## Africa’s Hour of Need

_IMF Blog, May 22, 2020_

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**Canonical URL:** [Africa’s Hour of Need](https://www.imf.org/en/blogs/articles/2020/05/22/vc-africa-s-hour-of-need)

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## Bibliographic details
- Authors: Abebe Aemro Selassie
- Published: May 22, 2020

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### Economic impact and outlook
- The region’s expected economic contraction this year is: GDP set to shrink by at least 1.6%, and by 4% in per capita terms.
- This will be the region’s sharpest contraction since at least 1970.
- Formal economic activity has been brutally curtailed across the board due to aggressive containment and mitigation measures (complete lockdowns to border closures).
- The poor will likely endure the brunt of the crisis: many who earn daily incomes cannot work from home and are required to stay home and practice social distancing.
- The external environment deterioration compounds domestic challenges, especially tighter financial conditions and sharp commodity-price declines (especially for oil).

### Fiscal and financing constraints
- Many Sub-Saharan African countries have high levels of public debt, limited domestic savings, and drying private external financing options just when they would be most needed.
- The IMF and the World Bank estimate the region faces a government financing gap (assuming a modestly supportive fiscal stance) of at least $114 billion in 2020.
- African governments cannot mobilize this amount domestically.
- The IMF can provide close to $19 billion of rapidly disbursable financing to African countries this year; 26 have already received funding from its emergency facilities.
- In addition, 19 of the region’s poorest countries will receive direct debt relief, with the IMF Catastrophe Containment and Relief Trust providing grants to cover their upcoming debt-service payments to the Fund.
- Other partners (World Bank Group, African Development Bank) are ramping up financing.
- G20 countries have initiated a suspension of debt-service payments until the end of 2020 for poor countries that request relief.
- Despite these efforts, African governments still face a significant residual financing gap of at least $44 billion for 2020.

### Policy priorities and recommended responses
- Critical priority: protect citizens’ health and wellbeing by boosting spending to improve health-care system preparedness.
- Provide targeted cash or in-kind transfers to the most vulnerable groups.
- Wherever possible, governments should consider extending liquidity support to small and medium-size enterprises to ensure their survival through this period.
- Assistance must be provided in a transparent manner and in accordance with the highest governance standards.
- The case for the international community to bridge the residual $44 billion shortfall is presented as overwhelming to enable fiscal measures that mitigate the pandemic’s adverse effects.
- International lenders are encouraged to supplement financing to buttress the region’s economic recovery, viewed as a strategic long-term investment.

### Strategic rationale and long-term stakes
- One way or another, what happens in Africa will shape this century:
  - Ten years from now, Sub-Saharan Africa will account for more than half of the annual increase in the global labor force.
  - The marginal increase in global consumption and investment demand will increasingly come from this region.
- Healthier populations and climate-friendly urbanization in Africa are linked to a more robust future global workforce and a greener future.
- The amounts involved are characterized as manageable: $100 billion in new financing to support the region’s economic recovery amounts to only about 2% of the fiscal support that G7 governments have injected into their economies in recent weeks.
- With global interest rates as low as they are now, the op-ed argues it is an opportune time to commit additional financing to Africa.

*Op-ed by Abebe Aemro Selassie, Director of the African Department at the International Monetary Fund; first published on Project Syndicate on May 22, 2020.*

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## References

- [set to shrink](https://www.imf.org/en/News/Articles/2020/04/13/na0413202-six-charts-show-how-covid-19-is-an-unprecedented-threat-to)
- [government financing gap](https://www.imf.org/en/News/Articles/2020/04/17/sp041720-2020-Spring-Meetings-High-Level-Virtual-Event-on-Mobilizing-with-Africa)
- [received funding](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)
- [more than half](https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2018/12/14/The-Future-of-Work-in-Sub-Saharan-Africa-46333)

_Source: https://www.imf.org/en/blogs/articles/2020/05/22/vc-africa-s-hour-of-need_