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The Sahel, Central African Republic Face Complex Challenges to Sustainable Development
November 16, 2023
Conflict and external shocks are amplifying obstacles to economic development
IMF NEWS
Countries in the Sahel (comprising Burkina Faso, Chad, Mali, Mauritania, and Niger), along with neighboring Central African Republic (CAR) are facing a medley of development challenges. Escalating insecurity, political instability including military takeovers, climate change, and overlapping economic shocks are making it even harder to achieve sustainable and inclusive development in one of the poorest parts of the world.
In 2022, conflict-related fatalities in these countries increased by over 40 percent. The deterioration of the security situation over the past decade has caused a humanitarian crisis, with more than 3 million people fleeing violence in Burkina Faso, Mali, and Niger, according to UNHCR.
More frequent extreme weather events in the Sahel—including historic floods and drought—depress productivity in agriculture, resulting in the loss of income and assets, while exacerbating food insecurity and reinforcing a vicious circle of fragility and conflict.
In an interview with Country Focus, the IMF African Department’s Abebe Selassie and Vitaliy Kramarenko discuss the economic ramifications of these challenges and how these countries can best address priority needs.
What do some of these challenges mean for Sahel and CAR economies?
Abebe Selassie: Governments in these countries (except for Mauritania) are facing tighter financing constraints, exacerbated by escalating security costs and rising debt. Security spending has imposed an increasing and unavoidable burden on budgets, reaching 3.9 percent of GDP in 2022 and absorbing 25 percent of fiscal revenues before grants, on average. Increased security spending is a necessity to ensure stability, but it is crowding out other priority spending, including the provision of basic public services.
For the countries in the Sahel region, public debt as a share of GDP has been increasing steadily since 2011 and is projected to average close to 51 percent in 2023. With financial conditions likely to remain tight in the near term, there is limited scope for governments to borrow more. To meet pressing needs, Sahel countries must therefore focus on grants, highly concessional financing, domestic revenue mobilization, and private sector development efforts.
What is the economic outlook for the region, and how can the Sahel catch up with other economies?
Vitaliy Kramarenko: Economic growth in the region is projected to stabilize at about 4.7 percent over the medium term. But this is not enough to reverse the increasing income divergence between the Sahel region and advanced economies. The divergence could be further exacerbated if terms of trade deteriorate relative to the baseline scenario.
IMF estimates suggest that additional investments of about US$28.3 billion over 2023-26 would be required to fully reignite the development catch-up process in the region.
What kind of additional support is needed to ensure a path to sustainable development in the region?
Vitaliy Kramarenko: Addressing the multiple challenges faced by the five Sahel countries and CAR will require stepped up efforts from both governments and development partners. Bold reforms, supported by highly concessional financing, are needed to revive income convergence trends and address the driving forces of rising insecurity.
Additional donor support, preferably in the form of grants, will be an essential part of the solution. Donor support to these countries has declined by close to 20 percent over the last decade to reach about 4 percent of GDP. Strikingly, less than half a percent of GDP was provided in the form of budget support grants in 2022, which are crucial to address financing priorities in a flexible manner.
Political instability and fragile transitions to civilian rule in Burkina Faso, Mali, and Niger are making it more difficult to raise the concessional financing needed to meet spending priorities. Concerns related to the transparency of public spending is also an important issue in CAR.
Prolonged reductions of budget support to the region present significant risks to essential functions of the state and will worsen already dire social and humanitarian conditions. Hence, the international community needs to find ways to engage Sahel countries on financing key social programs even amidst difficult transitions to help lay the foundation for peace and sustainable development in the region and beyond.
What else can country authorities do?
Abebe Selassie: Country authorities can also play their part to facilitate greater donor financing. Measures that increase budget transparency and accountability and further enhance governance and anti-corruption frameworks will help, including efforts to strengthen security expenditure management and internal controls.
While more financial support is critically important in the near term, government efforts to boost domestic revenue mobilization are also essential to finance spending needs in a sustainable manner.
Countries should also improve the provision of public services in fragile zones and implement policies to unlock access to economic opportunities for young people. Given the preponderance of agricultural livelihoods and that climate change is likely to remain an important driver of conflict, these efforts must go hand in hand with adopting policies to foster resilience and climate-smart investments, including in the agricultural sector.
How has the IMF been helping Sahel countries improve their economies?
Abebe Selassie: Currently, five out of the six countries have an IMF-supported financing arrangement helping them strengthen macroeconomic frameworks and implement reforms. Moreover, Mauritania has requested access to the Resilience and Sustainability Facility (RSF) and an IMF program to introduce macro-critical climate reforms is under preparation. In addition, the Fund continues to provide extensive capacity development activities for all the economies in the region.
More broadly, the IMF’s strategy for engaging with fragile and conflict affected states focuses on delivering more robust support, tailored to the characteristics of these countries. This includes rolling out Country Engagement Strategies to better assess the country specific manifestations of fragility and conflict, deploying more staff on the ground, scaling-up capacity development, and strengthening partnerships with humanitarian, development, and peace actors. The Fund is committed to helping the economies in the Sahel resume their development path even in a context of significant stress.
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Abebe Aemro Selassie is the Director of the IMF’s African Department, where Vitaliy Kramarenko is Deputy Director.
