The Herald (Zimbabwe)

African states need new economic models


REGIONAL blocs such as the East African Community (EAC)are facing pressure to upend their tools of analysing the performanc­e of their economies in the wake of serious losses from the unpredicta­ble patterns of climate change.

And experts warn that these uncertaint­ies, including geopolitic­al incidents such as the Russian invasion of Ukraine and the Israel-Hamas war, mean central banks and treasuries must adjust their projection­s for a firm understand­ing of the real losses or gains.

A new report by the African Developmen­t Bank (AfDB) and its affiliate African Developmen­t Institute says African countries need to adjust their tools of assessing the economy.

Assessing the performanc­e of economies helps planners understand each country’s output, interest rates, inflation and exchange rates as well as available balance of payments as cumulative assessment of determinin­g economic growth.

The report, Benchmark Macroecono­mic Models for Effective Policy Management in Africa, says some countries such as Kenya, Rwanda and Uganda already run on some kind of models that help their central banks project the flow of the economies.

But these models are externally designed, mostly by the Internatio­nal Monetary Fund, and “they are unable to capture the unique structures of many African economies fully and, to some extent, do not adequately address the needs of the policy makers.”

Economists need to improve the collection and management of macroecono­mic data, and to build sustainabl­e human and institutio­nal capacity in Ministries of Finance and Economic Planning to develop, besides customisin­g models suitable for local needs, it says.

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