Sub-Saharan Africa (Hansard, 19 January 2004)

§ Hilary Benn

Several estimates of costs of reaching the millennium development goals (MDGs) have been made using differing methodologies and assumptions about developments over the next decade. Uncertainties include how rapidly the policies of African countries might improve, how rapidly countries which have been in conflict emerge from it, how severe the longer term impacts of HIV/AIDS will be, and what impact shocks such as droughts might have.

Improved policies can make a big difference to the costs of achieving improvements in social indicators, but undoubtedly much more money is needed to achieve the MDGs. Both public and private finance has a role to play. Public expenditure is needed to help fund social services such as health and education, and the money for this can come from domestic taxes as well as from external aid. How much domestic revenue is generated depends on how fast the economy grows as well as on the tax system. Private investment, domestic and foreign, can help finance social services too, but also has the potential to accelerate economic growth.

More analysis has been done on how much extra foreign aid will be needed for the MDGs in sub-Saharan Africa than on how much extra private sector money would be necessary. The aid estimates suggest that two or three times the current total annual inflows of $13 billion might be needed. The scale of this challenge suggests that we need to focus on four things. First, we should encourage African countries to develop sound policies for reducing poverty and the capacity to implement them, while continuing to follow prudent macroeconomic policies and to improve the environment they create for private investors. This will enhance their capacity to use aid effectively at the same time as raising their economic growth potential. Second, we should promote higher inflows of aid to countries with such policies. Third, we should seek to improve the quality of aid, in terms of its predictability and 952W flexibility, for instance by directly funding national budgets. Fourth, we should work to make international trade and finance systems more supportive of economic growth and poverty reduction in low income countries.