The International Monetary Fund (IMF) has advised Nigeria and other Sub-Saharan African countries to focus on eliminating tax exemptions and mobilise domestic revenue to reduce their fiscal deficits.
It said this was a better approach than reducing fiscal expenditure which could be detrimental to economic development. The lender stated this in a paper titled, ‘How to avoid a debt crisis in Sub-Saharan Africa.’
It said, “Sub-Saharan African countries tend to rely excessively on expenditure cuts to reduce their fiscal deficits. Although this may be warranted in some circumstances, revenue measures, like eliminating tax exemptions or digitalising filing and payment systems, should play a greater role.
“Mobilising domestic revenue is less detrimental to growth in countries where initial tax levels are low, whereas the cost associated with reducing expenditures is particularly high given Africa’s large development needs. While difficult to achieve, large and rapid increases in revenue have been observed in some countries like The Gambia, Rwanda, Senegal, and Uganda, which relied on a mix of revenue administration and tax policy measures.”
The IMF also said that developing countries could boost their Gross Domestic Product by about eight per cent in the next few years if they increased the rate of women participating in the labour force.
IMF said this in a weekly chart posted on Wednesday on its website. It stated that bridging the gap between the number of men and women who worked was one of the very important reforms policymakers could make to revive economies amid the weakest medium-term growth outlook in more than 30 years.
“We estimate that emerging and developing economies could boost gross domestic product by about 8 per cent over the next few years by raising the rate of female labour force participation by 5.9 percentage points—the average amount by which the top 5 per cent of countries reduced the participation gap during 2014-19,” the IMF said.