World Bank Document - Africa Infrastructure Knowledge Program

336 Africa’s Transport Infrastructure
Table 8.7 Net Change in Central Government Budgets by Economic Use, 1995–2004
Use
Africa
Middle-income
countries
Percentage of GDP
Resource-rich
countries
Low-income,
nonfragile
countries
Low-income,
fragile
countries
Increase (decrease)
in net expenditure
budget 1.89 4.08 (3.73) 1.69 3.85
Increase in current
infrastructure
spending as a share
of expenditures 0.00 0.02 0.03 0.00 0.09
Increase (decrease) in
capital infrastructure
spending as a share
of expenditures (0.14) 0.04 (1.46) 0.54 0.22
Source: Adapted from Briceño-Garmendia, Smits, and Foster 2009.
Note: Based on annualized averages for 2001–06. Averages weighted by country GDP. Totals are extrapolations
based on the 24-country sample covered in AICD phase 1.
infrastructure investments. The fragile states, despite seeing their overall
budgetary expenditures rise by about 3.9 percent of GDP, devoted only
6 percent of the gain to infrastructure.
Compared with other developing regions, Africa does a particularly
poor job of collecting tax revenues, thus limiting its public financing capabilities.
Domestic revenue generation is around 23 percent of GDP, trailing
averages for other developing countries. That figure is lowest for the
low-income countries (less than 15 percent of GDP per year). Despite
strong growth in the past decade, domestically raised revenues increased
by less than 1.2 percent of GDP. This suggests that challenging institutional
reforms will be required to increase the effectiveness of revenue
collection and broaden the tax base.
The capacity of African countries to borrow from domestic and external
sources is also limited. Domestic borrowing is often very expensive,
with interest rates far exceeding those on concessional external loans.
Because of the scarcity of private domestic savings, public domestic borrowing
tends to precipitate sharp increases in interest rates, particularly
for the poorest countries. For many African countries, the ratio of debt
service to GDP is more than 6 percent.
The ongoing financial crisis is expected to reduce fiscal receipts globally,
and Africa will not be exempt. Growth projections for the coming