Yet another shock
The economic recovery in sub-Saharan Africa surprised on the upside in the second half of 2021, prompting a significant upward revision in last year’s estimated growth, from 3.7 to 4.5 percent. This year, however, that progress has been jeopardized by the Russian invasion of Ukraine which has triggered a global economic shock that is hitting the region at a time when countries’ policy space to respond to it is minimal to nonexistent. Most notably, surging oil and food prices are straining the external and fiscal balances of commodity-importing countries and have increased food security concerns in the region.
The Role of Foreign Exchange Intervention in sub-Saharan Africa’s Policy Toolkit
The IMF has developed the Integrated Policy Framework to help countries develop the most appropriate policy response to global shocks. This new analytical framework considers the combined and potentially interacting role of monetary, exchange rate, macroprudential, and capital flow management policies. In this context, this note considers the role of foreign exchange (FX) intervention as a part of the policy toolkit in sub-Saharan Africa, focusing specifically on countries with flexible exchange rates.
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