{
  "title": "Sustaining High Growth in Sub-Saharan Africa",
  "publication": "IMF News, November 6, 2017",
  "sourceUrl": "https://www.imf.org/en/news/articles/2017/11/06/sp110617-sustaining-high-growth-in-sub-saharan-africa",
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  "summary": "Political and administrative reforms: increasing checks and balances, development of regulatory and judicial frameworks, and more independent central banks.",
  "publishDate": "2017-11-06",
  "sections": [
    {
      "heading": "Progress to date",
      "content": "- Political and administrative reforms: increasing checks and balances, development of regulatory and judicial frameworks, and more independent central banks.\n- Growth episodes:\n  - Since 1990, three quarters of the countries in the region have registered at least 10 years of uninterrupted growth.\n  - Over one-third of the countries have registered 20 years or more of uninterrupted growth.\n- Human development improvements over the last 25 years:\n  - Life expectancy increased from 50 to 60 years.\n  - Child and maternal mortality rates have halved.\n  - Primary school enrolment is up to 80 percent."
    },
    {
      "heading": "Emerging macroeconomic vulnerabilities",
      "content": "- End of a long growth spell:\n  - Over 15 years of continuous growth in income per capita in the region came to an end last year.\n  - 12 of 45 countries are expecting per capita incomes to decline this year; these 12 countries are home to about 40 percent of the region’s population, or 400 million people.\n- Rapid public debt accumulation:\n  - Median public sector debt in sub-Saharan Africa rose from 34 percent of GDP in 2013 to 48 percent in 2016.\n  - Public debt is now above 50 percent of GDP in half of the economies in the region.\n- Rising debt-service burden:\n  - The median debt service-to-revenue ratio among sub-Saharan African countries increased from 5 percent in 2013 to nearly double that in 2017.\n  - In oil-exporting countries, the debt service-to-revenue ratio is at 25 percent.\n  - Example: In Zambia, spending on debt interest alone is over half of what the government spends on education and health; in 2011 it was just 20 percent."
    },
    {
      "heading": "Why debt has increased so rapidly",
      "content": "- By region and sector:\n  - In oil-exporting countries, public debt increased on average by more than 8 percentage points of GDP per year between 2013 and 2016. Drivers: large primary deficits, a growing interest bill, and balance sheet effects associated with exchange rate depreciation amid low or negative growth.\n  - In the rest of the region, the debt-to-GDP ratio has been increasing at an average rate of about 5 percentage points of GDP per year. Drivers: large primary deficits, valuation effects from exchange rate depreciation, and below-the-line operations such as migration of state-owned enterprise liabilities onto the government balance sheet.\n- Contributing factors:\n  - Desirable borrowing for growth-enhancing investment to close a significant infrastructure gap and support convergence given lower starting incomes and population growth.\n  - Political economy: strong pressures to spend on infrastructure, social services, and institutions; small coalition for fiscal prudence versus powerful coalition for postponing adjustment.\n  - External environment: low global interest rates increasing investor appetite for the region’s debt, lowering borrowing costs despite worsening fundamentals."
    },
    {
      "heading": "Policy requirements and recommendations",
      "content": "- Overall objective: strike a better balance between much needed investment and debt sustainability; raise macroeconomic health to the top of the policy agenda.\n- Fiscal reform priorities:\n  - Raise domestic revenues and broaden the tax base to create space to scale-up social and other priority spending and strengthen fiscal sustainability.\n  - Potential to increase the tax-to-GDP ratio by 3 to 6 percentage points over the medium-term.\n  - Reduce inefficient fuel subsidies that disproportionately benefit the better-off and larger firms.\n  - Implement targeted cash transfers for the most needy to protect vulnerable groups while achieving redistribution.\n  - Increase transparency to identify how public resources are being raised and spent to help overcome vested interests and build support for revenue measures.\n- Implementation considerations:\n  - Design fiscal consolidations to attenuate adverse effects on growth and the most vulnerable.\n  - Strengthen institutions and policies (IMF offers policy advice, technical assistance and program engagement) to help countries capture returns on public investments."
    },
    {
      "heading": "Future prospects and structural opportunities",
      "content": "- Demographics:\n  - Most countries in sub-Saharan Africa are on the cusp of a demographic transition; by 2030 or so, half of the annual increase in the global working age population will come from sub-Saharan Africa.\n- Technology:\n  - Rapid technological change, including Fintech expansion, can facilitate greater catch-up growth and broaden financial access.\n- Critical challenges to realize potential:\n  - Climate change, deepening power sharing, ensuring inclusivity, and closing gender gaps (about half of the contribution from the growing labor force are women).\n- Final assessment:\n  - Rising public debt, if left unaddressed, will constrain the region’s growth potential.\n  - With tough but necessary reforms, sub-Saharan Africa can return to a path of strong growth that raises living standards for all.\n\nSource: Speech by Abebe Aemro Selassie, Director, African Department, IMF; The London School of Economics, London, November 6, 2017.\n\n---\n\n\n References\n\n- Abebe Aemro Selassie\n- Sub-Saharan Africa Regional Economic Outlook: Fiscal Adjustment and Economic Diversification\n- The Federal Democratic Republic of Ethiopia and the IMF\n- Zambia and the IMF\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/11/06/sp110617-sustaining-high-growth-in-sub-saharan-africa"
    }
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    "Published: November 6, 2017",
    "Political and administrative reforms: increasing checks and balances, development of regulatory and judicial frameworks, and more independent central banks.",
    "Growth episodes:",
    "Human development improvements over the last 25 years:",
    "End of a long growth spell:",
    "Rapid public debt accumulation:",
    "Rising debt-service burden:",
    "By region and sector:",
    "Contributing factors:",
    "Overall objective: strike a better balance between much needed investment and debt sustainability; raise macroeconomic health to the top of the policy agenda.",
    "Fiscal reform priorities:",
    "Implementation considerations:",
    "Demographics:",
    "Technology:",
    "Critical challenges to realize potential:",
    "Final assessment:",
    "[Abebe Aemro Selassie](https://www.imf.org/en/About/senior-officials/Bios/abebe-selassie)",
    "[Sub-Saharan Africa Regional Economic Outlook: Fiscal Adjustment and Economic Diversification](http://www.imf.org/en/Publications/REO/SSA/Issues/2017/10/19/sreo1017)",
    "[The Federal Democratic Republic of Ethiopia and the IMF](http://www.imf.org/external/country/ETH/index.htm)",
    "[Zambia and the IMF](http://www.imf.org/external/country/ZMB/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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