Home Africa Budget cuts will hurt economies – experts

Budget cuts will hurt economies – experts

55
0

Austerity measures by the governments in an effort to tame public expenditure risk sinking Sub Saharan African countries into a financial crisis.

Experts warn that most low-income countries in Africa are staring at extremely uncertain outlooks in 2022 and 2023 with most states set to experience fiscal contractions.

A report by lobby group African Forum and Network on Debt and Development (AFRODAD) and Oxfam shows that austerity measures are regressive and impact mostly on the poor, thus widening socio-economic inequalities

The report titled Coping with Austerity Amid Multiple Crisis Facing African Countries highlighted the impact of austerities arising from the rising public debt and IMF conditions on social services, health, education, care work and inequality.

Enock Nyorekwa Twinoburyo, a Senior Economist at The Sustainable Development Goals Center for Africa (SDGC) says targeting social protection, which is already significantly low, will increase vulnerability of the poor

Already the wage bills are low as share of budget and not growing in real terms, austerity cuts in health budgets lead to; worse health outcomes,” said Nyorekwa.

He pointed out that the removal of measures such as the maize subsidy impacted poor Kenyans more due to higher prices further widening the economic gap. 

According to experts, if public expenditure is reduced by 20 per cent, GDP will automatically reduce by 20 per cent.

This means there are less investment and employment and therefore less tax revenue for government.

If governments further tighten the belt, it means GDP will shrink further according to Abdirahman Bilacha an international banking expert.

The Kenya Kwanza government is currently hard-pressed for resources to finance its essential projects. 

The has seen The National Treasury order accounting officers of all public institutions to audit the salary requirements for their staff to curb abuse of funds through avoidable perks such as allowances.

Further the entire budget on foreign travel, training, purchases of furniture and motor vehicles has been cut in a Sh300 billion-austerity plan on the expenditures of ministries, departments, and agencies (MDAs) in the current 2022/2023 budget.

Expenditure on hospitality, travel, and training has also been targeted.

Joab Okanda the Pan Africa Senior Advocacy Advisor at Christian Aid said austerity measures are not the way to go for African countries.

Among the proposals the lobby is recommending is the rationalisation of budget and widening of the domestic revenue

“Instead of depending on the budget cuts they should deepen and widen revenue reforms through medium term revenue strategies,” said Okanda.

He said any budget cuts should be on military, defense, and bank bailouts and other expenditures that benefit powerful interest groups and not the general population.