Opening Remarks at Press Briefing on Regional Economic Outlook for Sub-Saharan Africa

IMF News, April 15, 2021

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Authors: Abebe Aemro Selassie
Published: April 15, 2021

Pandemic developments and vaccine access

Since the October 2020 Regional Economic Outlook, sub‑Saharan Africa has confronted a second wave of the coronavirus pandemic that outpaced the scale and speed of the first.
A global effort produced effective vaccines, but "the process of manufacturing, procuring, and deploying vaccines is off to a slow and highly unequal start."
Some advanced economies have secured enough vaccine to cover their populations several times over; many sub‑Saharan Africa countries are struggling to vaccinate essential frontline workers.
Few countries in the region will achieve widespread vaccine availability before 2023.
With scant access to vaccines, many countries in the region face the risk of additional waves of infection.
Calls to the international community:
- Avoid restrictions on dissemination of vaccines or medical equipment.
- Ensure multilateral facilities such as COVAX are fully funded.
- Quickly redistribute any surplus vaccine doses from wealthy countries.
Rationale: Ensuring vaccine coverage for sub‑Saharan Africa is framed as a global public good.

Economic impact: contraction, recovery, and social costs

Regional GDP:
- The regional economy contracted by ‑1.9 percent in 2020.
- Projected growth for 2021 is 3.4 percent.
Timing of recovery:
- Per capita output is not expected to return to 2019 levels until after 2022.
- In many countries, per capita incomes will not return to pre-pandemic levels until 2025.
Poverty and education impacts:
- The number of people living in extreme poverty in sub‑Saharan Africa is projected to have increased by more than 32 million.
- Students in the region have missed 67 days of instruction, "more than four times the days missed by children in advanced economies."
Overall assessment: 2020 outcome was "the worst outcome on record," with the region recovering some ground in 2021 but facing prolonged scarring.

Outlook, risks, and divergence

The outlook for sub‑Saharan Africa is expected to diverge from the rest of the world due to constraints on policy space and vaccine rollout.
Advanced economies have deployed extraordinary policy support driving recoveries; most countries in sub‑Saharan Africa lack that option.
Main risks:
- Repeated COVID-19 episodes before vaccines become widely available.
- Limited access to external financing.
- Political instability and domestic security issues.
- Climate events.
Upside possibility: Faster‑than‑expected vaccine supply or rollout could boost near-term prospects.
Uncertainty: The region's outlook is "subject to greater-than-usual uncertainty."

Policy priorities: immediate health response and structural reforms

Immediate priority: Save lives.
- Requires more spending to strengthen local health systems and containment efforts, and to cover vaccine procurement and distribution.
- For most countries, "the cost of vaccinating 60 percent of population will require increasing health spending by as much as 50 percent."
Next priority: Reinforce the recovery and unlock growth potential through "bold and transformative reforms."
- Areas for reform: strengthen social protection systems, promote digitalization, improve transparency and governance, and mitigate climate change.
Fiscal strategy and debt vulnerabilities:
- Delivering reforms and overcoming scarring will require difficult policy choices, including tightening fiscal stances to address debt vulnerabilities and restore public balance sheet health.
- Particular emphasis on the seventeen countries in the region that are in debt distress or at high risk of it.
- Policy actions recommended: mobilize domestic revenue, prioritize essential spending, and more effectively manage public debt to create fiscal space for recovery investment.

International support and financing needs

IMF actions taken: emergency financing facilities, increased access under existing arrangements, and debt relief through the CCRT.
G-20 Debt Service Suspension Initiative:
- Delivered breathing space by alleviating debt service pressures in excess of $6½ billion from mid‑2020 to what is in the pipeline through mid‑2021.
For deeper relief, the G-20 Common Framework for Debt Treatment could provide tailored solutions.
Aggregate financing need:
- Countries in sub‑Saharan Africa will need additional external funding of around $425 billion over the next 5 years to boost pandemic response spending, maintain adequate reserves, and accelerate recovery.
Additional instruments and contributors needed:
- An SDR allocation by the IMF would be an important step, providing liquidity to most vulnerable sub-Saharan African countries.
- Meeting total needs will require contributions from private capital inflows; international financial institutions; debt-neutral support via ODA; debt relief; and capacity development.
Forthcoming engagement: Issues will be discussed at the High-Level International Summit on Financing for Africa in May.

Source: Opening Remarks at Press Briefing on Regional Economic Outlook for Sub-Saharan Africa by Abebe Aemro Selassie, Director, African Department, IMF, Washington, DC, April 15, 2021.