## selassie ## Source details **Canonical URL:** [selassie](https://www.imf.org/-/media/files/publications/fandd/article/2021/december/selassie.pdf) ## Other formats - [Markdown version](/-/media/files/publications/fandd/article/2021/december/selassie.pdf.md) - [Structured JSON version](/-/media/files/publications/fandd/article/2021/december/selassie.pdf.json) --- ### Vision and three enabling forces - Fast-forward to 2081: sub-Saharan Africa’s demographic boom could transform many of the region’s economies into the largest and most dynamic in the world. - Three factors that will influence this outcome: - The demographic transition underway: By 2050, many sub-Saharan African countries will be among the few with a rising working-age population. - The ongoing digital revolution: diffusion of know-how, new business opportunities, and more efficient service delivery. - The transition to a low-carbon economy and management of climate change consequences. ### Near-term constraints and priorities - COVID-19 impacts and immediate challenges: - Vaccination rates averaging about 2½ percent of the population across sub-Saharan Africa by early October 2021. - Most countries have limited fiscal space and near-term growth prospects remain below pre-pandemic projections. - IMF engagement during the COVID-19 crisis: - Nearly $27 billion in financial assistance provided to 39 African countries. - Three-quarters of this lending came from the Poverty Reduction and Growth Trust—the IMF’s vehicle for zero-interest loans to low-income countries. ### Demographic dividend: scale and policy implications - Scale: - The population of sub-Saharan Africa is projected to double from 1 billion to 2 billion by about 2050. - This will account for half of global population growth, with the working-age population growing faster than any other age group. - Policy imperatives: - Invest in human capital: increased high-quality educational opportunities at primary, secondary, and tertiary levels; expanded investment in health care; broader access to vaccines (potentially through regional production hubs); family planning. - Implement multiyear plans to scale up service capacity (infrastructure, training of teachers and health professionals) while balancing near-term provision. - Close gender gaps in access to education and jobs to help lower fertility and boost productivity. - Promote private sector-led job creation by cultivating a growth-friendly business climate and incentivizing private investment to complement rising labor supply. ### Digitalization: opportunities and risks - Opportunities: - Boost resilience and efficiency, expand access to global markets, improve public service delivery, increase transparency and accountability, and foster new job creation. - Examples: online tax filing, online business registration, computerized customs administration, social assistance via mobile money. - Digitalization promotes entrepreneurship by allowing rapid firm growth with less physical capital and limited geographic footprint. - Risks and mitigating requirements: - Automation and artificial intelligence could put downward pressure on the labor share of income if they replace rather than enhance labor. - Without investment in key infrastructure, digitalization’s benefits may be concentrated among elites. - Essential infrastructure needs: reliable and affordable electricity, undersea cables with sufficient bandwidth, nationwide telecommunications infrastructure, and a well-regulated telecommunications sector with competitive prices. - Education must integrate information technology early; vocational and tertiary programs must emphasize technical skills. Online education can expand access beyond current national limits. ### Climate change: vulnerabilities and transition challenges - Vulnerabilities: - Countries face droughts, rising sea levels, cyclones, floods, rising temperatures, and rainfall anomalies. - Limited climate resilience and reliance on rain-fed agriculture make climate change weigh more on economic activity in sub-Saharan Africa than elsewhere. - Adaptation priorities: - Targeted investment in climate-resilient infrastructure, people, and coping mechanisms to raise resilience, boost productivity, and reduce inequality. - Examples: widespread irrigation, robust buildings and drainage, investments in health care and education, social assistance, and access to finance to support climate-smart agriculture and post-shock recovery. - Good macroeconomic policies—greater fiscal space, economic diversification, and exchange rate flexibility—will limit the impact of climate shocks. - Low-carbon transition: - Oil and gas exporters will face lower revenues and less related investment; rapid economic diversification is crucial to provide inclusive jobs. - Region-wide transition to greener industrial activity and renewable energy (solar, wind) will require policies from financial regulation to large-scale investment and technology transfers. - Pressure to preserve carbon sinks and reservoirs will increase, potentially constraining logging and mining opportunities. ### Financing the transformation - Investment needs: - Significant investment required in both human and physical infrastructure to seize transformative changes. - Constraints and finance options: - COVID-19 has reduced fiscal space and increased debt burdens in many countries. - Authorities must intensify efforts to develop fiscal revenues via efficient tax policy, comprehensive public financial management, transparency, and good governance. - Multilateral development banks and development partners should increase grants and concessional loans. - Rechanneling Special Drawing Rights from advanced economies with strong balance of payments positions may provide longer-maturity loans to aid in financing. - Debt considerations: - The increase in debt over the past two years heightens concern about taking on new debt. - It is critical that debt finances projects with good returns: target high-quality projects backed by comprehensive feasibility studies and robust, transparent public procurement. ### Strategic recommendations (summary) - Prioritize short-term COVID-19 response while maintaining focus on long-term structural reforms. - Scale up investments in human capital (education, health, family planning) and basic infrastructure (electricity, digital connectivity, climate-resilient works). - Foster a growth-friendly business environment to mobilize private sector investment and create jobs at scale. - Pursue digital reforms, invest in telecommunications and power infrastructure, and integrate IT skills into education systems. - Accelerate climate adaptation measures and plan for an inclusive low-carbon transition, including technology transfers and renewable energy investment. - Strengthen fiscal revenue mobilization, public financial management, and governance; seek concessional external financing and consider rechanneling Special Drawing Rights. - Ensure new debt is used for high-return, well-vetted projects with transparent procurement. *Abebe Aemro Selassie, "The African Century," Finance & Development, December 2021.* --- _Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/december/selassie.pdf_