## ch1

## Source details

**Canonical URL:** [ch1](https://www.imf.org/-/media/files/publications/reo/afr/2019/april/english/ch1.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/reo/afr/2019/april/english/ch1.pdf.md)
- [Structured JSON version](/-/media/files/publications/reo/afr/2019/april/english/ch1.pdf.json)

---

### Conflict: prevalence, impact, channels, and fiscal implications
- Chapter 2 analyzes:
  - (1) the evolution in prevalence and intensity of conflicts over time in sub-Saharan Africa,
  - (2) the impact (both directly and indirectly, through spillover effects) of conflicts on economic growth,
  - (3) the key channels through which conflict affects output, and
  - (4) the fiscal implications.

### Regional opportunities: AfCFTA (summary of Chapter 3 context)
- Chapter 3 assesses opportunities from the African Continental Free Trade Area (AfCFTA), focusing on:
  - (1) How Africa’s intraregional and international trade evolved over time and lessons from subregional economic communities on potential for further integration,
  - (2) The potential impact of the AfCFTA on intraregional trade and the policies needed to foster further regional trade integration, and
  - (3) How the AfCFTA will affect welfare, income distribution, and fiscal revenue of African countries.

### Macroeconomic developments and external environment
- Global environment and commodity dynamics:
  - Global growth is estimated at 3.6 percent in 2018.
  - Global growth is expected to slow to 3.3 percent in 2019 before recovering to 3.6 percent in 2020.
  - Volatility in commodity prices increased, with a sharp fall in oil prices during the last quarter of 2018.
  - Markets are expecting most commodity prices to weaken further in 2019–20.
  - Terms of trade implications:
    - Terms of trade for the region’s oil exporters are expected to deteriorate.
    - Terms of trade for oil importers are poised to improve somewhat.
- Global asset markets and financing:
  - Issuances of international sovereign bonds by sub-Saharan African frontier markets reached US$17.2 billion in 2018.
  - Nigeria and Angola accounted for about US$5.4 billion and US$3.5 billion worth of Eurobonds, respectively.
  - Borrowing cost at issuance for the 30-year maturity has increased (for example, by about 162.5 basis points for Nigeria over the past year).

### Growth outlook: two-track recovery and heterogeneity
- Regional aggregate projections:
  - Sub-Saharan Africa’s average growth (weighted by GDP in purchasing power parity terms) is expected to increase from 3.0 percent in 2018 to 3.5 percent in 2019 and 3.7 percent in 2020.
  - These projections are about ¼ percentage point less than envisaged in the October 2018 World Economic Outlook.
  - Based on current policies, medium-term growth for the region as a whole is expected to plateau at about 3¾ percent, or 1¼ percent in per capita terms.
  - The region needs growth well above these levels to help create the 20 million jobs a year needed to absorb new entrants to labor markets.
- Country group specifics:
  - Resource-intensive countries:
    - Nigeria:
      - Growth was 1.9 percent in 2018 and is expected to reach 2.1 percent in 2019.
      - Over the medium term, under current policies, growth is projected to plateau at about 2¾ percent.
    - South Africa:
      - Expected to grow at 0.8 percent in 2018 and 1.2 percent in 2019.
      - Under current policies, growth is expected to stabilize at about 1.8 percent over the medium term.
    - Other resource-intensive countries: growth is expected to pick up at about 3.1 percent on average.
  - Non-resource-intensive countries:
    - Expected to continue growing rapidly at about 6.3 percent on average in 2019–20.
    - Ethiopia: growth expected to accelerate to 7.7 percent.
    - Growth drivers include rapid public investment (Senegal) and private consumption (Côte d’Ivoire, Kenya).

### Inflation dynamics
- Average inflation in sub-Saharan Africa:
  - Projected to decline to 8.1 percent in 2019 from 8.5 percent in 2018.
  - Decline driven by the large decline in global energy prices; pass-through of lower energy prices expected to more than offset lingering effects from past exchange rate depreciation.
  - Demand pressures have played a limited role; only a quarter of each year’s inflation manifests into the next year, on average, across countries.

### External buffers and current accounts
- Current account and reserve projections:
  - The (simple) average current account deficit is projected to widen to 7.3 percent of GDP in 2019 from 6.6 percent of GDP in 2018.
  - Widening reflects a larger deficit in non-resource-intensive countries and oil-exporting countries.
  - A 1 percent change in the commodity terms of trade translates into a 0.3–0.6 percent of GDP change in the trade balance.
  - Foreign exchange reserves are projected to fall to 3.7 months of imports in 2019.
  - Reserve levels remain below levels deemed adequate based on IMF metrics for emerging market and developing economies.

### Fiscal positions, consolidation, and procyclicality
- Fiscal balance and cyclicality:
  - Following a contraction in 2018 by about ½ percent of GDP, the (simple) average fiscal deficit in the region is expected to narrow to about 3.2 percent in 2019–20 and continue consolidating beyond 2020.
  - Fiscal consolidation path primarily reflects the evolution in oil-exporting countries now expecting much lower oil revenue.
  - Fiscal procyclicality observations:
    - Increases in the terms of trade above trend ("good times") raise revenues in oil exporters; declines below trend ("bad times") see revenues fall by an even larger margin.
    - Oil exporters expand capital expenditure when terms of trade increase and contract capital expenditure by an even larger margin during bad times.
    - Recurrent expenditures are much less sensitive to terms-of-trade cycles.
  - The size of current account deficits primarily reflects imbalances in public accounts, with public savings-investment deficits about three times as large as for the private sector in non-resource-intensive countries.

### Domestic revenue mobilization and fiscal space
- Revenue mobilization progress:
  - Noncommodity revenue (excluding grants) increased as a ratio of GDP in 2018 in 25 countries, with the largest increases in Democratic Republic of the Congo, Equatorial Guinea, Niger, Sierra Leone, and Togo.
  - Most revenue increase stemmed from tax revenue.
  - Revenue mobilization drivers included tax policy reforms (lower exemptions) and improvements in revenue administration (tax identification numbers, land registry, stronger tax audits).
  - Non-commodity-related revenue remained broadly unchanged or declined in some countries (Botswana, Republic of Congo, Nigeria).
  - The revenue gap for sub-Saharan African countries is estimated at 3–5 percent of GDP on average and is not expected to be closed through the medium term.
- Stepping up revenue mobilization (policy notes):
  - Average revenue gap estimated at 3–5 percent of GDP.
  - Revenue advanced in 2018 by about 0.3 percent of GDP on average across countries, mainly due to higher-than-anticipated oil prices.
  - Past successful cases recorded an average increase in revenue (excluding grants) of 1¼ percent of GDP in episodes cited (Liberia, 2006–10; Mozambique, 2007–12; Rwanda, 2012–14; Senegal, 2001–03; Tanzania, 2005–07; Uganda, 2014–16).
  - Measures include broadening tax base (Angola, Senegal), bringing informal sector into tax net (Senegal), and reducing tax expenditures (Benin, Kenya).

### Public debt, vulnerabilities, and financing risks
- Debt levels and risk classifications:
  - Average public debt in sub-Saharan Africa was estimated at close to 56 percent of GDP at the end of 2018.
  - Sixteen countries classified as having either a high risk of debt distress or being in debt distress: Burundi, Cameroon, Cabo Verde, Central African Republic, Chad, Ethiopia, Ghana, Sierra Leone, Zambia (high risk); Republic of Congo, Eritrea, The Gambia, Mozambique, São Tomé and Príncipe, South Sudan, Zimbabwe (in debt distress).
  - The remaining 19 low-income and developing countries have low to moderate debt vulnerabilities.
  - For middle- and upper-income countries, public debt remains sustainable under the baseline in most cases; debt ratios are close to or exceed risk thresholds in a few countries (Namibia, Seychelles).
- Debt dynamics and uncertainties:
  - Under current consolidation plans, public debt ratios are expected to stabilize or decline across country groupings on average.
  - Baseline public debt trajectories are subject to significant uncertainties, including foreign exchange and rollover risk.
  - Fiscal uncertainties related to state-owned enterprises (SOEs) and accumulation of public domestic arrears weigh on public balance sheets (Cameroon, Ethiopia, The Gambia, Mozambique).
  - SOEs pose significant fiscal and financial risks in some economies (Angola, Cabo Verde, South Africa) and have crowded out higher-priority public spending in some countries (Botswana, Cabo Verde, Madagascar).
  - Progress with debt resolution has helped reduce outstanding external arrears in some cases (Chad), and other highly indebted countries are making good faith efforts to reach agreements with creditors (Republic of Congo, The Gambia).
- Drivers of rising public debt:
  - Investment in human capital and infrastructure during easier global financial conditions.
  - Adverse commodity price shock (2014–16), with oil exporters facing the largest real oil price decline since 1970.
  - Migration of contingent liabilities to the public sector balance sheet, losses by SOEs, and valuation effects from exchange rate depreciations.
- Three main concerns with rising debt:
  1. Debt restructuring needs: seven countries, mainly fragile or hard-hit by the commodity price slump, have been unable to service their debt and needed restructuring.
  2. Rising debt service burden: the median interest payment burden has doubled to about 10 percent of revenue since 2011.
  3. More complex debt composition:
     - Of the US$366 billion increase in debt between 2010 and 2017, about two-thirds was due to market borrowing.
     - About 43 percent of the increase was in foreign currency.
     - 13 percent was from bilateral creditors.
- Offsetting improvements:
  - Some countries (Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal) used favorable global financing conditions to improve the maturity structure of debt, replacing short-term debt with longer-term debt and reducing rollover risk.

### Banking sector, financial stability, and credit
- Nonperforming loans (NPLs) and banking weaknesses:
  - NPLs remain high in many sub-Saharan African countries and have continued to rise, particularly in some countries where ratios are already elevated (Central African Economic and Monetary Community [CEMAC]).
  - Systemwide NPL ratio in Ghana reached 18.2 percent at end-2018.
  - High NPL levels reflect the legacy of the 2014 commodity shock.
  - High NPL levels are weighing on credit growth and encouraging banks to hold more government bonds.
- Capital adequacy and other concerns:
  - Banks’ capital has increased as a ratio to risk-weighted assets in Chad, Republic of Congo, Equatorial Guinea, Gabon, Ghana, Malawi, Namibia.
  - Zero risk weighting of government bonds could mask underlying capital coverage if sovereign risk materializes.
  - In several countries, capital increases reflect measures to raise minimum capital requirements, resolve insolvent banks, or support illiquid ones (Ghana, Kenya).
  - A few small banks remain undercapitalized (Kenya, Nigeria, Togo); in some cases, systemic banks remain undercapitalized.
  - Other banking-sector concerns include foreign currency liquidity mismatches (Angola), high loan concentration (Benin, Equatorial Guinea, Eswatini, Malawi, Namibia), insufficient provisioning (Angola), and increased household and corporate debts (Tanzania).
- Financial sector measures and reforms:
  - Strengthen bank capital where undercapitalization persists, improve provisioning, and address loan concentration risks.
  - Improve supervision and risk management practices to reduce systemic vulnerabilities from sovereign-bank linkages.
  - Macroprudential tightening has included restrictions on banks’ foreign exchange positions, higher reserve requirements, and capital requirements (Angola, Ghana, Mozambique, Nigeria).
  - CEMAC: new regulations on systemically important institutions, accelerated resolution of small microfinance institutions, emergency liquidity assistance framework.
  - WAEMU: new prudential rules aligned with Basel II/III principles.
  - Transitioning to IFRS 9 requires strengthening banks’ balance sheets due to increased provisioning requirements; implications for credit growth and sovereign exposures during transition remain uncertain.

### Correspondent banking relations (CBRs) and related responses
- Loss of CBRs has prompted upgrades to AML/CFT frameworks and related legal and regulatory amendments (Angola, Seychelles).
- Decline in CBRs has increased concentration in remaining relationships, posing financial stability risk if correspondent banks face difficulties.
- Responses and initiatives:
  - Strengthen financial stability frameworks and international capital adequacy requirements (Seychelles).
  - Engage with correspondent banks and supervisors to understand causes of CBR loss (Seychelles).
  - Regional IMF initiatives to facilitate policy dialogue on CBR issues, including a high-level workshop for SADC countries in 2018 and three more events covering all of Africa planned for 2019.
  - Implement data monitoring frameworks (Angola, The Gambia, Seychelles) with IMF capacity support.

### Risks to the outlook (channels and quantified impacts)
- Overall risk tilt:
  - Near term: risks mainly tilted to the downside.
  - Medium term: risks are balanced.
- Key downside risk channels and quantified impacts:
  - Trade tensions, lower commodity prices, and tighter global financial conditions could lower growth in sub-Saharan Africa by 2 percentage points in 2019 and 1½ percentage points in 2020.
  - Intense conflicts could lower output by a cumulative 7½ percentage points through the medium term; large conflicts in neighboring states within 500 kilometers are associated with a reduction in growth of about 2 percentage points.
  - Climate shocks: below-average precipitation can reduce growth by up to 1½ percentage points within the same year in extreme cases.
- Trade tensions and China slowdown:
  - China is the region’s largest trading partner, accounting for about 20 percent of total trade.
  - About 70 percent of the region’s exports to China are related to commodities (oil, minerals, metals).
  - About 20 percent of the region’s imports are from China; of those imports, 45 percent are consumer goods.
  - Imports from China amounted to US$67.5 billion in 2017, compared with US$13.7 billion imports from the United States and US$79.7 billion imports from Europe.
  - China’s direct investment into the region is about 5 percent of total foreign direct investment and flows primarily to resource-intensive countries.
  - Empirical estimates: over a one-year horizon, a 1 percent fall in industrial production in China leads to a 5–7 percent fall in metals and fuel prices.
- Tighter global financial conditions:
  - Triggers include escalating trade tensions, higher-than-expected US inflation, a “no-deal Brexit”, or a deeper slowdown in China.
  - Frontier economies face large refinancing needs given the lumpy maturity of bonds.
- Climate and security shocks:
  - Cyclone Idai (March 2019) affected more than 2.6 million people.
  - El Niño could cause droughts in southern Africa (Botswana, Lesotho, Malawi, Mozambique, South Africa, Zambia, Zimbabwe) and above-average rainfall in east Africa (Ethiopia, Kenya, Tanzania, White Nile Basin).
  - The number of internally displaced persons is estimated to have reached 18 million in 2018 alone.

### Policy priorities and reforms
- Overall objective: balance continuing investment in human and physical capital, contain public debt levels, and create jobs for some 20 million new entrants into the labor market each year.
- Fiscal and debt management recommendations:
  - Avoid unsustainable debt buildup and strengthen debt management practices.
  - Prioritize public investment that yields high economic returns while containing recurrent commitments.
  - Enhance transparency and monitoring of contingent liabilities and SOE exposures.
  - Use debt buybacks to ease near-term refinancing risks and reprofile external debt (example cited).
  - Better align repayment currency with foreign exchange earnings (Seychelles).
  - Reduce bunching of external loan repayments via multitranche Eurobond issuances.
- Public investment efficiency and fiscal trade-offs:
  - Improve project planning, allocation, and implementation phases.
  - Assess macroeconomic consequences and potential risks associated with alternative financing strategies and investment efficiency.
  - Where debt dynamics are a serious concern, use fiscal savings to contain debt accumulation and rebuild fiscal buffers.
  - Rebalance public spending away from nonessential recurrent spending and subsidies toward social and development spending.
  - Where infrastructure gaps impede growth and public investment management capacity is high, use fiscal space for development purposes.
- Financial sector measures:
  - Strengthen bank capital, improve provisioning, address loan concentration risks, and improve supervision and risk management.
  - Implement comprehensive NPL reduction strategies: accelerate loss recognition, strengthen supervisory focus on recovery, reform insolvency and debt enforcement frameworks, and establish permanent macroprudential buffers.
- External and macro policies:
  - Prepare for tighter global financial conditions by improving external buffers and managing refinancing risks.
  - Mitigate exposure to commodity price volatility through macroeconomic buffers and diversification.
- Development financing:
  - Mobilize joint efforts from national authorities, the donors’ community, and the private sector to finance large investment needs in infrastructure, education, and health care.

### Two-track recovery: ensuring efficiency, inclusiveness, and growth
- Implementing growth-friendly fiscal policies:
  - Multipliers of both public investment and consumption expenditure are significantly larger in countries where public investment is most efficient.
  - Actions: substantially cut low-priority capital expenditure and recurrent spending while protecting social outlays; improve efficiency in goods and services (including reducing subsidies); undertake payroll cleanup and limit nonwage compensation.
  - Simulation evidence: Reducing income and gender inequality in the West African Economic and Monetary Union (WAEMU) could boost real GDP per capita by 0.5 percentage point on average and reduce volatility of GDP growth.
- Improving economic efficiency and containing fiscal risks from SOEs:
  - Reforms include publishing SOE performance reports (Cabo Verde, Cameroon, Ghana), strengthening oversight agencies (Angola, Ghana), auditing SOE governance (The Gambia, Niger, Seychelles), updating legal frameworks (Cameroon, Guinea, Mozambique), outsourcing SOE management (Guinea-Bissau).
  - Restructuring measures include resolving insolvent SOEs (Angola) and possible privatization of nonstrategic SOEs (Angola, Cabo Verde, Chad, Ethiopia, South Africa).
  - Improve capital project selection to reduce risks from SOEs and PPPs (Benin, Senegal, Seychelles, Tanzania).
- Reducing procyclicality of spending and strengthening PFM:
  - Develop fiscal rules and fiscal stabilization funds for oil revenue management (Angola, Senegal, Uganda).
  - Address large domestic arrears (Cabo Verde, Cameroon, Ghana, São Tomé and Príncipe, South Africa, Zambia) through strengthened PFM: enhance medium-term expenditure frameworks (Angola, Botswana), switch to Treasury Single Account (Republic of Congo, Côte d’Ivoire), move to performance-based budgeting (Botswana), enforce internal controls (Angola, Uganda), improve capital project selection (Benin, Senegal, Seychelles, Tanzania).
- Improving debt management frameworks and monetary policy:
  - Caution on delayed buybacks with Eurobond proceeds due to unnecessary carry costs.
  - Strengthen monetary transmission: raise caps on interest rates, move toward market-oriented monetary policy operating systems, improve secondary bond and interbank markets, reduce excess liquidity via active open market operations, develop forward-looking liquidity and inflation forecasting, and strengthen central bank independence.
- Real exchange rate flexibility and balance-sheet considerations:
  - Pass-through of exchange rate changes to inflation estimated at about 40 percent.
  - Additional exchange rate flexibility, where balance sheet vulnerabilities are manageable and accompanied by product and labor market reforms, would enhance resilience.

### Raising medium-term growth: productivity, investment, and inclusion
- Constraints and priorities:
  - Medium-term growth prospects held back by low productivity growth and limited physical capital accumulation relative to comparable regions.
  - Increase productivity by enhancing market contestability, removing constraints (access to reliable electricity, rent seeking, informal sector practices, security concerns, tax rates, access to credit), levelling the playing field between public and private firms, improving governance, and fostering trade openness and integration.
- AfCFTA potential:
  - Further trade integration could significantly boost intra-African trade; estimated impact is an approximate 1 percent increase in GDP levels if tariffs are eliminated and nontariff barriers are halved.
- Financial deepening and inclusion:
  - Improve financial regulation, supervision, institutional environment, credit/collateral registries (Angola, Benin, Tanzania), financial literacy (Seychelles), regional capital markets, and leverage fintech (mobile money) for greater inclusion.
- Equality of opportunities:
  - Most return to capital accrues to nonfinancial corporates (55 percent); households receive 20 percent and their share has been declining.
  - Within corporates, high state ownership firms enjoy higher benefits, including greater access to credit.
  - Some progress: share of income earned by the highest 20 percent has declined and that of “middle-income earners” has increased.

### Inclusion, constraints, and policy priorities (Emerging Market and Developing Economies)
- Poverty and gender:
  - Some 40 percent of people in sub-Saharan Africa still live on less than US$1.25 a day.
  - Region exhibits among the highest levels of gender inequality in the world.
- Major constraints to business operations (categories from World Bank Enterprise Survey): Access to credit; Licensing and permits; Tax rates; Customs and trade regulations; Transportation; Electricity; Crime theft and disorder; Political stability; Corruption; Practices of competitors in informal sector; Labor regulation; Inadequately educated labor force.
- Policy recommendations:
  - Facilitate movement of labor toward sectors other than government and agriculture.
  - Fiscal reform, including domestic revenue mobilization and subsidy reform, to create space for targeted transfers and efficient spending on physical and human capital.
  - Deepen financial systems with greater financial inclusion.
  - Enhance women’s participation in the economy, abolish legal restrictions for women to open bank accounts or accept jobs, and address inequality in education.
  - Promote flexible education systems and full enrollment, leveraging digital technologies.

### Boxed topics: IFRS 9, Mobile Money, Demographics and Gender Gaps
- Box 1.1 — IFRS 9:
  - IFRS 9 became effective worldwide in 2018; moves to an expected credit loss framework.
  - IFRS 9 used in about four-fifths of sub-Saharan African countries.
  - Transitional arrangements: three years in South Africa, four years in Rwanda and Nigeria, five years in Kenya.
  - Empirical finding: South African banks saw a 39 percent increase in credit impairment (SARB [2018]) with no breaches of capital adequacy ratios.
  - Recommendation: supervisors need further work to achieve compliance while avoiding excessive impact on banks’ ability to lend.
- Box 1.2 — Financial Development and Mobile Money:
  - Financial development (excluding mobile money) has grown faster in sub-Saharan Africa than in other regions but overall levels trail peers.
  - Mobile money accounts have surged and surpassed traditional deposit accounts in the region.
  - East Africa lessons: telecom-led regulatory models and dominant telecom providers aided adoption; national identification systems facilitated faster mobile payments.
- Box 1.3 — Demographics and Gender Gaps:
  - Population could double in the next three decades and quadruple by the end of the century.
  - Declining dependency ratios create opportunity if jobs and human capital improvements are scaled up.
  - Some countries still see fewer than three girls enrolled in secondary education for every four boys.
  - Policies to narrow education gaps include higher public spending on education, better infrastructure (sanitation, women’s health), and raising legal age of marriage in some cases.

*Regional Economic Outlook: Sub-Saharan Africa — Chapter excerpts as presented in the supplied content.*

### Chapter 2 is devoted to a comprehensive analysis

### Chapter 2 is devoted to a comprehensive analysis

### Conflict: prevalence, impact, channels, and fiscal implications
- Chapter 2 analyzes:
  - (1) the evolution in prevalence and intensity of conflicts over time in sub-Saharan Africa,
  - (2) the impact (both directly and indirectly, through spillover effects) of conflicts on economic growth,
  - (3) the key channels through which conflict affects output, and
  - (4) the fiscal implications.

### Regional opportunities: AfCFTA (summary of Chapter 3 context)
- Chapter 3 assesses opportunities from the African Continental Free Trade Area (AfCFTA), focusing on:
  - (1) How Africa’s intraregional and international trade evolved over time and lessons from subregional economic communities on potential for further integration,
  - (2) The potential impact of the AfCFTA on intraregional trade and the policies needed to foster further regional trade integration, and
  - (3) How the AfCFTA will affect welfare, income distribution, and fiscal revenue of African countries.

### Macroeconomic developments and prospects — a complex external environment
- Global environment and commodity dynamics:
  - Global growth is estimated at 3.6 percent in 2018.
  - Global growth is expected to slow to 3.3 percent in 2019 before recovering to 3.6 percent in 2020.
  - Volatility in commodity prices increased, with a sharp fall in oil prices during the last quarter of 2018.
  - Markets are expecting most commodity prices to weaken further in 2019–20.
  - Terms of trade implications:
    - Terms of trade for the region’s oil exporters are expected to deteriorate.
    - Terms of trade for oil importers are poised to improve somewhat.
- Global asset markets and financing:
  - Issuances of international sovereign bonds by sub-Saharan African frontier markets reached US$17.2 billion in 2018.
  - Nigeria and Angola accounted for about US$5.4 billion and US$3.5 billion worth of Eurobonds, respectively.
  - Borrowing cost at issuance for the 30-year maturity has increased (for example, by about 162.5 basis points for Nigeria over the past year).

### Growth outlook: two-track recovery and heterogeneity
- Regional aggregate projections:
  - Sub-Saharan Africa’s average growth (weighted by GDP in purchasing power parity terms) is expected to increase from 3.0 percent in 2018 to 3.5 percent in 2019 and 3.7 percent in 2020.
  - These projections are about ¼ percentage point less than envisaged in the October 2018 World Economic Outlook.
  - Based on current policies, medium-term growth for the region as a whole is expected to plateau at about 3¾ percent, or 1¼ percent in per capita terms.
  - The region needs growth well above these levels to help create the 20 million jobs a year needed to absorb new entrants to labor markets.
- Country group specifics:
  - Resource-intensive countries:
    - Nigeria:
      - Growth was 1.9 percent in 2018 and is expected to reach 2.1 percent in 2019.
      - Over the medium term, under current policies, growth is projected to plateau at about 2¾ percent.
    - South Africa:
      - Expected to grow at 0.8 percent in 2018 and 1.2 percent in 2019.
      - Under current policies, growth is expected to stabilize at about 1.8 percent over the medium term.
    - Other resource-intensive countries: growth is expected to pick up at about 3.1 percent on average.
  - Non-resource-intensive countries:
    - Expected to continue growing rapidly at about 6.3 percent on average in 2019–20.
    - Ethiopia: growth expected to accelerate to 7.7 percent.
    - Growth drivers include rapid public investment (Senegal) and private consumption (Côte d’Ivoire, Kenya).

### Inflation dynamics
- Average inflation in sub-Saharan Africa:
  - Projected to decline to 8.1 percent in 2019 from 8.5 percent in 2018.
  - Decline driven by the large decline in global energy prices; pass-through of lower energy prices expected to more than offset lingering effects from past exchange rate depreciation.
  - Demand pressures have played a limited role; only a quarter of each year’s inflation manifests into the next year, on average, across countries.

### External buffers and current accounts
- Current account and reserve projections:
  - The (simple) average current account deficit is projected to widen to 7.3 percent of GDP in 2019 from 6.6 percent of GDP in 2018.
  - Widening reflects a larger deficit in non-resource-intensive countries and oil-exporting countries.
  - A 1 percent change in the commodity terms of trade translates into a 0.3–0.6 percent of GDP change in the trade balance.
  - Foreign exchange reserves are projected to fall to 3.7 months of imports in 2019.
  - Reserve levels remain below levels deemed adequate based on IMF metrics for emerging market and developing economies.

### Fiscal positions and consolidation
- Fiscal balance and cyclicality:
  - Following a contraction in 2018 by about ½ percent of GDP, the (simple) average fiscal deficit in the region is expected to narrow to about 3.2 percent in 2019–20 and continue consolidating beyond 2020.
  - Fiscal consolidation path primarily reflects the evolution in oil-exporting countries now expecting much lower oil revenue.
  - Fiscal procyclicality observations:
    - Increases in the terms of trade above trend ("good times") raise revenues in oil exporters; declines below trend ("bad times") see revenues fall by an even larger margin.
    - Oil exporters expand capital expenditure when terms of trade increase and contract capital expenditure by an even larger margin during bad times.
    - Recurrent expenditures are much less sensitive to terms-of-trade cycles.
  - The size of current account deficits primarily reflects imbalances in public accounts, with public savings-investment deficits about three times as large as for the private sector in non-resource-intensive countries.

### Domestic revenue mobilization and fiscal space
- Revenue mobilization progress:
  - Noncommodity revenue (excluding grants) increased as a ratio of GDP in 2018 in 25 countries, with the largest increases in Democratic Republic of the Congo, Equatorial Guinea, Niger, Sierra Leone, and Togo.
  - Most revenue increase stemmed from tax revenue.
  - Revenue mobilization drivers included tax policy reforms (lower exemptions) and improvements in revenue administration (tax identification numbers, land registry, stronger tax audits).
  - Non-commodity-related revenue remained broadly unchanged or declined in some countries (Botswana, Republic of Congo, Nigeria).
  - The revenue gap for sub-Saharan African countries is estimated at 3–5 percent of GDP on average and is not expected to be closed through the medium term.

### Public debt and vulnerabilities
- Debt levels and risk classifications:
  - Average public debt in sub-Saharan Africa was estimated at close to 56 percent of GDP at the end of 2018.
  - Sixteen countries classified as having either a high risk of debt distress or being in debt distress: Burundi, Cameroon, Cabo Verde, Central African Republic, Chad, Ethiopia, Ghana, Sierra Leone, Zambia (high risk); Republic of Congo, Eritrea, The Gambia, Mozambique, São Tomé and Príncipe, South Sudan, Zimbabwe (in debt distress).
  - The remaining 19 low-income and developing countries have low to moderate debt vulnerabilities.
  - For middle- and upper-income countries, public debt remains sustainable under the baseline in most cases; debt ratios are close to or exceed risk thresholds in a few countries (Namibia, Seychelles).
- Debt dynamics and uncertainties:
  - Under current consolidation plans, public debt ratios are expected to stabilize or decline across country groupings on average.
  - Baseline public debt trajectories are subject to significant uncertainties, including foreign exchange and rollover risk.
  - Fiscal uncertainties related to state-owned enterprises (SOEs) and accumulation of public domestic arrears weigh on public balance sheets (Cameroon, Ethiopia, The Gambia, Mozambique).
  - SOEs pose significant fiscal and financial risks in some economies (Angola, Cabo Verde, South Africa) and have crowded out higher-priority public spending in some countries (Botswana, Cabo Verde, Madagascar).
  - Progress with debt resolution has helped reduce outstanding external arrears in some cases (Chad), and other highly indebted countries are making good faith efforts to reach agreements with creditors (Republic of Congo, The Gambia).

### Banking sector and credit growth
- Nonperforming loans (NPLs) and banking weaknesses:
  - NPLs remain high in many sub-Saharan African countries and have continued to rise, particularly in some countries where ratios are already elevated (Central African Economic and Monetary Community [CEMAC]).
  - High NPL levels reflect the legacy of the 2014 commodity shock.

*Regional Economic Outlook: Sub-Saharan Africa — Chapter excerpts as presented in the supplied content.*

### Appendix for country groupings table.

### Appendix for country groupings table

### Financial sector vulnerabilities and banking system health
- Systemwide nonperforming loan (NPL) ratio in Ghana reached 18.2 percent at end-2018.
- High NPL levels are weighing on credit growth and encouraging banks to hold more government bonds.
- Capital adequacy:
  - Banks’ capital has increased as a ratio to risk-weighted assets in Chad, Republic of Congo, Equatorial Guinea, Gabon, Ghana, Malawi, Namibia.
  - Zero risk weighting of government bonds could mask underlying capital coverage if sovereign risk materializes.
  - In several countries, capital increases reflect measures to raise minimum capital requirements, resolve insolvent banks, or support illiquid ones (Ghana, Kenya).
  - A few small banks remain undercapitalized (Kenya, Nigeria, Togo); in some cases, systemic banks remain undercapitalized.
- Other banking-sector concerns:
  - Foreign currency liquidity mismatches (Angola).
  - High loan concentration (Benin, Equatorial Guinea, Eswatini, Malawi, Namibia).
  - Insufficient provisioning (Angola).
  - Increased household and corporate debts (Tanzania).

### Risks to the outlook
- Overall risk tilt:
  - Near term: risks mainly tilted to the downside.
  - Medium term: risks are balanced.
- Key downside risk channels and quantified impacts:
  - Trade tensions, lower commodity prices, and tighter global financial conditions could lower growth in sub-Saharan Africa by 2 percentage points in 2019 and 1½ percentage points in 2020.
  - Intense conflicts could lower output by a cumulative 7½ percentage points through the medium term; large conflicts in neighboring states within 500 kilometers are associated with a reduction in growth of about 2 percentage points.
  - Climate shocks: below-average precipitation can reduce growth by up to 1½ percentage points within the same year in extreme cases.
- Trade tensions and China slowdown:
  - China is the region’s largest trading partner, accounting for about 20 percent of total trade.
  - About 70 percent of the region’s exports to China are related to commodities (oil, minerals, metals).
  - About 20 percent of the region’s imports are from China; of those imports, 45 percent are consumer goods.
  - Imports from China amounted to US$67.5 billion in 2017, compared with US$13.7 billion imports from the United States and US$79.7 billion imports from Europe.
  - China’s direct investment into the region is about 5 percent of total foreign direct investment and flows primarily to resource-intensive countries.
  - Empirical estimates: over a one-year horizon, a 1 percent fall in industrial production in China leads to a 5–7 percent fall in metals and fuel prices.
- Tighter global financial conditions:
  - Triggers include escalating trade tensions, higher-than-expected US inflation, a “no-deal Brexit”, or a deeper slowdown in China.
  - Tighter conditions could manifest as higher US interest rates, a stronger US dollar, and lower commodity prices, increasing capital outflows and refinancing risks.
  - Frontier economies face large refinancing needs given the lumpy maturity of bonds.
- Climate and security shocks:
  - Cyclone Idai (March 2019) affected more than 2.6 million people.
  - El Niño could cause droughts in southern Africa (Botswana, Lesotho, Malawi, Mozambique, South Africa, Zambia, Zimbabwe) and above-average rainfall in east Africa (Ethiopia, Kenya, Tanzania, White Nile Basin).
  - The number of internally displaced persons is estimated to have reached 18 million in 2018 alone.

### Debt, fiscal pressures, and financing risks
- Drivers of rising public debt:
  - Country-specific: investment in human capital and infrastructure during easier global financial conditions.
  - Adverse commodity price shock (2014–16), with oil exporters facing the largest real oil price decline since 1970.
  - Migration of contingent liabilities to the public sector balance sheet, losses by SOEs, and valuation effects from exchange rate depreciations.
- Three main concerns with rising debt:
  1. Debt restructuring needs: seven countries, mainly fragile or hard-hit by the commodity price slump, have been unable to service their debt and needed restructuring (examples: Chad, Mozambique, Republic of Congo).
  2. Rising debt service burden: the median interest payment burden has doubled to about 10 percent of revenue since 2011.
  3. More complex debt composition:
     - Of the US$366 billion increase in debt between 2010 and 2017, about two-thirds was due to market borrowing.
     - About 43 percent of the increase was in foreign currency.
     - 13 percent was from bilateral creditors.
- Offsetting improvements:
  - Some countries (Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal) used favorable global financing conditions to improve the maturity structure of debt, replacing short-term debt with longer-term debt and reducing rollover risk.

### Policy priorities and reforms
- Overall objective: balance continuing investment in human and physical capital, contain public debt levels, and create jobs for some 20 million new entrants into the labor market each year.
- Fiscal and debt management recommendations:
  - Avoid unsustainable debt buildup and strengthen debt management practices.
  - Prioritize public investment that yields high economic returns while containing recurrent commitments.
  - Enhance transparency and monitoring of contingent liabilities and SOE exposures.
- Financial sector measures:
  - Strengthen bank capital where undercapitalization persists, improve provisioning, and address loan concentration risks.
  - Improve supervision and risk management practices to reduce systemic vulnerabilities from sovereign-bank linkages.
- External and macro policies:
  - Prepare for tighter global financial conditions by improving external buffers and managing refinancing risks.
  - Mitigate exposure to commodity price volatility through macroeconomic buffers and diversification.
- Development financing:
  - Mobilize joint efforts from national authorities, the donors’ community, and the private sector to finance large investment needs in infrastructure, education, and health care.

*Source: Appendix for country groupings table, ch1 - Appendix for country groupings table.*

### 1. TWO-TRACK RECOVERY AMID ELEVATED UNCERTAINTY

### 1. TWO-TRACK RECOVERY AMID ELEVATED UNCERTAINTY

### Ensuring efficient public investment
- Improve project planning, allocation, and implementation phases (IMF 2015a).
- Assess macroeconomic consequences and potential risks associated with alternative financing strategies, different public investment trajectories, and changes in investment efficiency.
- Baseline projections assume higher efficiency in public investment for countries with high debt (Figure 1.25).
- Policy trade-offs depend on country-specific circumstances, needs, capacity, and fiscal space:
  - Where debt dynamics are a serious concern, use fiscal savings to contain debt accumulation and rebuild fiscal buffers.
  - Rebalance public spending away from nonessential recurrent spending and subsidies toward social and development spending.
  - Where infrastructure gaps impede growth and public investment management capacity is high, use fiscal space for development purposes.

### Implementing growth-friendly fiscal policies
- Multipliers of both public investment and consumption expenditure are significantly larger in countries where public investment is most efficient, and lower where it is less efficient (IMF 2017).
- Actions to improve spending composition and quality:
  - Substantially cut low-priority capital expenditure and recurrent spending while protecting social outlays.
  - Improve efficiency in goods and services (including reducing subsidies), undertake payroll cleanup, and limit nonwage compensation (example: Benin).
  - Prioritize social spending on health, education, and social safety nets.
- Simulation evidence:
  - Reducing income and gender inequality in the West African Economic and Monetary Union (WAEMU) could boost real GDP per capita by 0.5 percentage point on average and reduce the volatility of GDP growth.

### Stepping up revenue mobilization
- Average revenue gap estimated at 3–5 percent of GDP.
- Revenue advanced in 2018 by about 0.3 percent of GDP on average across countries, mainly due to higher-than-anticipated oil prices.
- Past successful cases of revenue mobilization recorded an average increase in revenue (excluding grants) of 1¼ percent of GDP (examples and periods: Liberia, 2006–10; Mozambique, 2007–12; Rwanda, 2012–14; Senegal, 2001–03; Tanzania, 2005–07; Uganda, 2014–16).
- Successful episodes were mostly driven by noncommodity revenue and based on improvements in revenue administration and tax policy reform (IMF 2018c).
- Measures countries are considering to increase tax efficiency and administration:
  - Broaden tax base (introducing or reforming VAT: Angola, Senegal).
  - Bring the informal sector into the tax net (Senegal).
  - Reduce tax expenditures and streamline tax exemptions via transparent, rules-based processes (Benin, Kenya).

### Improving economic efficiency and containing fiscal risks from SOEs
- Recent reforms to increase SOE transparency and governance include:
  - Publishing findings of official reports on SOE performance (Cabo Verde, Cameroon, Ghana).
  - Strengthening SOE oversight agencies (Angola, Ghana).
  - Auditing SOE governance and operations (The Gambia, Niger, Seychelles).
  - Updating legal frameworks for SOEs (Cameroon, Guinea, Mozambique).
  - Outsourcing SOE management (Guinea-Bissau).
- Restructuring measures include resolving insolvent SOEs (Angola) and possible privatization of nonstrategic SOEs (Angola, Cabo Verde, Chad, Ethiopia, South Africa).
- Improve capital project selection to reduce risks from SOEs and PPPs (Benin, Senegal, Seychelles, Tanzania).

### Reducing procyclicality of spending and strengthening PFM
- Develop fiscal rules and fiscal stabilization funds to manage future oil revenue and reduce spending procyclicality (Angola, Senegal, Uganda).
- Address large domestic arrears (Cabo Verde, Cameroon, Ghana, São Tomé and Príncipe, South Africa, Zambia) through strengthened PFM:
  - Enhance medium-term expenditure frameworks (Angola, Botswana).
  - Switch to the Treasury Single Account (Republic of Congo, Côte d’Ivoire).
  - Move to performance-based budgeting (Botswana).
  - Enforce internal controls (Angola, Uganda).
  - Improve capital project selection (Benin, Senegal, Seychelles, Tanzania).

### Improving debt management frameworks
- Use debt buybacks to ease near-term refinancing risks and reprofile external debt (example: Ghana’s buyback of the 2022 Eurobond with proceeds from the 2018 Eurobond, Ghana’s first ever bond with a 30-year maturity).
- Better align repayment currency with foreign exchange earnings (Seychelles).
- Reduce bunching of external loan repayments via multitranche Eurobond issuances.
- Caution: delayed buybacks with Eurobond proceeds could result in unnecessary carry costs.

### Strengthening the effectiveness of monetary policy
- Monetary transmission mechanism has strengthened overall but varies widely across countries; stronger where monetary authorities clearly communicate objectives, instruments, and strategy.
- Reversals observed in some countries (Kenya, Malawi, Nigeria) due to central bank financing, redirecting bank lending toward government securities (Malawi), crowding-out effects (Nigeria), and lending rate caps (Kenya).
- Populist pressures for interest controls (Kenya, Malawi) have adverse consequences on credit availability.
- Recommendations to enhance transmission:
  - Raise caps on interest rates.
  - Move toward a more market-oriented monetary policy operating system and reduce fiscal dominance.
  - Improve secondary bond and interbank markets.
  - Reduce excess liquidity via active open market operations.
  - Enhance interbank transactions, addressing counterparty risks (new collateral mechanisms for bank refinancing operations: CEMAC, WAEMU).
  - Expand collateral framework to include all government securities (CEMAC, Botswana).
  - Bring short-term interest rates into positive territory in real terms and keep them there (especially in Angola).
  - Narrow the overnight interest rate corridor and establish a symmetrical corridor linked to the key policy rate.
  - Develop forward-looking frameworks for forecasting liquidity and managing inflation.
  - Strengthen central bank independence.

### Enhancing real exchange rate flexibility
- Lower external buffers have increased exchange rate pressures and foreign exchange shortages, creating large premiums between official and parallel market exchange rates, particularly for oil exporters (Angola, South Sudan) and some resource-intensive countries (Ghana).
- Countries have often relied on reserves rather than exchange rate flexibility due to concerns about large foreign-currency-denominated liabilities, significant pass-through of exchange rate changes to inflation (estimated at about 40 percent), and limited responsiveness of output and exports to real exchange rate changes.
- Additional exchange rate flexibility, where balance sheet vulnerabilities are manageable and accompanied by product and labor market reforms, would enhance resilience and facilitate structural transformation.
- In de jure fixed regimes, flexibility would stem mainly from relative price adjustments and require wage and price flexibility reforms.

### Securing financial stability
- Macroprudential tightening has included restrictions on banks’ foreign exchange positions, higher reserve requirements, and capital requirements (Angola, Ghana, Mozambique, Nigeria).
- Measures to reduce NPLs and strengthen financial sector resilience:
  - Strengthen creditor rights and shorten judicial processes for collateral recovery.
  - Halt net accumulation of public domestic arrears to the private sector (Equatorial Guinea).
  - Improve credit information systems and modernize insolvency regimes.
  - Implement financial education programs for medium-size corporates.
  - Provide adequate safeguards to borrowers, including customer protection measures.
- Addressing persistent NPLs requires comprehensive NPL reduction strategies:
  - Accelerate loss recognition through regulatory action.
  - Strengthen supervisory focus on recovery actions.
  - Reform insolvency and debt enforcement frameworks to enable swift restructuring of distressed but viable borrowers.
  - Establish permanent macroprudential buffers (on top of microprudential minimums) that can be relaxed by regulators in the event of shocks, allowing NPLs to be absorbed by capital while preserving credit provision.
- Progress in banking sector reforms:
  - CEMAC: new regulations on systemically important institutions, accelerated resolution of small microfinance institutions, emergency liquidity assistance framework.
  - WAEMU: new prudential rules aligned with Basel II/III principles.
  - Transitioning to IFRS 9 requires strengthening banks’ balance sheets due to increased provisioning requirements; implications for credit growth and sovereign exposures during transition remain uncertain.

### Correspondent banking relations (CBRs) and related responses
- Loss of CBRs has prompted upgrades to AML/CFT frameworks and related legal and regulatory amendments (Angola, Seychelles).
- Decline in CBRs has increased concentration in remaining relationships, posing financial stability risk if correspondent banks face difficulties.
- Responses and initiatives:
  - Strengthen financial stability frameworks and international capital adequacy requirements (Seychelles).
  - Engage with correspondent banks and supervisors to understand causes of CBR loss (Seychelles).
  - Regional IMF initiatives to facilitate policy dialogue on CBR issues, including a high-level workshop for SADC countries in 2018 and three more events covering all of Africa planned for 2019.
  - Implement data monitoring frameworks (Angola, The Gambia, Seychelles) with IMF capacity support.

### Raising medium-term growth: productivity, investment, and inclusion
- Region’s medium-term growth prospects held back by low productivity growth and limited physical capital accumulation relative to comparable regions (Figure 1.27).
- Increasing productivity requires:
  - Enhancing market contestability and nurturing a dynamic private sector.
  - Removing salient constraints: access to reliable electricity, rent seeking, informal sector practices, security concerns, tax rates, and access to credit (Figure 1.28).
  - Level the playing field between public and private firms and between formal and informal sectors; improve governance; foster trade openness and integration.
- AfCFTA potential: further trade integration could significantly boost intra-African trade, foster competition, and increase efficiency; estimated impact is an approximate 1 percent increase in GDP levels if tariffs are eliminated and nontariff barriers are halved.
- Deepening financial markets:
  - Improve financial regulation, supervision, and the institutional environment to enhance access to finance, especially for SMEs.
  - Promote credit/collateral registries (Angola, Benin, Tanzania).
  - Enhance financial literacy (Seychelles).
  - Develop regional capital markets and leverage fintech (mobile money) for greater financial inclusion.
- Equality of opportunities:
  - Most return to capital accrues to nonfinancial corporates (55 percent); households receive 20 percent and their share has been declining.
  - Within corporates, high state ownership firms enjoy higher benefits, including greater access to credit.
  - Some progress toward greater equity: share of income earned by the highest 20 percent of the income distribution has declined and that of “middle-income earners” has increased, consistent with a rising middle class.

*Source: ch1 - 1. TWO-TRACK RECOVERY AMID ELEVATED UNCERTAINTY (PDF).*

### 2. Emerging Market and Developing Economies

### 2. Emerging Market and Developing Economies

### Sub-Saharan Africa: inclusion, constraints, and policy priorities
- Some 40 percent of people in sub-Saharan Africa still live on less than US$1.25 a day.  
- Region exhibits among the highest levels of gender inequality in the world.  
- Major constraints to business operations (percent of firms) identified by World Bank Enterprise Survey Data include (categories listed as in source): Access to credit; Licensing and permits; Tax rates; Customs and trade regulations; Transportation; Electricity; Crime theft and disorder; Political stability; Corruption; Practices of competitors in informal sector; Labor regulation; Inadequately educated labor force. (Figure referenced: Selected Emerging Market and Developing Regions: Major Constraints to Business Operations.)  
- Policy recommendations to strengthen inclusion and growth:
  - Facilitate movement of labor toward sectors other than government and agriculture to generate significant gains in efficiency (Figure 1.29).  
  - Fiscal reform, including domestic revenue mobilization and subsidy reform, to create space for transfer mechanisms targeted to the poor, and efficient spending on physical and human capital.  
  - Deepen financial systems with greater financial inclusion to help further reduce inequalities.  
  - Enhance women’s participation in the economy, including by abolishing legal restrictions for women to open bank accounts or accept jobs, and addressing inequality in education (Box 1.3) to strengthen inclusivity of growth and growth potential.  
  - Support these steps with measures to promote flexible education systems, while ensuring full enrollment with recourse to digital technologies to overcome existing bottlenecks.  
- Labor productivity and earnings relative to government sector: weighted-average comparisons across sectors (Agriculture; Trade; Manufacturing; Transport; Finance; Construction; Utilities) shown in Figure 1.29 with axes labeled Relative labor productivity and Relative monthly earnings.

### Box 1.1 — Transitioning to International Financial Reporting Standard 9 (IFRS 9)
- IFRS 9 became effective worldwide in 2018 and changes accounting rules for financial instruments to an expected credit loss framework (forward-looking).  
- Expected benefits: more transparent disclosure of financial instruments.  
- Expected transitional costs/risks:
  - Banks may need to increase loan loss provisions and raise capital, which is costly, during transition.  
  - Potential downward pressure on credit growth during transition.  
- Adoption and transitional arrangements in sub-Saharan Africa:
  - IFRS 9 is used in about four-fifths of sub-Saharan African countries.  
  - Some authorities allowed banks to adjust capital over an extended period: three years in South Africa, four years in Rwanda and Nigeria, and five years in Kenya.  
  - Some authorities set provisioning for government securities at zero (Rwanda), with caveat that this could distort banks’ asset-allocation decisions.  
- Empirical findings:
  - Quantitative assessment for South African banks found a 39 percent increase in credit impairment but no breaches of capital adequacy ratios (SARB [2018]).  
  - In Rwanda, provision coverage ratio has been on an increasing trend since adoption of IFRS 9, while credit growth remains lower than the 2017 average (Figure 1.1.1).  
  - Causality from IFRS 9 adoption to credit growth is hard to establish, particularly given transitional arrangements.  
- Recommendation: Further work by supervisors in the region is needed to achieve compliance while avoiding an excessive impact on banks’ ability to lend.

### Box 1.2 — Financial Development and Mobile Money Growth in Sub-Saharan Africa
- Overall assessment:
  - Financial development—excluding mobile money transactions—has grown faster in sub-Saharan Africa than in other regions, but overall level continues to trail other economies.  
  - During 2011–16, pace of development in financial markets far exceeded that of financial institutions, starting from a low base. Financial markets deepened (stock and bond markets); financial institution development propelled by improved access to banking infrastructure (branches and ATMs).  
  - Sub-Saharan African countries outperformed comparator regions in Asia and the Middle East and central Asia in some categories but trailed in financial deepening of banking and nonbanking sectors (Figure 1.2.1).  
- Mobile money:
  - Usage of mobile money accounts has continued to surge faster than in other regions; mobile money accounts have surpassed traditional deposit accounts in sub-Saharan Africa (IMF 2019a) (Figures 1.2.1–1.2.3).  
  - Figure 1.2.3 shows accounts per 1,000 adults for 2012–17 comparing Traditional deposit accounts and Mobile money accounts (sample includes Botswana, Eswatini, Ghana, Guinea, Kenya, Madagascar, Rwanda, Uganda, Zambia, and Zimbabwe).  
  - Figure 1.2.2 reports Mobile Money Accounts, 2017, showing accounts per 1,000 adults for a long country list (CIV, GHA, RWA, ZMB, KEN, BWA, ZWE, BEN, UGA, LSO, MUS, MLI, BFA, TGO, SWZ, SEN, MDG, MOZ, GNB, GIN, NER, NGA, SYC, CAF).  
- East Africa lessons for mobile money adoption:
  - Telecom-led regulatory model (telecom provider works with financial regulator) proved more successful in attracting users than bank-led models.  
  - Dominant telecom providers with large market shares helped reach critical mass: e.g., Safaricom nearly 70 percent market share in Kenya; Vodacom close to half in Tanzania. Large market share allowed most users to operate on a single platform—raising concentration and potential stability concerns—while interoperability is increasingly allowing transactions across providers.  
  - National identification systems in East African countries facilitated faster mobile payment adoption and more secure transactions.  
- Note on measurement: Financial development measured by the Financial Development Index encompassing financial institutions—banking and nonbanking—and markets across three dimensions: depth, access, and efficiency.

### Box 1.3 — Sub-Saharan African Demographic Trends and Gender Gaps in Education
- Demographics and opportunity:
  - Sub-Saharan Africa’s population could double in the next three decades, and quadruple by the end of the century (Figure 1.3.1).  
  - Large entry of young people into the labor force is associated with a decline in the dependency ratio as fertility rates are expected to decline from current levels.  
  - Declining dependency ratios present a large opportunity, but harnessing the demographic dividend requires creating jobs and scaling up human capital through improvements in health and education.  
- Gender gaps in education:
  - While gender gaps have narrowed substantially in many countries, some countries still see fewer than three girls enrolled in secondary education for every four boys in some sub-Saharan African countries (Figure 1.3.2).  
  - Policies associated with narrower education gaps include higher public spending on education; better infrastructure, particularly improvements in sanitation facilities and women’s health; and, in some cases, raising the legal age of marriage for men and women (Jain-Chandra and others 2018).  
  - Complementary measures: level the playing field for economic participation by women, including in the context of rapid technological advances and automation.  
- Expected outcomes: Such measures could result in higher productivity growth and stability gains (Cuberes and Teignier 2016; Sahay and Cihak 2018).  
- Figure references:
  - Figure 1.3.1: Projected Population Size and Dependency Ratio (United Nations Population Division) — shows Population (millions) and Dependency ratio (ratio of people age <15 and >64 to people age 15–64, percent) over time.  
  - Figure 1.3.2: Ratio of Female-to-Male Secondary Enrollment, 2016, for selected countries (TCD, AGO, CAF, NER, CIV, MLI, BEN, LBR, CMR, MWI, NGA, SLE, BFA, BDI, GHA, SWZ, MDG, SEN, MUS, SYC, ZAF).

*Regional Economic Outlook: Sub‑Saharan Africa — chapter content provided in the source PDF.*

---


_Source: https://www.imf.org/-/media/files/publications/reo/afr/2019/april/english/ch1.pdf_