IMF’s Regional Economic Outlook for Sub-Saharan Africa is Hopeful, Yet Cautious

This year’s Annual Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group (WBG) were held at the organization’s headquarters in Washington, D.C. 

The event, which began on Monday, October 10th, and ended on Sunday, October 16th, witnessed a significant number of financial players and stakeholders from across the globe come together for a variety of discussions. Amongst the attendees were central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations, and academics.

The event, attended by some of the most influential and essential financial minds, had a series of seminars, addresses, and talks.

On October 14th, the IMF African Department Director Abebe Aemro Selassie presented the current Regional Economic Outlook for Sub-Saharan Africa followed by questions from the press.

The Sub-Saharan Africa region would see projected economic growth of 3.6% this year. This is a reduction compared to last year’s figure, which saw an increase of 4.7%. This can be attributed to an economic slowdown globally. “Late last year, sub-Saharan Africa appeared to be on a strong recovery path out of a long pandemic. Unfortunately, this progress has been abruptly interrupted by turmoil in global markets, placing further pressures on policymakers in the region,” said Selassie. 

Inflation is one of the issues causing economic problems across the world and Sub-Saharan Africa is not immune. This is the reason why there have been sharp increases in the price of food and other commodities. This increase in the price of food has led to serious food insecurity which has caused turbulence both socially and politically in many countries. 

Selassie also pointed out how several countries in the region were facing financial distress due to high levels of debt. 

However, the director had suggestions on how to solve all these problems. “First, in the context of rising food insecurity, the utmost priority must be to protect the most vulnerable. Scarce resources should go to those who need them most,” he said. “On our side, we have been supporting sub-Saharan Africa with close to $50 billion since the beginning of the pandemic; recent new Fund-supported programs (e.g., Benin, Cabo Verde, Mozambique, Tanzania, Zambia), have included policies to address the impact of the food crisis; and the IMF Board has just approved a new Food Shock Window to support our members suffering from acute food insecurity, a sharp food imports shock, or from a cereals export shock.” 

He further called on policymakers to tread with caution when it came to the management of financial markets and currencies. One of his suggestions was the proper management of public funds and the creation of an environment conducive to growth. He also suggested that relevant parties look into debt management. 

The director did not forget to speak on climate change issues as he called on the region to invest in sustainable green infrastructure. He said, “capitalizing on the region’s sizable renewable-energy resources will require both innovative private finance and energy sector reforms.” 

Selassie answered questions regarding countries, their economic outlook, and where they stand with the IMF. Ghana was one of those countries. Director Selassie confirmed that the IMF had engaged with Ghana regarding a financial package. “We fielded a mission back in July, I think it was, and we agreed on a road map, in which things could move, the first step of which was the government wanting to share with us its economic reform plan, so we just had a mission to discuss the key elements of the reform plan which the government has just shared with us, and we are now assessing that and having further discussion on the plan. So, we’re at the stage where discussions are proceeding well, I would say, and much will depend on how quickly this reform plan can be fleshed out and start implementing for us to move forward with a program, so that’s what we’re waiting for,” he said.  

Selassie responded to a question about the floods that have recently impacted Nigeria, speaking positively about tackling climate change. “Again, if we keep talking about, as an institution about climate change, it’s exactly because of what you’re highlighting now, right? It’s not a theoretic thing for our countries, for our region, but something that’s impacting people in real time as we are speaking. So, we are very conscious of that. And how we can help as an institution is twofold. The advocacy we continue to make about every country in the world trying to do its utmost to address to reduce the footprint that they have on climate change to not contribute to more global warming. We continue that advocacy,” he said. He did, however, say that Nigeria had not asked for any assistance from the IMF. 

As one of the largest economies on the African continent, the director was asked for his perspective on South Africa. The problems with the supply of electricity were highlighted as a factor in the country’s economic performance, amongst other challenges. Selassie said, “Our assessment of the outlook now is a little bit behind the curve on account of the problems with electricity production that South Africa has encountered of late.  Stepping back, what we see is a country that has been impacted by global economic conditions and pressures on the financial market, and this has been compounded by the modern time challenges that South Africa is facing. This is all a little bit unfortunate because, with the high-end commodity prices we are seeing globally, this would have been a moment where South Africa was in a better position that could have exploited the benefits quite a bit from this.”

Selassie continued, “in terms of policy priorities, it [South Africa] remains to make sure that the supply side of the economy continues to be robust and healthy as possible and the calibration of microeconomic policies remains as sound as everywhere else.”

Selassie, in his final comment, said, “I would like to stress how important it is for the region to be supported by the international community. We at the IMF are, of course, doing our part and stand ready to do even more.”