By Gbemi Faminu
The International Monetary Fund (IMF) has highlighted priority areas that policymakers in Sub-Saharan Africa (SSA) must focus on to boost economic growth in the medium to long term in the face of global crises and declining growth projections. This was discussed during a webinar held on Monday, 7 November, titled ‘Living on the Edge: IMF outlook for sub-Saharan Africa’ hosted by the Institute for Security Studies (ISS) and the International Monetary Fund (IMF).
During his presentation, Luc Eyraud, Head, Regional Studies Unit, IMF African Department said growth in the SSA region is expected to decline from 4.7 percent in 2021 to 3.6 percent in 2022 which reflects the global economic slowdown, rise in global inflation and other crises.
Regarding inflation and food insecurity, he said 80 percent of countries in the region took mostly untargeted and temporary measures in response to food and fuel price shocks explaining that half of the accelerated inflation was driven by food which represents 40 percent of the consumption basket. “19 Out of the region’s 35 low-income countries are either in debt distress or have high risk of debt distress. Also, countries are now moving very close to the edge of buffers; the limited policy space with limited room for error. So, decisions must often strike a delicate balance between competing demands,” he said.
Highlighting four priority areas to strike a balance, Eyraud said policymakers must address food insecurity, consolidate public finances, manage the shift in monetary policies and accelerate sustainable and greener growth. “Policies implemented in an emergency including untargeted, costly and distortionary fiscal support measures should be gradually phased out, and countries need to strike a delicate balance in conducting monetary policy to address the rise in inflation and resist exchange rate pressures without undermining recovery,” he said.
Speaking on public finance, Eyraud noted the growing debt profile of countries in the region amid rising financing costs and advised that there is a need for countries to stabilize their debt below 70 percent of GDP. “It is important to ensure effective and transparent public debt management while maintaining credible and clearly articulated medium-term fiscal frameworks. Countries must consolidate public finance by boosting revenue mobilization, prioritizing and increasing the efficiency of public spending where possible,” he added.
Speaking on sustainable and greener growth, Eyraud said SSA accounts for two to three percent of global CO2 emissions yet needs $30 to $50 billion annually to finance climate adaptation hence international support will be critical to financing climate adaptation needed for resilient growth. “High-quality growth will require investment in resilient green infrastructure to capitalize on the region’s sizable endowment of renewable energy resources leveraging private sector innovation, activity and finance,” he said.
In her remarks Cathy Pattillo, Deputy Director, IMF African Department said the region is experiencing significant problems, ranging from high public debt to the impact of the concurrent crises and double-digit inflation among other issues. She lamented that solutions such as political stability, supportive global environment and help from the international community which was employed in the late 1990s were no longer obtainable. “The reality is that most countries are teeming with these imbalances and they’re going to have to live with them, and more countries are going to find themselves in a kind of grey zone and there’s going to be extreme uncertainty, as vulnerabilities and imbalances are going to stay high and it’s going to be difficult to calibrate,” she said.
Pattillo also said that there are hopes that some countries are going to be more resistant than expected and can live in this grey zone for some time without taking risks. She added that by 2050, SSA’s population was going to double. However, this can be utilized, explaining that in the next 15 years, at least half of the new entrants into the global labour force are going to come from the region. “It is important for the global community to help with investing in Sub-Saharan Africa over the next decade in a way that will serve as a boost for human capital,” she said.