Transcript of Africa's Regional Economic Outlook
IMF News, October 13, 2023
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- Published: October 13, 2023
Overview and regional growth outlook
- The Sub-Saharan Africa Regional Economic Outlook special issue is titled “Light on the Horizon.”
- 2023 growth: slowed to 3.3 percent from 4 percent in 2022.
- Median growth for the region in 2023: 4.1 percent.
- 2024 projection: growth is expected to rebound to 4 percent and be broad based.
- External headwinds noted: slower international demand, expensive and difficult access to finance.
Key macroeconomic challenges and vulnerabilities
- Fiscal:
- Fiscal deficits have been narrowing in many countries, helping stabilize public debt in most countries.
- High debt service ratios to revenue risk crowding out development spending.
- Inflation:
- Inflation remains too high, with one third of countries having double digit inflation.
- Financing:
- The funding squeeze is ongoing; while debt levels have stabilized, the cost of repayments has increased.
- Shocks and fragility:
- Policymakers face frequent shocks and fragility, including conflicts (examples cited: Libya, Sudan, Sahel).
- Country-specific snapshots and concerns:
- South Africa: IMF raised its growth outlook to 0.9 this year, up from 0.6 earlier this year; energy-sector disruptions (Eskom) and delayed structural/governance reforms pose risks to growth and fiscal balance.
- Ghana: Government awaiting creditor actions to unlock the $600 million second tranche; IMF expects official creditors to take steps to allow the upcoming review to conclude.
- Nigeria:
- Reported nominal debt stock cited as 87 trillion naira.
- Debt-to-GDP ratio estimated to reach 37 percent this year.
- IMF view: the debt stock is manageable in stock terms, but debt servicing is difficult because the government does not generate enough tax revenue; need for higher non-oil tax revenues and subsidy reform.
- Recent policies: exchange rate unification and fuel subsidy removal welcomed but are not sufficient without tighter monetary policy and stronger revenue mobilization.
- Kenya: Authorities proactively working on options to address large maturities; IMF supportive and sending a team to engage.
- Sierra Leone: Two currencies circulating during redenomination is not unusual but requires transparency and an orderly process.
Policy priorities and recommendations (four interrelated priorities emphasized)
- Address inflation in countries with elevated and rising inflation:
- Further monetary tightening might be warranted where inflation is elevated.
- Countries where inflation is falling and on track to meet targets could pause monetary tightening.
- Reduce debt vulnerabilities while creating space for development spending:
- Balance raising domestic revenues with reforms to foster growth.
- Allow exchange rate depreciation where needed:
- Avoiding depreciation pressures by exhausting international reserves erodes competitiveness and causes larger problems later.
- Increase investment in priority areas:
- Prioritize health, education, infrastructure as growth-enhancing investments.
Implementation guidance and IMF engagement
- IMF role:
- Provides macroeconomic assessments and supports authorities; engages with creditors indirectly by supporting borrowers.
- Encourages holistic and coordinated policy packages (fiscal, monetary, structural) to reinforce reforms (example: Nigeria).
- Debt treatments and creditor engagement:
- Common Framework: progress has been mixed; Chad completed a case; Zambia progressed with program approvals and ongoing creditor negotiations; delays have occurred but IMF emphasizes continued disbursements where program conditions are met.
- Creditor questions often focus on macroeconomic projections and uncertainties in the current volatile environment.
- Climate and innovative financing:
- Debt-for-nature / carbon credit ideas are discussed as promising in some contexts (e.g., countries acting as carbon sinks), but applicability varies by country and is partially outside IMF core mandate.
- IMF supports countries via mechanisms like the Resilience and Sustainability Trust (RST) to leverage private finance for climate needs.
- Private sector and brain drain:
- Long-term solutions include making domestic economies more attractive and enabling diasporas and remittances to contribute to development and investment.
Selected policy advice and country-specific recommendations
- South Africa:
- Maintain nimble macroeconomic policies to respond to exogenous and domestic shocks.
- Implement deep structural reforms in network industries to unlock growth and exports.
- Ghana:
- Continue program implementation; creditor actions needed to finalize debt treatment and unlock the $600 million second tranche.
- IMF to provide governance diagnostic technical assistance when resources allow.
- Nigeria:
- Raise non-oil tax revenues to ease debt servicing pressures.
- Maintain unified exchange rate policy but back it with tighter monetary policy and fiscal consolidation.
- Reduce distortive trade restrictions in favor of fiscal and monetary levers and targeted tax policy where appropriate.
- Kenya:
- Continue implementing policies to stabilize debt dynamics; IMF engagement planned to support options for upcoming maturities.
Communication points and institutional notes
- The IMF emphasizes cautious optimism given signs of a broadening recovery, while underscoring that “it is too early to celebrate.”
- The IMF notes heterogeneity across the continent; conflict-affected areas coexist with peaceful, rapidly growing economies.
- On governance of IMF representation: the question of additional Board representation for Africa is under member consideration and beyond the African Department’s remit.
Transcript of Press Briefing: Regional Economic Outlook for Sub-Saharan Africa, October 13, 2023 — International Monetary Fund