Washington, DC:
Sub-Saharan Africa’s economic activity is expected to slow significantly in
2022 and remain relatively modest in 2023. A downturn in advanced economies
and emerging markets, tighter financial conditions, and volatile commodity
prices, have undermined last year’s gains. Looking ahead, the outlook
remains highly uncertain. Consequently,
countries in the region are living on the edge, the International Monetary
Fund (IMF) said in its latest Regional Economic Outlook for Sub-Saharan Africa.
“Late last year, sub-Saharan Africa appeared to be on a strong recovery path out of
a long pandemic. Unfortunately, this progress has been abruptly interrupted
by turmoil in global markets, placing further pressures on policymakers in
the region,” stressed Abebe Aemro Selassie, Director of the IMF’s African
Department.
The region is expected to grow by 3.6 percent in 2022, down from 4.7
percent in 2021, due to muted investment and the overall worsening of its
balance of trade. Non-resource-intensive countries, which enjoy a more
diverse economic structure, will continue to be among the region’s more
dynamic and resilient economies, growing by 4.6 percent in 2022, compared
to 3.3 percent in oil exporters and 3.1 percent in other resource-intensive
countries.
Following worldwide trends, inflation has increased faster and more
persistently than previously anticipated, reflecting mounting prices for
essential food and energy items, which comprise about 50 percent of the
region’s consumption basket. And while the recent pickup in inflation is less striking relative to historical averages
for sub-Saharan Africa, the cost-of-living squeeze has pushed millions of
people into acute food insecurity and could weigh on economic growth and
undermine social and political stability.
The most recent turmoil is just the latest in a series of shocks over the
past few years, all of which have taken a toll on the region’s policy
space. Public debt has reached about 60 percent of GDP, leaving the region with debt levels last
seen in the early 2000s. In this regard, the composition of debt has
shifted towards higher-cost private sources, increasing debt service costs
and rollover risks.
In fact, 19 of the region’s 35 low-income countries are now in debt
distress or at high risk of distress.
Against this backdrop, Mr. Selassie pointed to four priorities for policy
makers in the region:
“First, in the context of rising food insecurity, the utmost priority must
be to protect the most vulnerable. Scarce resources should go to those who
need them most. Poorly targeted emergency measures should be gradually
phased out.
“Second, to contend with increased inflation and tightening global interest
rates, policymakers should cautiously raise policy rates, while keeping a
close eye on inflation expectations and foreign exchange reserves.
“Third, policy makers in the region need to continue consolidating their
public finances to preserve fiscal sustainability, particularly in the
context of rising interest rates. Credible medium-term fiscal frameworks,
including effective debt management, can help lower borrowing costs. In
countries with acute debt vulnerabilities, debt restructuring or
reprofiling may be required, suggesting the need for improved
implementation of the G20 Common Framework.
“And finally, they should set the stage for high-quality growth, amid
accelerating climate change. Investment in resilient, green infrastructure,
and capitalizing on the region’s sizable renewable-energy resources will
require both innovative private finance and energy sector reforms.
“Budget support—including official development financing and humanitarian
assistance—has been declining over the past two decades while the region’s
immediate and longer-term development needs are rising, particularly in
areas such as food security and climate change. Increased support,
including more concessional finance, will be crucial for sub-Saharan Africa
to be able to pursue a low-carbon and climate-resilient growth path.
“On our side, we have been supporting sub-Saharan Africa with close to $50
billion since the beginning of the pandemic; recent new Fund-supported
programs (e.g., Benin, Cabo Verde, Mozambique, Tanzania, Zambia), have
included policies to address the impact of the food crisis; and the IMF
Board has just approved a new Food Shock Window to support our members
suffering from acute food insecurity, a sharp food imports shock, or from a
cereals export shock.
“We are also helping catalyze new capital inflows by boosting local
capacity and expanding our lending facilities with our new Resilience and
Sustainability Trust to provide affordable financing to address longer-term
structural challenges.
“With help, sub-Saharan Africa will be poised to fulfill the promise of the
African century, contributing to a more prosperous, greener future for the
region and the world,” he said.
