Income classification dilemma

Windhoek- This past week, Ethiopia hosted the United Nations’ 3rd International Conference on Financing for Development to assess progress made in the implementation of the Monterrey Consensus and the Doha Declaration with emphasis on the constraints encountered in the achievement of sustainable development goals as well as actions and initiatives needed to accelerate economic growth.

The conference that took place in Addis Ababa from July 13-16, 2015 that was attended by Heads of State and Government, Ministers of Finance, Foreign Affairs and Development Cooperation; international bodies, and representatives of business and civil society, was aimed at strengthening global partnership for financing what the UN describes as “people-centred sustainable development.

UN Secretary-General Ban Ki-moon also told the leaders at the opening of the Third International Conference on Financing for Development that development finance needs a “reboot” if world leaders want to ensure the well-being of all people and the health of the planet.

“In a world in which both the global population and resource constraints are growing, development finance needs a reboot. Solutions lie in using all sources of finance–public, private, domestic and international. 

These must be matched by strengthened public policies and regulatory frameworks, and incentives for changes in consumption and production patterns” he said.

Mr Ban called for the establishment of an enabling international economic environment, where national efforts and public policies are supported by sustainable private investment.

Ban Ki-moon has said 2015 marks an important milestone, as the world’s governments are set to agree to a new set of development goals with the ambition of ending extreme poverty and ensuring that “no one is left behind”,, but that will only happen if financial resources meet the needs of the promises made on paper.

The UN Chief said the new financial framework adopted that focused on investments in infrastructure and public services, dissemination of technology and international cooperation in tax matters, among others will be an opportunity to make sure no one is left behind in the new development agenda.

Ban Ki-moon therefore urged the UN member states to reach a final agreement in the ongoing negotiations, and to adopt the Addis AbabaAction Agenda in order to secure the funding of the post-2015 development agenda.

In his address at the conference, Namibian President Hage Geingob emphasised that the political and economic landscape of Africa has changed fundamentally over the past 30 years.

“Gone are the days when reports of coups d’état dominated African news. Today we are witnessing the emergence of a new Africa, an Africa, which is the second fastest growing region on the planet. 

We have turned a new page and begun a new chapter in the African story.

This is why we say, Africa has risen, and Africa’s time is now,” said the Namibian leader.

However the President argued against the classification of Namibia as an upper middle-income country.

“Namibia, like most of our fellow African Nations, has strong macroeconomic fundamentals. For the past five years we have had strong economic growth averaging 5 percent per annum. Our debt is well contained at 25 percent as a ratio of GDP, and we are able to fund current Government operations and a significant part of our capital budget entirely from domestic resource mobilization,” he said.

“What has proven to be a burden to our economic development is the classification of Namibia as a so-called upper middle-income country.

This flawed definition and the calculation thereof, simply takes the GDP of a country and divides it by the population of the country.

“Because Namibia has a small population, this approach results in a higher per capita income without considering how that income is distributed, and without considering the structural imbalances of our economy, especially income distribution.

“This is an unfair definition, which deprives Namibia from accessing concessional funding which the country needs to pursue its developmental objectives. Although we have made tremendous progress in terms of governance, I hope you can forgive my fellow Namibians and I, for thinking that instead of being supported for these achievements, we are now being punished and our developmental aspirations are being stifled.

Given our current World Bank classification as an upper-middle income country, we do not have access to soft loans and grants. One of the few exceptions was former U.S. President Bush and his administration, which waived our status and opened the door for Namibia to access funding through the Millennium Challenge Account. This timely and supportive gesture went a long way in helping us achieve several of our developmental objectives”. The Namibia President has urged the 3rd International Conference on Financing for Development to consider concessional funding including grant funding “should be extended to upper middle-income countries.

“We need access to funding at better conditions. Without a change in approach, our efforts to develop will be curtailed”.

July 2015
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