report said countries are proving slow to act, adding that policy and legal frameworks for mobilizing development finance have remained largely the same over the last decade, and the weaknesses in current frameworks have become more evident with the changing composition and terms of EDF, particularly the lack of provisions for dealing with emerging state and non-state actors.
However, Rwanda is an exception as it has an elaborate framework for managing ODA and has shown that it is adapting quite well to the shifting aid architecture.
“The bright spot is that most of the study countries are preparing new development cooperation frameworks or action plans to reflect the changing landscape. Uganda and Ghana passed new public financial management (PFM) laws in 2015 and 2016 respectively to integrate all financial regulations into one overarching law so as to address persistent weaknesses and to promote discipline, transparency, and accountability in PFM
However, the report said implementation has generally been poor, and institutional reforms to implement the new policies have been lacking.
The report therefore recommended on the declining ODA that recipient African governments should take advantage of the new parameters for development finance that have emerged in the context of the post-2015 perspectives.
Original Post at BFT Online