Sub-Saharan Africa’s Difficult Road to Recovery

IMF Blog, October 22, 2020

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The COVID-19 pandemic represents an unprecedented health and economic crisis for sub-Saharan Africa, jeopardizing years of development and decades-long gains against poverty while threatening the lives and livelihoods of millions of people.
Lockdown measures implemented to protect health have come with high economic and social costs.
Policymakers face the added challenge of rekindling their economies with fewer resources and more difficult choices.

Regional GDP projection for 2020: -3 percent growth in sub-Saharan Africa’s GDP in 2020, representing the worst outcome on record for the region.
Sectoral impacts: The drop will be even larger for economies dependent on tourism and commodity exports.
Near-term rebound: Growth in the region should rebound modestly in 2021 to 3.1 percent.
Timing of recovery: For many countries, a return to 2019 levels won’t occur until 2022–24.
Uncertainty: The path of the pandemic continues to loom over an enduring recovery.

Top priority: Saving lives and protecting livelihoods through health spending and income and liquidity support for households and businesses.
Fiscal space: Countries entered the crisis with significantly less fiscal space than prior to the global financial crisis of 2008–09.
COVID-19 fiscal support: COVID-19 related fiscal support in sub-Saharan Africa has averaged 3 percent of GDP—markedly less than what has been spent in other regions of the world.
Trade-offs and constraints:
- Fiscal policies to boost the economy must be balanced against debt sustainability, already a daunting challenge.
- Monetary support for growth must be matched against maintaining external stability and longer-term credibility.
- Financial regulation and supervision measures are needed to address crisis-affected banks and firms but should not compromise longer-term growth.
- Efforts to stabilize and grow economies must be weighed against maintaining social stability while preparing for sustained and inclusive long-term growth.
Framing: Advanced economies have had the space to do “whatever it takes.” In sub-Saharan Africa no such luxury exists, as countries struggle to do “whatever is possible” with their scarce resources.

IMF financing provided in the year: about $16 billion financing this year alone to 33 countries.
Debt service relief: immediate debt service relief to 22 of the poorest, most vulnerable sub-Saharan African countries.
Coordination: IMF worked with countries to put in place governance mechanisms to help ensure funds benefit their people as intended.
Debt initiatives: IMF worked with the G20 to suspend debt service payments to official bilateral creditors and welcomes the extension of the Debt Service Suspension Initiative.
Additional financing needs:
- Sub-Saharan Africa faces additional financing needs of $890 billion through 2023.
- Private financial flows are expected to fill less than half of that need.
- Current commitments from international financial institutions and bilateral donors will cover only one-quarter of the need.
- Projected financing gap under that scenario: $290 billion through 2023.
Principle: No country should have to choose between paying their debt or providing food and medicine for their people.

Immediate actions:
- Prioritize health spending and income and liquidity support for households and businesses.
- Use available governance mechanisms to ensure funds reach intended beneficiaries.
International assistance:
- The region will need access to more grants, concessional credit, and debt relief to prevent the loss of decades-worth of development gains.
Medium- and long-term reforms to foster resilient, inclusive growth:
- Foster better transparency and governance to improve trust in rule of law, strengthen business conditions, and encourage external support.
- Transformative domestic reforms to improve revenue mobilization, digitalization, trade integration, competition, social safety nets, and climate-change mitigation.
Vision: The pandemic presents a historic opportunity to build a better future—green, sustainable and inclusive development—and the international community has an important role to play.

The long climb out of this crisis won’t come easy, but the actions and choices of today will be vital for a prosperous and resilient future for sub-Saharan Africa.
Quotation: “may your choices reflect your hopes, not your fears.” — Nelson Mandela

Abebe Aemro Selassie, October 22, 2020 — Sub-Saharan Africa’s Difficult Road to Recovery

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- governance-commitments-in-covid-19-rapid-instruments-as-of-9-1-2020 (Markdown version)
- governance-commitments-in-covid-19-rapid-instruments-as-of-9-1-2020 (PDF)