IMF Sub-Saharan Africa Regional Economic Outlook Huge funding squeeze
April 14, 2023
- Growth in Sub-Saharan Africa (SSA) is expected to slow to 3.6% as a “huge funding gap” linked to aid depletion and access to private finance hits the region. This marks the second year in a row that her SSA growth has declined overall.
- If no action is taken, this funding shortfall will force countries to reduce financial resources for critical development such as health, education and infrastructure, preventing the region from reaching its true potential. There is a possibility.
- The IMF is playing that role. Between 2020 and 2022, the IMF has provided more than $50 billion of his to the region. That’s more than double his spending in the decade since the 1990s. Also, as of March 2023, the IMF has financing agreements with 21 countries, and more requests are under consideration.
- Sub-Saharan Africa is by no means powerless. Here are four of his policies to help you navigate the current turmoil. i) strengthen public finances and strengthen fiscal management; ii) contain inflation; iii) adjust exchange rates while mitigating adverse economic impacts; is to Climate change will not crowd out funding for basic needs like health and education.
In the midst of a global slowdown,
Sub-Saharan Africa (SSA) growth is expected to slow to 3.6%
Before rebounding to 4.2% in 2024, in line with the global recovery, subdued inflation and less tightening of monetary policy, according to the latest IMF Regional Economic Outlook for Sub-Saharan Africa, released today. This is the second year in a row that SSA has posted year-over-year growth.
“Growth across the region varies by country. SSA growth will slow down in 2023,” said Abebe Aemro Selassie, Director of the IMF Africa Department.
Public debt and inflation are at levels
Half of the countries are seeing double-digit inflation, household purchasing power is declining, and the most vulnerable are under attack.
Rapid tightening of global monetary policy
Raised borrowing costs for SSA countries in both domestic and international markets
All frontier markets in sub-Saharan Africa have been cut off from market access since spring 2022. Last year, the US dollar’s effective exchange rate hit its highest level in 20 years, increasing the burden of servicing dollar-denominated debt. Over the past decade, he has doubled his average interest payments on SSA member country revenues.
Shrinking aid budgets and reduced inflows from partners have significantly strained resources in the region.
“People in sub-Saharan Africa are feeling the effects of the financial crisis. Since Russia’s invasion of Ukraine, the cost of living has skyrocketed, borrowing costs have risen and access to cheaper finance has declined.” Selassie said.
“Combined with the long-term decline in aid and recent declines in investment from partners, this means less money will be spent on critical services such as health, education and infrastructure. If so, this funding shortfall will hamper efforts in sub-Saharan Africa to build a skilled and educated population and power the global economy in the years to come,” he added.
The IMF is doing its part and stands ready to help its members. Between 2020 and 2022, we have provided more than $50 billion through programs, emergency loans and special drawing rights allocations. In just two years, the IMF has provided him with more than double the amount spent in the decade since the 1990s. As of last month, we have financing arrangements with 21 countries, and more program requests are being considered.
Sub-Saharan Africa is by no means powerless. To address macroeconomic imbalances, Selassie pointed to his four priorities.
“First of all, it is important to restore fiscal consolidation and strengthen fiscal management amid the financial crisis. This depends on continued revenue mobilization, better management of fiscal risks and more active debt management. For countries in need of debt reprofiling or restructuring, a well-functioning debt settlement framework is essential to creating fiscal space.
“Second, keep inflation under control. Monetary policy needs to be tweaked cautiously until inflation is projected to follow a definitive downward trajectory and return to central bank target ranges.
“Third, it allows us to adjust the exchange rate while mitigating the negative economic impacts of currency depreciation, such as inflation and rising debt.
“And finally, a key effort to tackle climate change is to ensure that it does not crowd out basic needs such as health and education. I have to add.”
A video and audio interview with Abebe Aemro Selassie, Director of the IMF Africa Department, is available here.
For more information, see the SSA Regional Economic Outlook, Big Funding Squeeze (LINK), and accompanying analytical notes.
Geoeconomic Fragmentation: Sub-Saharan Africa Between Fault Lines
It shows that sub-Saharan Africa stands to lose the most in a highly fragmented world and underscores the need to build resilience.
Managing Exchange Rate Pressures in Sub-Saharan Africa: Adapting to New Conditions
Realities reviews the drivers and consequences of recent exchange rate pressures and discusses policies that can help soften the impact on the region’s economy.
Closing the Gap: Concessional Climate Finance and Sub-Saharan Africa
Considering the critical need for concessional finance in helping regions address climate change, we explore ways in which additional flows could be unlocked.
IMF Communications Department
Media contact point
Press officer: Nico Montbrial
phone: +1 202 623-7100Email: MEDIA@IMF.org