Sub-Saharan Africa’s economic growth is set to recover this year; yet, the path to recovery, and overcoming the long-lasting effects of the pandemic, will be difficult, warns the International Monetary Fund (IMF).
Policymakers must strive to deliver vaccines, while restoring the health of public balance sheets harmed by the crisis, while transformative reforms and renewed external support are more important than ever to rekindle the region’s growth, it notes.
In its latest Regional Economic Outlook for sub-Saharan Africa’’, the IMF says sub-Saharan Africa is continuing to grapple with an unprecedented health and economic crisis.
“Since our last assessment of the Regional Economic Outlook in October 2020, the region has confronted a second pandemic wave, which outpaced the scale and speed of the first.
“And many countries continue to face or are bracing for further waves, particularly as access to vaccines remains scant,” stresses IMF Africa director Abebe Aemro Selassie.
The pandemic has had a devastating impact on the region’s economy. The estimated 1.9% contraction in 2020 is somewhat less severe than anticipated last October, but it is still the worst year on record.
While the region is projected to grow by 3.4% this year, per capita output is not expected to return to 2019 levels until after 2022.
“The economic hardships have caused significant social dislocation, with far too many being thrust back into poverty,” Selassie explains.
In many countries, per capita incomes will not return to pre-crisis levels until 2025. The number of extreme poor in sub-Saharan Africa is projected to have increased by more than 32-million.
“The ‘learning loss’ has been enormous, with students missing 67 days of instruction, more than four times the level in advanced economies,” the IMF states.
The IMF predicts that sub-Saharan Africa will be the world’s slowest growing region this year, with limits on access to vaccines and policy space holding back the near-term recovery.
While some advanced economies have secured enough vaccine doses to cover their own populations several times, many sub-Saharan African countries are struggling to vaccinate essential frontline workers.
Few will achieve widespread vaccine availability before 2023. And most countries in the region were not in position to mount the scale of extraordinary fiscal and monetary policy support that is helping to drive the recovery in advanced economies.
“The outlook for sub-Saharan Africa continues to face greater-than-usual uncertainty. While pandemic-related risks dominate, other factors such as access to external financing, political instability, domestic security, or climate shocks could jeopardize the recovery.
“More positively, faster‑than‑anticipated vaccine supply or rollout could boost the region’s near-term prospects,” Selassie says.
The IMF has highlighted the necessary policy priorities going forward, starting with the immediate priority to save lives. This will require more spending to strengthen health systems and containment efforts, and cover vaccine procurement and distribution.
For most countries, the cost of vaccinating 60% of the population will require an up to 50% increase in health spending, and could exceed 2% of gross domestic product in some countries.
“For the international community, ensuring vaccine coverage for sub-Saharan Africa is a global public good. Restrictions on the dissemination of vaccines or medical equipment should be avoided, multilateral facilities such as Covax should be fully funded, and excess doses in wealthy countries should be redistributed quickly,” Selassie laments.
He explains that the next priority is to reinforce the recovery and nurture the region’s growth potential through bold and transformative reforms. These include digitalization, trade integration, competition, transparency and governance, and climate-change mitigation.
“Delivering on these reforms, while restoring the health of public balance sheets damaged by the crisis, will entail difficult policy choices. By pursuing actions to mobilize domestic revenues, prioritize essential spending, and more effectively manage public debt, policymakers can create the fiscal space needed to invest in the recovery and put debt on a sustainable footing.”
The IMf continues that the 17 countries in the region that are at high risks of, or already in, debt distress will need deeper support. For some, the Group of Twenty Debt Service Suspension Initiative has delivered valuable breathing space, alleviating debt service pressures in the order of $1.8-billion through December 2020 and the potential for another $4.8-billion in the first half of 2021.
For countries where deeper relief may be needed, the Group of Twenty Common Framework for Debt Treatment can provide solutions coordinated across creditors and tailored to each economy’s circumstances.
“The international community, including the IMF, has moved swiftly to help cover the region’s emergency needs over 2020, but further support will be essential to regain ground lost during the crisis. A potential general allocation of special drawing rights from the IMF would help provide liquidity to most vulnerable sub-Saharan African countries,” Selassie points out.
Moreover, to help boost spending on the pandemic response, maintain adequate reserves, and accelerate income convergence, IMF believes sub-Saharan Africa’s low-income countries face additional external funding needs of about $245-billion over the next five years or $425-billion for the whole region.
These issues will be further discussed at the High-Level International Summit on Financing for Africa in May.