The government has to redirect its efforts to mobilise revenues within the domestic economy in order to wean itself from dependence on foreign financing of development projects, the Director at the African Centre for Economic Transformation (ACET), Dr Edward K. Brown, has said.
He said because external development assistance was drying up, especially to African countries, more resource allocation should be directed to the private sector to expand, create jobs and boost avenues of mobilising revenues domestically.
“The government has to focus more on efficiency in public expenditure management which means that there should be due diligence in assessing where resources are going, whether they are applied in areas of national priority and whether they are supporting key interventions that will fuel the growth of the local economy,” he added.
He was speaking at a forum in Accra to present findings of a research conducted by the ACET on “mobilising and managing financial flows for development.”
The two-year research, which was conducted in six African countries, was funded by the Bill and Melinda Gates Foundation, with a focus on reviewing and analysing how recipient countries mobilise, allocate and manage the variety of external resource inflows.
The countries are Ghana, Burkina Faso, Rwanda, Tanzania, Uganda and Zimbabwe.
Participants in the forum were drawn from civil society organisations and policymakers from the six countries, as well as Kenya and Cote d’ Ivoire.
Dr Brown, who is in charge of the Country Engagements and Operations at ACET, said Ghana and other African countries needed to be more strategic and create structures that would leverage the resources of the private sector.
“There is the need for governments in Africa to be able to understand the dynamics of the evolving international development finance landscape and be able to put in place policies, institutions and implementation frameworks to take advantage of the domestic sector,” he said.
One of the key findings of the research showed that the volume of external development finance had been rising in the countries studied, but growth in their Gross National Incomes (GNI) remained flat.
The research also indicated that Ghana and Tanzania had been the major recipients of external assistance, recording the highest year-to-year increase, with Burkina Faso and Rwanda receiving the least among the six countries.
The study also revealed an increasing shift from traditional development assistance to other forms of financial flows, to which international private capital flows are making the largest contribution.
A worrying development, according to the report, is the slow pace at which countries are instituting systems in the local economy to respond to the changing dynamics, especially policy and legal frameworks for mobilising development finance.
The study observed that at the country level, traditional development partners were realigning their assistance to the market and exploring new development financing mechanisms, including offering national risk guarantees and setting up development finance institutions in the recipient countries.
The Advisor, Finance for Development at the World Bank, Dr David Kuijper, observed that the ability of countries to mobilise financial resources and efficiently utilise them through institutional restructuring was key to economic development.
Other speakers underscored the need for government policies and institutional frameworks to be geared towards growing the local private sector to spur growth.