Macroeconomic Frameworks for Structural Transformation of African Economies
Growth and development focused macroeconomic frameworks play a critical role in creating a conducive environment for a country’s transformation. In addition to short term macroeconomic stabilization, effective macroeconomic management has a developmental role to play in an economy. This is done by ensuring that government revenue generation and allocation of resources promote both productivity-enhancing structural change and institutional and societal transformation towards an articulate and inclusive economy.
Hence exploring macroeconomic policy frameworks appropriate for structural transformation of African economies in the 21st century is imperative. The forthcoming ECA report Macroeconomic framework for structural transformation of African economies seeks to do this through a thorough review of the evolution of macroeconomic and development policy frameworks adopted by African countries over the last four decades, and a critical analysis of the elements of a new overarching macroeconomic framework for advancing Africa’s structural transformation agenda.
The report argues that as a direct result of how the relationships among policy frameworks, institutional configurations, and macroeconomic outcomes evolved, the policy frameworks that have prevailed in the past failed to undertake public investment in a way that effectively enticed private investment. At the same time, inadequate provision of quality public goods to domestic stakeholders resulted in a rapid depletion of stocks of productive assets, rather than accumulation from normal development processes.
At the backdrop of the narrative of “Africa rising”, Africa is positioned at a historically decisive juncture with many opportunities as well as formidable challenges. Besides ensuring macro stability, macroeconomic policies should be envisioned in relation to an overall, pro-active, developmental strategy specifically designed to facilitate the process of transformation of economic and social structures, and engendering pro-poor and shared growth.
The new macroeconomic framework is based on key building blocks addressing the particular deficits faced by African economies such as: i) investing in human resources; ii) building economic and social infrastructures; and iii) realizing institutional transformation for productive private-public coalition. The ambitious vision of structural transformation necessitates a cross-cutting approach to policy frameworks, drawing attention to the dynamics between the macroeconomic framework and complementary policies in areas such as trade, technology, social sector and industry.