Business Analyst - July 5

Tuesday, July 5, 2022 PAGE 11
Sub-Saharan Africa: One Planet,
Two Worlds, Three Stories
This is a press release from
the International Monetary
Fund following its recent joint
annual general meetings with
the World Bank and the release,
last week of its latest Regional
Economic Outlook on Sub Saharan
Africa, both done in Washington
DC
Sub-Saharan Africa is projected to
grow by 3.7 percent in 2021 and
3.8 percent in 2022 – a welcome
but relatively modest recovery,
suggesting that divergence with
the rest of the world will persist over the
medium term.
• The crisis has highlighted key
disparities in resilience between countries
in sub-Saharan Africa and has also
exacerbated preexisting vulnerabilities
and inequality within each country.
Moreover, food price inflation threatens to
jeopardize previous gains in food security
and exacerbate social and political
instability.
• As the pandemic continues,
authorities face an increasingly difficult
policy environment, with rising needs,
limited resources, and difficult tradeoffs.
Saving lives remains the top priority, but
there is also an urgent need for spending
prioritization, revenue mobilization,
enhanced credibility, and an improved
business environment.
• International solidarity
and cooperation remain vital,
not only on vaccination but also
on addressing other critical
global issues, such as climate
change.
Washington, dC: Sub-
Saharan Africa’s economy is set
to recover in 2021 – a marked
improvement over the
extraordinary contraction of
2020. This rebound is most
welcome and primarily results
from a favorable external
environment, including a sharp
improvement in trade and
commodity prices. In addition,
improved harvests have lifted
agricultural production. Yet, the
outlook remains highly
uncertain as the recovery
depends on the progress in the
fight against COVId-19 and is
vulnerable to disruptions in
global activity and financial
markets, the International
Monetary Fund (IMF) said in its
latest Regional Economic Outlook for Sub-
Saharan Africa.
“As sub-Saharan Africa navigates
through a persistent pandemic with
repeated waves of infection, a return to
normal will be far from easy,” stressed
Abebe Aemro Selassie, director of the
IMF’s African department. “In the absence
of vaccines, lockdowns and other
containment measures have been the only
option for containing the virus.
“At 3.7 percent this year, the recovery in
sub-Saharan Africa will be the slowest in
the world—as advanced markets grow by
more than 5 percent, while other emerging
markets and developing countries grow by
more than 6 percent. This mismatch
reflects sub-Saharan Africa’s slow vaccine
rollout and stark differences in policy
space.
“Real per capita income is expected to
remain close to 5½ percent below precrisis
trends, with permanent real output losses
ranging between -21 percent and -2
percent. The non-resource-intensive
countries are growing at a much faster
rate than resource-rich countries—a
pattern that precedes the crisis and has
been amplified by recent events,
highlighting fundamental differences in
resilience. Non-resource-intensive
countries have a more diverse economic
structure, which helps them adjust and
recover faster. Commodity price increases
have also helped some countries, but these
windfall gains are often volatile and
cannot substitute more enduring sources
of growth. Furthermore, differences in
fiscal space also help to explain crosscountry
differences in the current pace of
recovery.
“Widening gaps between countries
“
“As sub-Saharan
Africa navigates
through a
persistent
pandemic with
repeated waves of
infection, a return
to normal will be
far from easy,”
stressed Abebe
Aemro Selassie,
Director of the
IMF’s African
Department.
have been accompanied by growing
divergence within countries, as the
pandemic has had a particularly harsh
impact on the region’s most vulnerable.
With about 30 million people thrown into
extreme poverty, the crisis has worsened
inequality not only across income groups,
but also across subnational geographic
regions, which may add to the risk of
social tension and political instability. In
this context, rising food price inflation,
combined with reduced incomes, is
threatening past gains in poverty
reduction, health, and food security.
“Furthermore, increasing debt
vulnerabilities remain a source of concern,
and many governments will have to
undertake fiscal consolidation. Overall,
public debt is predicted to decline slightly
in 2021 to 56.6 percent of GdP but remains
high compared to a pre-pandemic level of
50.4 percent of GdP. Half of sub-Saharan
Africa’s low-income countries are either in
or at high risk of debt distress. And more
countries may find themselves under
future pressure as debt-service payments
account for an increasing share of
government resources.
Against this backdrop, Mr. Selassie
pointed to a number of policy priorities.
“The difficult policy environment that
authorities faced before the crisis has been
made more demanding by the crisis.
Policymakers face three key fiscal
challenges: 1) to tackle the region’s
pressing development spending needs; 2)
to contain public debt; and finally, 3) to
mobilize tax revenues in circumstances
where additional measures are generally
unpopular. Meeting these goals has never
been easy and entails a difficult balancing
act. For most countries, urgent policy
priorities include spending prioritization,
revenue mobilization, enhanced
credibility, and an improved business
climate.
“The recent SdR allocation has boosted
the region’s reserves, easing some of the
burden of authorities as they guide their
countries’ recovery. And rechanneling
SdRs from countries with strong external
positions to countries with weaker
fundamentals could help to bolster the
region’s resilience.
“On COVId-19, international
cooperation on vaccination is
critical to address the threat of
repeated waves. This would help
prevent the divergent recovery
paths of sub-Saharan Africa and
the rest of the world from
hardening and becoming
permanent fault lines, which
would jeopardize decades of hardwon
social and economic progress.
“Looking further ahead, the
region’s vast potential remains
undiminished. But the threat of
climate change—and the global
process of energy transition—
suggest that sub-Saharan Africa
may need to adopt a more
innovative and greener growth
model. This presents both
challenges and opportunities, and
it underscores the need for bold
transformative reforms and
continued external funding. Such
measures may not be easy, but
they are key prerequisites of the
long-promised African century.