African Union Implements Kigali Financing Decision
The African Union (AU) has made significant progress in financing its development agenda, primarily through domestic resource mobilization. Over the past two years, the AU has effectively implemented the 2016 decision on financing, with 25 countries—representing nearly 45% of AU members—at various stages of adapting the Kigali Decision.
Progress in Member States’ Contributions
Out of the 25 countries, 16 have introduced a new revenue collection system. This system imposes a 0.2% levy on eligible imports to meet the AU’s financial obligations. All but two countries—Chad and The Gambia—have contributed to the Union’s budget for 2018, either fully or partially, through this new mechanism.
Another six countries, including Nigeria, Comoros, Senegal, Mauritania, Ethiopia, and Libya, are still in the process of adopting the Kigali Decision. The full scope of their implementation progress is yet to be confirmed.
Flexibility in the Financing System
The Kigali Decision allows member states flexibility in determining the most suitable methods for implementing the decision, while ensuring they comply with national and international obligations. This approach is designed to ensure predictability and adherence to AU financial rules.
Strengthening Financial Discipline
In order to enhance financial discipline, the AU has undertaken significant reforms in its financial and budgetary systems. These efforts aim to address low execution rates, prevent waste, and avoid instances of over-budgeting. Key achievements in this regard include:
New Budgeting and Planning Approaches: The AU has introduced a more transparent process for program planning and budgeting. This includes joint meetings between finance ministers and AU technical experts to oversee budget preparations.
Golden Rules for Financial Accountability: Eight of the nine financial management principles, known as the “Golden Rules,” are now fully operational. These rules ensure that the AU’s financial processes are rigorous and transparent.
Budget Ceilings Based on Performance: The AU has established budget ceilings for various departments and organs based on their execution records and ability to meet targets. This system ensures that funding is aligned with the Union’s priorities and the capacity of member states to contribute.
Significant Budget Reductions
As a result of these reforms, the AU adopted a budget for 2019 totaling USD 681 million. This represents a 12% reduction compared to the previous year’s budget. Additionally, member states’ contributions to the budget have increased significantly, with their share rising to 66%, compared to just 34% from external partners.
Ongoing Efforts to Secure Reliable Funding
With these improvements, the AU is gradually achieving its goal of reliable, sustainable funding. Domestic resource mobilization efforts have strengthened, and measures are now in place to ensure that these funds are used efficiently to meet the continent’s development needs.
New Sanctions Regime for Non-Payment
In November 2018, the AU adopted a new sanctions regime to ensure that its 55 member states meet their financial obligations on time. The regime specifies various penalties for countries that fail to pay their contributions within six months to two years.
Revised Scale of Assessment
During the 32nd Ordinary Session, the AU also adopted a revised scale of assessment for the period 2020-2022. This scale determines the percentage share each member state will contribute to the Union’s budget. The new system is designed to ensure fair burden-sharing, based on each country’s ability to pay.
The revised scale divides member states into three tiers, with the largest contributors in Tier 1 covering 45.15% of the budget, followed by Tier 2 at 32.74%, and Tier 3 at 22.10%.
The AU continues to refine its financial systems to further enhance the Union’s fiscal sustainability. Dr. Donald Kaberuka, the AU’s High Representative for Financing the Union, is currently leading regional consultations to assess the Peace Fund, with a report expected in June 2019.
The AU’s financial reforms represent a significant step toward ensuring that Africa can finance its own development agenda.
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