Transcript of the Press Conference on the Regional Economic Outlook Update for Sub-Saharan Africa

IMF News, June 29, 2020

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Sub-Saharan Africa's economy is expected to contract by 3.2 percent in 2020, "double the contraction" projected in April.
The 2020 outlook implies a 7 percentage points swing from the growth expected prior to the crisis for 2020.
On a per-person basis, the shock amounts to a decline in income of around 5.2 percent (per capita).
The region has confirmed "more than a-quarter-of-a-million cases"; new cases are "still doubling every two to three weeks" and the pandemic is described as "very much remains in its exponential place."

Immediate priority: protect lives and strengthen local health systems to contain the outbreak, given "already-stretched health care capacity."
Recent trends: growth rate of new infections has continued to fall in some countries, leading to easing of containment measures, but vigilance is emphasized because it is "too soon to rule out the pandemic trajectory that we've seen elsewhere."

Sub-Saharan African countries have announced COVID-related fiscal packages averaging around 3 percent of GDP.
These fiscal efforts have often come at the expense of other priorities such as public investment.
The World Bank estimates an increase of "about 20 million" in poverty numbers for 2020.
The IMF has modified the Catastrophe Containment and Relief Trust (CCRT) to provide immediate debt service relief for its poorest and most vulnerable members, and doubled access limits under its emergency lending facilities.
"In total, over the past 8, 10 weeks we've provided some $10 billion to Sub-Saharan African countries so far."
The G20 announced the Debt Service Suspension Initiative (DSSI) allowing the world's poorest countries to suspend debt service payments through the end of this year.
Financing gap: countries in the African region face an additional financing need of "over $110 billion" in 2020; "there is still some 44 billion of this that remains unfinanced."

Pre-crisis trend: debt levels had been increasing over the last eight to 10 years and many countries had limited additional borrowing capacity.
Impact of the shock: GDP declines are likely to push up debt-to-GDP ratios for the vast majority of countries in the region.
Debt sustainability and solvency assessments are country-specific and will need to be conducted on a country-by-country basis.
Official sector relief (DSSI/G20) is described as NPV-neutral and intended to provide fiscal breathing space without necessarily impairing market access; analogous arrangements from private creditors would be helpful if provided in an NPV-neutral way.
The IMF will not lend where "debt is clearly unsustainable"; countries already in debt difficulties will need creditor relief and targeted IMF engagement.

Near-term: preserve health and lives; once caseloads decline substantially and remain low, gradually shift from broad fiscal support to more targeted measures focused on poorest households and hardest-hit sectors.
Medium-term priorities to pursue aggressively alongside existing reform agendas:
- Strengthening resilience
- Rethinking and expanding social nets
- Facilitating digitalization
- Adapting to climate change
- Sustaining investment in human capital
- Facilitating stronger private sector development
Emphasis on coordinated effort by development partners to support recovery and sustainable development.

The IMF has used and expanded existing instruments rather than pursuing an immediate SDR issuance or reallocation; membership discussions on SDRs were ongoing.
The Rapid Financing Instrument (RFI) was requested by South Africa; IMF financing under the RFI would provide access to financing at very low interest rates relative to market costs.
Discussions with South Africa on IMF support were described as proceeding at a measured pace, with an anticipated outcome in the coming weeks.

Oil exporters (e.g., Republic of Congo, Angola, Cameroon): hit by a "double whammy" of domestic COVID-19 impact and historic declines in oil prices; Republic of Congo also faces pre-existing unsustainable debt constraints.
Nigeria: projected to contract by "around 5 percent, 5.4 percent if I remember correctly"; impact compounded by the sharp decline in oil prices; a nimble policy response is critical to avoid prolonged damage.
Kenya: hit significantly due to decline in tourism and extended lockdowns affecting regional economic activity.
Botswana: revisions reflect spread of the pandemic in neighboring South Africa and longer-than-expected lockdown extensions, prompting more marked downward GDP revisions.

Large cohort of young people entering labor markets across the region requires growth strategies that are as labor intensive as possible.
Recovery and development models should focus on generating domestic economic activity and identifying country-specific sectors capable of creating jobs for youth.