Via IMF (Den Internationale Valutafond)

Sub-Saharan Africa: A Cautious Reopening







June 29, 2020











  • The regional outlook has deteriorated sharply since the April 2020 Regional Economic Outlook report release. Sub-Saharan Africa’s economy is now expected to contract by 3.2 percent in 2020; double the contraction expected in April.
  • This will contribute to poverty increase this year.
  • The growth rate of new COVID infections has slowed somewhat, allowing some countries to gradually ease their containment measures. However, the scope for the pandemic to spread as aggressively as elsewhere remains a very real threat.
  • Governments have acted swiftly to support the economy. Nonetheless, these efforts have been constrained by falling revenues and limited fiscal space.
  • Africa’s resilience is being tested. The Continent has come through much and will come through this crisis also. But with stepped-up support from the international community, the region will be able to boost local containment efforts and healthcare capacity and also enjoy a robust recovery in the coming months.

Washington, DC –
The COVID-19 pandemic continues to represent an unprecedented health and
economic crisis, with costs that will be felt most keenly by the poorest
segments of the world’s population, the International Monetary Fund (IMF)
said in its latest Regional Economic Outlook for Sub-Saharan Africa.

“This is a fast-moving crisis” said Abebe Aemro Selassie, Director of the
IMF’s African Department. “And recent developments suggest that the
downturn will be significantly larger than we had anticipated only 10 weeks
ago. The risks we highlighted in April all continue to be a concern, but
the deterioration of the global outlook has been particularly striking. In
line with this new outlook, and consistent with local high-frequency
indicators, output in Sub-Saharan Africa is now projected to shrink by 3.2
percent this year, more than double the contraction we had outlined in
April. Again, this is set to be the worst outcome on record.

“On the pandemic, the growth rate of new cases has slowed slightly since
April, and a number of countries have cautiously eased some of their
containment measures. But regionwide, the pandemic is still in its
exponential phase—Sub-Saharan Africa has recently exceeded more than a
quarter of a million confirmed cases, and new cases are still doubling
every 2-3 weeks. Given the region’s already-stretched healthcare capacity,
the immediate priority is still to protect lives and to do whatever it
takes to strengthen local health systems and contain the outbreak.

“On economic policies, sub-Saharan African countries have acted swiftly and
aggressively to support the economy. Monetary and prudential policies have
been eased, with countries adopting a mix of reduced policy rates, added
injections of liquidity, greater exchange-rate flexibility, and a temporary
relaxation of regulatory and prudential norms, depending on country
circumstances.

“On the fiscal side, however, country responses have often been more
constrained. Even before the crisis, debt levels were elevated for many
countries in the region. In this context, and in light of collapsing tax
revenues, the ability of governments to increase spending has been limited.
To date, countries in the region have announced COVID-related fiscal
packages averaging 3 percent of GDP. This effort has been indispensable.
But it has often come at the expense of other priorities, such as public
investment, and is markedly less than the response seen in other emerging
markets or advanced economies.

“Also, authorities in sub-Saharan Africa face a distinct challenge in
getting support to those who need it most. Around ninety percent of
non-agricultural employment is in the informal sector, where participants
are usually not covered by the social safety net. Moreover, a large
proportion of this activity centers on the provision of services, which
have been particularly hard hit by the crisis. Further, informal workers
typically have few savings and limited access to finance. So staying at
home is often not an option; complicating the authorities’ efforts to
maintain an effective lockdown. In response, many authorities have done
what they can to temporarily expand their safety nets; using home-grown,
often innovative approaches to ensure that transfers reach as much of their
population as possible. But again, resources are limited, and these efforts
cannot hope to offset the full impact of this crisis.

“In sum, many authorities in Sub-Saharan Africa face a particularly stark
set of near-term policy choices; concerning not only the scale of support
they can afford, but also the pace at which they can reopen their
economies.”

Against this backdrop, Mr. Selassie pointed to a number of policy
priorities going forward.

“First and foremost, the immediate priority remains the preservation of
health and lives. But as the region starts to recover, authorities should
gradually shift from broad fiscal support to more affordable, targeted
policies; concentrating in particular on the poorest households and those
sectors hit hardest by the crisis.

“Looking even further forward, and once the crisis has waned, countries
should refocus their attention on transforming their economies, creating
jobs, and boosting living standards—clawing back some of the ground lost
during the current crisis. As before the crisis, part of this effort will
require putting fiscal positions back on a path consistent with debt
sustainability; which will in turn require a renewed determination to
implement revenue-mobilization, debt-management, and public financial
management reforms. In addition, sustainable, job-rich, and inclusive
growth will require private-sector investment, along with a business
environment in which new ideas and projects can flourish, and where new
opportunities (such as from the digital revolution) can be developed fully.

“None of this will be easy, particularly in light of the scale of the
crisis and its longer-term consequences. The region cannot tackle these
challenges alone, and a coordinated effort by all development partners will
be key. The IMF has modified the Catastrophe Containment and Relief Trust
(CCRT) to provide immediate debt service relief for its poorest and most
vulnerable members, and has also doubled its emergency lending facilities.
So far, 29 countries in the region have received around $10 billion in
funding through these facilities, or through expanded access under existing
programs. In April, the G20 also announced the Debt Service Suspension
Initiative (DSSI), which allows the world’s poorest countries—most of them
in Africa—to suspend up to US$14 billion of debt service payments due
between May and December this year.

“Nonetheless, more international support is needed urgently. This year
alone, countries in the region face will additional financing needs of over
$110 billion, and despite the efforts outlined above, $44 billion of this
has yet to be financed.

“This crisis is unprecedented. Our members need us now more than ever. And
our efforts today will have significant consequences down the road, not
only in helping our members offset the immediate tragedy of the crisis, but
also in ensuring that peoples’ lives and livelihoods are not destroyed
forever.”


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Gediminas Vilkas

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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