AfDB inaugurates macroeconomic model for effective policy management in Africa

The African Development Bank (AfDB) Group, has inaugurated the Bank’s Maiden report on “Benchmark Macroeconomic Models for Effective Policy Management in Africa”.

Prof. Kevin Urama, the Chief Economist and Vice-President of Economic Governance and Knowledge Management, AfDB, inaugurated the report on the sidelines of the African Economic Conference (AEC) in Addis-Ababa, Ethiopia.

According to Urama, the report is a product of collaboration between AfDB’s Institute and the African Economic Research Consortium (AERC).

He said it was an implementation activity of the Bank’s Capacity Development Strategy approved by its Board of Directors in 2021.

While thanking all who supported the process of conducting the report, he reiterated the bank’s commitment toward strengthening Africa’s capacity for effective macro-economic governance, policy-making and implementation.

Urama highlighted critical implementation programmes of the Bank’s Capacity Development Strategy to ensure growth, sustainable development, and the achievement of Africa’s Agenda 2063.

He said the key implementation capacities development programme was the Executive Training Programne on Macro-Economic Policy Management in Africa (MEMA).

“The study that informed the report we are inaugurating today was commissioned to understand better the existing macro-economic modelling capabilities and tools in all African Countries.

“It aims to inform the curriculum and capacity development programmes of MEMA that address the capacity development needs of countries.

Urama said macroeconomic models provided tools for countries to effectively understand and predict the behaviour of their economies, analyse policy response options, evaluate possible outcomes, and guide their implementation, monitoring and evaluation.

“This report provides an inventory of existing models and modelling capacity in African countries based on an Africa-wide survey implemented by the Bank Group.

“It examines the relevance of the existing models to African development realities in the face of recurrent and dynamic challenges.

“Considering the significant heterogeneity in economic structures across the 54 African countries,” he said.

Urama said it was important for policymakers to make policy decisions more straightforwardly and better understand their economic environment.

“They need to anticipate the impact of their policy options on inclusive growth and sustainable development.

“Although there have been positive strides in macroeconomic management on the continent, macroeconomic modelling capacity in Africa has remained low.

“Some countries continue to rely on simple models, which do not capture the complex intricacies and realities of the operation of their economies in a globalised world,” he said.

The AfDB vice-president said that to bridge the capacity gap, policymakers in many African countries relied on external models and tools that did not necessarily consider the contexts and realities of their economies.

According to him, only a few effectively interrogate and adapt the policy recommendations to their specific contexts.

“Hence, while a plethora of policy recommendations exist on key policy challenges facing countries, policy implementation faces significant headwinds.

“While some argue that economic development is often a gamble, it has become evident that having sound models embedded in national realities improves the probability of winning the gamble.

“Strengthening capacity in macroeconomic modelling is, therefore, critical to inform better understanding of the dynamics of economies, formulation of good policy responses and prioritisation, and shape effective policy implementation, monitoring and evaluation,” he said.

According to him, the report elicits an understanding of the situation, maps the macroeconomic modelling capacity needs of African countries and develops protocols for cooperation in macro-economic policy management in Africa.

Dr Eric Ogunleye, the Division Manager, Policy Management of AfDB, said the bank was keen on ensuring its capacity development initiatives to support member countries are demand-driven and based on realities our countries faced.

“So, before defining any macroeconomic development, it is important to understand the issues on the ground,” he said.

Meanwhile, the Interim Executive Director of the African Economic Research Consortium (AERC), Dominique Njinkeu, said addressing why we do not have models that fit the purpose was crucial for success.

“And it is important that the report has identified capacity, so going forward, we need to invest in capacity to do the model,” he said.