Africa's Path to Recovery in an Uncertain World

IMF Blog, December 16, 2021

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Africa's Path to Recovery in an Uncertain World

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• Authors: its own circumstances, including economic growth, inflation pressures, budget space, its ability to attract public, private financing.
• Published: December 16, 2021

Current outlook and key challenges

• After the worst slump on record, Africa's economy is recovering: growth is expected to reach 5.1 percent this year and 3.9 percent in 2022.
• The recovery path is becoming more uncertain due to:
  • Massive vaccine inequity while the disease mutates.
  • Rising inflation.
  • Tightening global financial conditions that threaten to increase the region's borrowing costs and further limit its policy space.
• The emergence of the Omicron variant is emphasized as a reminder that the COVID-19 crisis is far from over.

Speed up vaccinations

• Vaccination targets set by the IMF, WHO, WTO and World Bank task force: vaccinate at least 40 percent of people in every country this year and 70 percent by mid-2022.
• Reported vaccination statistics in the source:
  • "Just seven percent of Africans have been fully vaccinated compared with 68 percent of people in advanced economies."
  • "Just over seven percent of Africans are vaccinated, contrasted with nearly 70 percent in advanced economies."
• To reach 70 percent next year, the international community should:
  • Accelerate existing dose donations to the Covax facility, and swap doses with Covax and the African Union so countries in the region have the vaccines they need and the means to deliver them.
  • Eliminate trade restrictions on vaccine exports and on critical vaccine inputs to permit far greater manufacturing of COVID-19 vaccines within Africa.
• Financing and capacity gaps:
  • A funding gap of roughly US$23 billion remains to be filled to provide all countries with the necessary vaccines, tests, treatments, and personal protective equipment.
  • With more support and better access to critical vaccine inputs, African facilities like the Institut Pasteur could do much more to fight the present pandemic and future health emergencies.
• Senegal's Institut Pasteur de Dakar highlighted as part of an Africa-wide health sciences community that discovered and sequenced the new variant.

Anchor the recovery in sound public finances

• Policymakers face difficult trade-offs to meet immediate and long-run needs while avoiding excessive debt; each country's course depends on circumstances including growth, inflation pressures, budget space, and ability to attract financing.
• Policies that benefit all countries:
  • Establish credible fiscal policy frameworks looking several years out.
  • Have clear plans to make spending and revenue more balanced to help lower borrowing costs and increase flexibility to handle shocks.
  • Raise more revenue (for example, broaden the tax base) while supporting society's most vulnerable.
  • Bolster transparency and accountability of government spending.
• Example: Senegal's Medium-Term Revenue Mobilization Strategy aims to raise domestic revenue to 20 percent of GDP by 2024.
• International financing needs and proposals:
  • "The international community must step up to reduce the $520 billion financial gap for Africa's recovery."
  • On-lending some of the new Special Drawing Rights issued by the IMF in August will help.
  • Reiterates the call that $100 billion of this reserve currency be directed toward Africa.
  • In light of growing debt pressures in 60 percent of the African countries, it is urgent to instill confidence in the G20's Common Framework for debt treatment and to put in place a road map to help other countries facing debt challenges.
• The IMF's role: policy advice, financial support, and capacity development as a full partner in the regional reform journey.

Steer a course to a resilient and inclusive economy

• Demographic opportunity:
  • The continent, already the world's youngest, is projected to add a billion people - half the world's population growth - in the next 30 years.
  • This represents a growing pool of human talent and a major opportunity if developed properly.
• Jobs are central:
  • A growth- and investment-friendly business climate is crucial to harness Africa's potential.
  • Policy priorities include open, contestable markets; more reliable electricity; broader financial inclusion; greater integration with international markets; investing in connectivity and education, including digital literacy.
• Climate transition:
  • The global move toward low carbon and climate resilient growth is both critical and an opportunity, but initially costly for Africa.
  • The burdens must be shared fairly by the international community.
  • Advanced economies must meet their financial commitment from the Paris climate agreement and accelerate technology transfers.

Closing pledge

• With transformational reforms at home and robust international support, Africa can navigate uncertain times and realize its potential as a dynamic and important region.
• "Today we pledge to work together to make that bright future a reality."

Op-Ed by Kristalina Georgieva, Managing Director of the International Monetary Fund, and Macky Sall, President of Senegal. Originally published on AllAfrica.com.