## Executive Summary

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### Slow recovery amid growing challenges
- Average growth in the region is projected to rise from 2.8 percent in 2017 to 3.4 percent in 2018.
- Growth is expected to accelerate in about two-thirds of the countries in the region, aided by stronger global growth, higher commodity prices, and improved market access.
- External imbalances have narrowed, but progress with fiscal consolidation has been mixed and vulnerabilities are rising:
  - About 40 percent of low-income countries in the region are now in debt distress or assessed as being at high risk of debt distress.
- On current policies, average growth in the region is expected to plateau below 4 percent—barely 1 percent in per capita terms—over the medium term.
- Cross-country heterogeneity:
  - Oil exporters continue to face the legacy of the largest real oil price decline since 1970, with growth well below past trends and rising debt levels.
  - Several other economies, both resource intensive and nonresource intensive and some fragile states, continue to grow at 6 percent or more.
  - A number of countries are suffering from internal conflicts, with record numbers of refugees and internally displaced people.
  - The two largest economies in the region, Nigeria and South Africa, remain below trend growth, weighing heavily on regional prospects.
- Near-term risks and outlook dynamics:
  - The impetus from the favorable external environment is likely to fade as the growth spurt in advanced economies tapers and borrowing terms for frontier markets become less favorable with US monetary policy normalization.
  - Higher refinancing needs could coincide with less favorable market conditions for many countries.
  - Political transitions, impending elections, and the uptick in oil prices may reduce appetite for difficult reforms and increase the risk of policy slippages.
  - The outlook could strengthen if uncertainties dissipate in countries undergoing political transition and if countries in need of adjustment make decisive progress toward macroeconomic stabilization.

- Policy priorities (high level):
  - Prudent fiscal policy to rein in public debt.
  - Monetary policy geared toward ensuring low inflation.
  - Structural reforms to reduce market distortions and foster private investment.
  - Strengthen revenue mobilization to finance physical and human capital and protect social spending during fiscal consolidation.
  - Reform priorities and sequencing should vary with individual country characteristics and strength of fundamentals.

- Country-specific guidance:
  - Oil-exporting countries:
    - Continue to adjust fiscal positions and advance economic diversification.
    - Take credible measures to boost non-oil revenues and enhance the efficiency of public spending.
    - Countries that opted for exchange rate flexibility need to eliminate foreign exchange restrictions and multiple currency practices and allow their exchange rate to adjust to reflect economic fundamentals.
  - Oil-importing countries:
    - Aim to transfer growth momentum from the public to the private sector.
    - Reduce fiscal imbalances to lower vulnerabilities that could threaten sustainable medium-term growth.

### Domestic revenue mobilization in Sub-Saharan Africa: what are the possibilities?
- Domestic revenue mobilization is a pressing policy challenge; nearly all countries are seeking to raise revenues to progress toward the Sustainable Development Goals while preserving fiscal sustainability.
- Despite substantial progress over the past two decades, Sub-Saharan Africa remains the region with the lowest revenue-to-GDP ratio.
- Structural factors account for underperformance; it is estimated that the region could, on average, mobilize between 3 and 5 percent of GDP in additional tax revenues—significantly more than what the region has received each year from international aid.
- Key steps to increase revenues:
  - Strengthen value-added tax systems.
  - Streamline exemptions.
  - Expand coverage of income taxes.
  - Strengthen the basic building blocks of effective tax administration through medium-term revenue strategies.
  - Broaden the tax base and modernize institutional processes.
  - Develop new sources of taxation, such as property taxes.
  - Harness new technologies to facilitate access to more reliable information.
- Institutional and political economy considerations:
  - Revenue mobilization requires sustained effort over years to have durable impact.
  - Building a constituency for reform is important, based on credible commitment to improved governance and transparency.
- Case studies of successful episodes highlight the importance of medium-term strategies and institutional modernization.

### Private investment to rejuvenate growth
- Increasing private investment is critical for achieving sustainable strong growth and improved social outcomes over the medium term.
- While public investment in the region is at a similar level to other regions, private investment in Sub-Saharan Africa lags well below all other regions.
- Empirical findings:
  - The strength of current and prospective economic activity plays a dominant role in driving private firms’ decisions to invest.
  - Strengthening regulatory and insolvency frameworks, increasing trade liberalization, and deepening financial markets could help lift private investment.
- Interim and complementary approaches to jump-start private investment:
  - Public-private partnerships (PPPs):
    - Widely used in the region.
    - Need careful consideration due to risks and sizable contingent liabilities.
    - Proper management requires adoption of institutional and legal frameworks to assess and limit risks.
  - Special economic zones (SEZs):
    - In some cases successful in attracting investors.
    - Benefit host economies more where they establish strong links with host country firms and integrate in national and regional development strategies.
  - Mechanisms to attract foreign direct investment (FDI).
- International initiatives:
  - Recent initiatives (for example, the G20 Compact with Africa and the Belt and Road Initiative) potentially provide opportunities to support private investment, including by fostering institutional reforms to encourage FDI and PPPs.

*Source: Executive Summary, Regional Economic Outlook: Sub‑Saharan Africa (April 2018).*

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_Source: https://www.imf.org/-/media/files/publications/reo/afr/2018/may/pdf/executive.pdf_