Africa’s overall fiscal deficit in 2016 remained unchanged from 2015 at 5.9 per cent, the United Nations Economic Commission for Africa (ECA) has said.
The commission’s Economic Report on Africa (ERA, 2017) obtained from its website on Friday said that the maintenance was due to spending cuts and increased utilisation of external reserves to fund development projects in some countries.
The report is titled: “Urbanization and Industrialization for Africa’s Transformation.”
It said that North Africa continued to have the largest fiscal deficit on the continent, in spite of a slight decline due to a stable fiscal deficit in Algeria and a narrowing one in Egypt.
It also said that spending cuts on large infrastructure projects in Algeria were offset by a further rise in social spending, while the phasing out of fuel subsidies helped to reduce Egypt’s fiscal deficit.
”The fiscal deficit in Southern Africa remained unchanged at 4.4 per cent of Gross Domestic Product (GDP),” it said.
“Although South Africa’s increased because of slow growth in revenue and heavier spending, this was counterbalanced by declining deficits elsewhere.
The report stated that East Africa’s fiscal deficit widened from 4.0 per cent to 4.6 per cent in 2016, reflecting expansionary fiscal policies.
It said that this was mostly evident in Ethiopia because it spent notably on infrastructure.
Kenya recorded a new railway line, sharply increased government salaries and transfers to new counties, while Uganda established hydropower projects.
It said that the fiscal deficit widened in West Africa in 2016, from 1.8 per cent to 2.8 per cent of GDP, largely reflecting in Nigeria with an increase in public spending, especially on security.
In Côte d’Ivoire, there was an increase in the minimum wage, higher security spending and heavier public investment on infrastructure.
In Ghana, election-related expenses and greater spending on public sector wages was recorded.
In Central Africa, the fiscal deficit widened from 5.1 per cent in 2015 to 5.8 per cent of GDP in 2016.
This is mainly because of expansionary fiscal policies in Cameroon, arising from public expenditure on transport and power infrastructure and lower oil revenue.
“Equatorial Guinea was occasioned by increased public investment in infrastructure and lower oil revenue, and in Congo due to government spending on public sector wages and lower oil revenue.
“Largely driven by low oil prices, as a group, the oil exporting countries’ fiscal deficit widened further from 6.2 per cent to 6.5 per cent of GDP in 2016.
“In contrast, oil-importing countries’ fiscal deficit improved marginally from 5.6 per cent to 5.5 per cent.
“The mineral rich countries’ fiscal deficit was the second highest on the continent, though it slightly declined from 6.5 per cent of GDP in 2015 to 6.1 per cent in 2016.’’
The report, however, said that African inflation climbed to 10 per cent from 7.5 per cent and was expected to remain at about the rate in 2017.
It said that domestic supply-side factors like drought, rising electricity prices and falling currencies were factors that contributed to inflation on the continent.
The report examines how the continent can accelerate industrialization as a vehicle for Africa’s structural transformation by harnessing opportunities arising from rapid urbanization.