The Sahel, Central African Republic Face Complex Challenges to Sustainable Development

IMF News, November 16, 2023

Source details

Canonical URL: The Sahel, Central African Republic Face Complex Challenges to Sustainable Development

Countries covered: Burkina Faso, Chad, Mali, Mauritania, Niger (the Sahel), and Central African Republic (CAR).
Primary drivers of fragility:
- Escalating insecurity and political instability, including military takeovers.
- Climate change: more frequent extreme weather events, including historic floods and drought.
- Overlapping external economic shocks.
Humanitarian impact:
- Conflict-related fatalities increased by over 40 percent in 2022.
- More than 3 million people fleeing violence in Burkina Faso, Mali, and Niger (UNHCR).
Agriculture and food security:
- Extreme weather events depress productivity in agriculture, resulting in the loss of income and assets, exacerbating food insecurity, and reinforcing fragility and conflict.

Security spending:
- Reached 3.9 percent of GDP in 2022.
- Absorbed 25 percent of fiscal revenues before grants, on average.
Public debt and borrowing space:
- Public debt as a share of GDP has been increasing steadily since 2011 for Sahel countries.
- Projected to average close to 51 percent in 2023.
- With financial conditions likely to remain tight, there is limited scope for governments to borrow more.
IMF recommendation on financing sources:
- Focus on grants, highly concessional financing, domestic revenue mobilization, and private sector development efforts.

Growth projection:
- Economic growth in the region is projected to stabilize at about 4.7 percent over the medium term.
Development gap:
- Stabilized growth is not sufficient to reverse increasing income divergence with advanced economies; divergence could worsen if terms of trade deteriorate relative to the baseline.
Investment requirement:
- IMF estimates additional investments of about US$28.3 billion over 2023-26 would be required to fully reignite the development catch-up process in the region.

Donor trends:
- Donor support declined by close to 20 percent over the last decade to reach about 4 percent of GDP.
- Less than half a percent of GDP was provided in the form of budget support grants in 2022.
Constraints to concessional financing:
- Political instability and fragile transitions to civilian rule in Burkina Faso, Mali, and Niger make it more difficult to raise concessional financing.
- Transparency of public spending is an important issue in CAR.
Risks of reduced budget support:
- Prolonged reductions present significant risks to essential functions of the state and will worsen social and humanitarian conditions.
Policy implication:
- Additional donor support, preferably in the form of grants and budget support grants, is essential to address financing priorities flexibly and help lay the foundation for peace and sustainable development.

Governance and transparency:
- Increase budget transparency and accountability.
- Enhance governance and anti-corruption frameworks.
- Strengthen security expenditure management and internal controls.
Domestic resource mobilization:
- Boost domestic revenue mobilization to finance spending needs sustainably.
Public services and inclusion:
- Improve provision of public services in fragile zones.
- Implement policies to unlock access to economic opportunities for young people.
Climate and resilience:
- Adopt policies to foster resilience and climate-smart investments, including in the agricultural sector.

IMF programs and tools:
- Five out of the six countries have an IMF-supported financing arrangement to strengthen macroeconomic frameworks and implement reforms.
- Mauritania has requested access to the Resilience and Sustainability Facility (RSF) and an IMF program to introduce macro-critical climate reforms is under preparation.
- The Fund provides extensive capacity development activities for all economies in the region.
Strategy for fragile and conflict-affected states:
- Deliver more robust support tailored to country characteristics through Country Engagement Strategies.
- Deploy more staff on the ground, scale-up capacity development, and strengthen partnerships with humanitarian, development, and peace actors.
- The Fund is committed to helping the economies in the Sahel resume their development path even in a context of significant stress.

Source: IMF News — The Sahel, Central African Republic Face Complex Challenges to Sustainable Development (November 16, 2023).