Sub-Saharan Africa: A Cautious Reopening

IMF News, June 29, 2020

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Regional growth is now expected to contract by 3.2 percent in 2020; double the contraction expected in April.
The contraction is "set to be the worst outcome on record."
The downturn has deteriorated sharply since the April 2020 Regional Economic Outlook report release.
The crisis will contribute to poverty increase this year.
Countries in the region have announced COVID-related fiscal packages averaging 3 percent of GDP.
Fiscal responses have often come at the expense of other priorities, such as public investment, and are markedly less than the response seen in other emerging markets or advanced economies.

The growth rate of new COVID infections has slowed somewhat since April, allowing some countries to gradually ease containment measures.
Regionwide, the pandemic is still in its exponential phase—Sub-Saharan Africa has recently exceeded more than a quarter of a million confirmed cases, and new cases are still doubling every 2-3 weeks.
Given the region’s already-stretched healthcare capacity, the immediate priority is to protect lives and to strengthen local health systems and contain the outbreak.

Around ninety percent of non-agricultural employment is in the informal sector, where participants are usually not covered by the social safety net.
A large proportion of informal activity centers on the provision of services, which have been particularly hard hit by the crisis.
Informal workers typically have few savings and limited access to finance, making sustained lockdowns especially difficult.
Many authorities have temporarily expanded safety nets using home-grown, often innovative approaches to ensure transfers reach as much of their population as possible, but resources are limited and cannot offset the full impact of the crisis.

Monetary and prudential policies have been eased, including a mix of reduced policy rates, added injections of liquidity, greater exchange-rate flexibility, and temporary relaxation of regulatory and prudential norms, depending on country circumstances.
On the fiscal side, collapsing tax revenues and elevated pre-crisis debt levels have constrained the ability of governments to increase spending.

Immediate priority: preservation of health and lives; strengthen local health systems and containment efforts.
As recovery begins, shift from broad fiscal support to more affordable, targeted policies concentrating on:
- The poorest households.
- Sectors hit hardest by the crisis.
Once the crisis wanes, refocus on transforming economies, creating jobs, and boosting living standards.
Restore fiscal positions to a path consistent with debt sustainability through:
- Revenue-mobilization reforms.
- Debt-management reforms.
- Public financial management reforms.
Promote private-sector investment and a business environment conducive to new ideas and opportunities (including the digital revolution).

The IMF modified the Catastrophe Containment and Relief Trust (CCRT) to provide immediate debt service relief for its poorest and most vulnerable members, and doubled its emergency lending facilities.
So far, 29 countries in the region have received around $10 billion in funding through these facilities, or through expanded access under existing programs.
In April, the G20 announced the Debt Service Suspension Initiative (DSSI), which allows the world’s poorest countries—most of them in Africa—to suspend up to US$14 billion of debt service payments due between May and December this year.
Despite these measures, more international support is needed urgently:
- Countries in the region face additional financing needs of over $110 billion this year.
- $44 billion of this financing has yet to be financed.

Source: Sub-Saharan Africa: A Cautious Reopening, Press Release No. 20/249 (June 29, 2020), IMF Communications Department.