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Resourcing NEPAD through Domestic Financing

Resourcing NEPAD through Domestic Financing. Dr. Patrick Osakwe Chief, Finance, Industry and Investment UNECA. I. Renewed political commitment. A major challenge facing African countries and regional institutions is how to mobilize adequate financial resources for development

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Resourcing NEPAD through Domestic Financing

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  1. Resourcing NEPAD through Domestic Financing Dr. Patrick Osakwe Chief, Finance, Industry and Investment UNECA

  2. I. Renewed political commitment • A major challenge facing African countries and regional institutions is how to mobilize adequate financial resources for development • This challenge is evident in the widening gap between investment requirements and resource availability • Since the adoption of NEPAD, African leaders have renewed their commitments to closing this financing gap through strengthening domestic resource mobilization. • African leaders have also emphasized the need to find more stable and sustainable sources of financing the NEPAD Agency and its programmes.

  3. II. The rationale for domestic financing of NEPAD programmes • Domestic finance is less volatile than external finance • It permits country ownership of development policies and outcomes. • Creates incentives for more accountability and transparency in use of public resources

  4. III. Facts on Development Finance

  5. Savings ratios in Africa are low relative to developing country average as well as domestic investment requirements

  6. There are several reasons for low domestic resource mobilization • Low income as well as tax base • Reliance on a narrow set of taxes • Undeveloped financial systems • Capital flight • Large informal sector • Weak administrative capacity

  7. IV. Ongoing Study on mobilizing domestic resources for NEPAD programmes • The study seeks to answer the following questions: • How can African countries strengthen domestic resource mobilization? • What are the feasible options for mobilizing domestic resources for NEPAD Agency and its programmes? • What are the advantages and disadvantages of the identified options? • What are the domestic and regional institutions that are needed to implement the proposed options?

  8. V. Some policy options being considered • Raising more revenue through taxation • (gap exists between tax potential and tax revenue) • Property taxes, environmental taxes, airline ticket taxes • Exploiting the potential of Sovereign Wealth Funds • Developing public-private partnerships • Reversing and stemming capital flight • Diaspora bonds • Issuing bonds on international capital markets • Strengthening domestic financial systems and regional capital market development

  9. Obstacles to the use of capital markets for savings mobilization (% of respondents to ECA survey)

  10. VI. Deliverables and timeline • An interim report based on desk research is expected in mid-July • Country surveys and case studies will be conducted in selected countries (mid August) and the findings will be used with the interim report to prepare a final report • The final report will be presented to the January 2013 Heads of State and Government Orientation Committee Summit

  11. THANK YOU

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