MIL OSI Translation. Government of the Republic of France statements from French to English –
Source: IMF in French
Towards a difficult recovery in sub-Saharan Africa
Abebe Aemro Selassie
October 22, 2020
The COVID-19 pandemic is an unprecedented health and economic crisis for sub-Saharan Africa. Within months, the spread of the virus has jeopardized years of development and gains from decades of fighting poverty in the region, while threatening the lives and livelihoods of millions of people.
In our latest regional economic outlook report, we forecast sub-Saharan Africa’s GDP to contract by 3% in 2020, which is the worst result ever for the region. This decline will be even more pronounced for countries which depend on tourism and commodity exports. Regional growth is expected to rebound weakly in 2021, to 3.1%, but many countries will not return to their 2019 level until between 2022 and 2024.
Countries in the region have acted quickly to protect their populations from the worst repercussions of the crisis, but containment measures have come at a cost economically and socially. In addition, leaders in sub-Saharan Africa now need to revive their economies with fewer resources and more difficult choices.
Ultimately, the uncertainty surrounding the course of the pandemic continues to threaten a sustainable recovery.
Constraints and difficult choices
Saving lives and protecting livelihoods through health spending and income and liquidity supports for businesses and households must be a priority. The leaders acted quickly with what little money they had.
However, countries in the region approached the crisis with much less fiscal space than they had before the global financial crisis of 2008-09. COVID-19-related budget support measures have averaged 3% of GDP in sub-Saharan Africa, significantly lower than in other regions of the world.
The advanced countries have had the means to do “whatever is necessary”. Sub-Saharan African countries do not have this luxury: they struggle to “do their best” with their scarce resources.
This lack of resources will ultimately force them to make difficult choices.
They will need to strike a balance between the fiscal policies that are necessary to stimulate the economy and debt sustainability, which is already an overwhelming problem for many countries in the region. They will have to reconcile the need to support growth through monetary policy and the maintenance of external stability and longer-term credibility. They will need to take action on financial sector regulation and supervision to address the problems of banks and businesses affected by the crisis, without compromising longer-term growth.
And they will need to balance efforts to stabilize and grow their economies against the need to preserve social stability, while paving the way for sustainable and inclusive growth over the long term.
Call for help from the international community
In the absence of substantial additional financial assistance, many countries in sub-Saharan Africa will struggle to simply maintain macroeconomic stability while meeting the basic needs of their populations.
The IMF has moved quickly to meet much of the region’s needs, providing financing of around $ 16 billion to 33 countries in the current year alone and immediate debt service relief to 22 African countries. poorest and most vulnerable sub-Saharan countries. We are working with countries to put in place governance mechanisms aiming to ensure that these funds benefit their people as intended.
We are also cooperating with the G20 to suspend debt service payments to official bilateral creditors and welcome the extension of the debt service suspension initiative.
But more help is needed. Sub-Saharan Africa’s additional financing needs amount to $ 890 billion by the end of 2023. Private financial flows are expected to meet less than half of this amount, while current commitments from international financial institutions and bilateral donors will cover only a quarter. In this scenario, the region’s projected financing requirement by the end of 2023 remains at $ 290 billion.
To pay its debt or to provide food and medicine for its people: no country should have to choose. To avoid the loss of decades of development progress, the region will need to have access to more grants, concessional loans and debt relief.
Looking towards a brighter future
Despite the uncertain outlook, the potential of sub-Saharan Africa and the ingenuity of its people remain evident. The time has come for reforms that bring lasting change.
Sub-Saharan Africa will return to the path of green, sustainable and inclusive development. The pandemic is a historic opportunity to build a better future, and the international community must play an important role in this regard.
To achieve a brighter future, it will be essential to improve transparency and governance in order to increase confidence in the rule of law, strengthen the business climate and encourage external aid. Transformative internal reforms, especially in the areas of revenue, digital transformation, trade integration, competition, social protection systems and climate change mitigation will be essential for resilience, growth and job creation in the region.
Nelson Mandela once said: “Let your choices reflect your hopes and not your fears.” The long exit from this crisis will not be easy, but the actions and choices today will be vital to ensure a prosperous and resilient future for sub-Saharan Africa.
Abebe Aemro Selassie is the Director of the IMF’s Africa Department. He was previously its deputy director. He led the staff teams responsible for relations with Portugal and South Africa, as well as the production of Regional Economic Outlook for Sub-Saharan Africa. He has also worked on Thailand, Turkey and Poland, as well as on policy issues. Between 2006 and 2009, he was IMF Resident Representative in Uganda. Before joining the IMF, Mr. Selassie worked for the Ethiopian government.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.