Q: International Monetary Fundof The (IMF)’s recently released World Economic Outlook forecasts that the global economy will grow at a slower rate in 2023 and the medium-term growth rate will be the lowest in decades. What is the outlook for Sub-Saharan Africa?
A: While growth remains stable in much of sub-Saharan Africa, the outlook for South Africa is bleak [where growth is forecast to slow to just 0.1%] This means that growth in the region will slow from 3.9% last year to 3.6% in 2023.
We expect economic improvements across the region in the medium term, but not enough to bring the entire region back to pre-Covid-19 levels in the near future.
Q: The report stubbornly highlights high inflation and debt levels as one of the major challenges facing the global economy. What are the biggest challenges facing African countries in 2023?
A: One of the biggest challenges facing sub-Saharan Africa is the enormous financial pressure. As interest rates rise, much of the region is effectively being devalued from international bond markets, making borrowing costs prohibitive.
Lending from countries such as China has been significantly cut, and official development assistance has also declined over time. Against the backdrop of a tight external funding environment and high levels of domestic exposure, African countries’ domestic funding capacity is severely limited.
In recent years, the IMF has played a key counter-cyclical role in the region, up to about $50 billion in sub-Saharan Africa. However, our ability to continue this is now more limited by the concessional financing facilities used to help areas in need of replenishment. So now is the time when the international community needs to help the region.
The cumulative impact on the world’s poorest regions is of great concern
Q: To what extent are the economic fortunes of African countries affected by uncontrollable factors such as climate change?
A: There is a recognition that the economic challenges that countries are experiencing are largely self-inflicted. Indeed, there are many countries whose economies are struggling, mainly for internal reasons, but challenges exist as a result of the accumulation of a series of exogenous shocks, including the effects of Covid, in most countries in the region. 19, the war in Ukraine, and the increasingly devastating events related to climate change.
Each of these phenomena alone is particularly devastating. The cumulative impact on regions of the world with the highest levels of poverty and the lowest ability to meet external financing pressures by looking to domestic markets is of great concern.
Q: Climate change is having a particularly devastating impact on sub-Saharan Africa through phenomena such as ongoing drought in the Horn of Africa. If funding is so hard, how can states invest in efforts to reduce emissions and adapt to the realities of climate change?
A: Adapting to climate change is undoubtedly a pressing issue facing much of Africa today. Carbon dioxide emissions are not a major issue for any country in the region outside South Africa, although most are severely impacted by climate change.
New local funding related to climate adaptation should be incremental, rather than replacing existing infrastructure investments or funding in other areas such as health, education and poverty reduction. is important.
One of the things I am most proud of at the IMF is the Resilience Sustainability Trust. It provides additional financing by directing special drawing rights resources from economically strong member countries to countries with the greatest need.