THE International Monetary Fund (IMF) has urged sub-Saharan African countries to implement strong and urgent policy action to boost growth in the region.
According to its latest Regional Economic Outlook, Restarting the Growth Engine, growth in sub-Saharan Africa as a whole fell to 1.4 percent in 2016—its lowest level in two decades—and is projected to record a modest recovery of 2.6 percent in 2017, although a number of countries, especially in Eastern and Western Africa, continue to grow robustly.
‘The overall weak outlook partly reflects insufficient policy adjustment,’ said Abebe Aemro Selassie, Director of the IMF’s African Department. ‘The delay in implementing much-needed adjustment policies is creating uncertainty, holding back investment, and risks generating even deeper difficulties in the future.’
Adjustment in resource-intensive countries has been delayed. In particular, oil exporters such as Angola, Nigeria, and the countries of the Central African Economic and Monetary Union (CEMAC) are still struggling to deal with the budgetary revenue losses and balance of payments pressures, some three years after the fall in oil prices. ‘Vulnerabilities are also emerging in many non-resource-intensive countries.’
While they have generally continued to record high growth rates, they have also maintained elevated fiscal deficits for a number of years as their governments rightly sought to address social and infrastructure gaps.
‘As a result, fiscal and external buffers are declining and public debt is on the rise.’ Looking ahead, Selassie points to a modest growth recovery from 1.4 percent in 2016 to 2.6 percent in 2017, noting that this will barely put sub-Saharan Africa back on a path of rising per capita income.
The uptick will be largely driven by one-off factors in the three largest countries—a recovery in oil production in Nigeria, higher public spending in Angola, and fading of drought effects in South Africa. But for other countries, the outlook remains shrouded in substantial uncertainties, including a possible further appreciation of the U.S. dollar, a tightening of global financing conditions-especially for countries where fundamentals have deteriorated-and a potential broad shift toward inward-looking policies.
On top of that, he notes that the outlook is further clouded by the incidence of drought, pests and security issues that have contributed to an increase in food insecurity and even famine in parts of sub-Saharan Africa.
In view of these challenges, Selassie stressed that ‘strong and urgent policy action is needed to restart growth where it has faltered and preserve the momentum elsewhere.’
While restoring macroeconomic stability is a prerequisite, it needs to be complemented with structural reforms to support the rebalancing and policies to strengthen social protection for the most vulnerable.
For the hardest-hit countries, he noted that strong fiscal consolidation is required, with an emphasis on revenue mobilisation. In addition, where available, greater exchange rate flexibility and the elimination of exchange restrictions will be important to absorb part of the shock. For countries where growth is still strong, he emphasised the need to address emerging vulnerabilities from a position of strength, including by shifting the fiscal stance toward gradual consolidation.
Selassie further reiterated that sub-Saharan Africa remains a region with tremendous potential for growth in the medium term–provided strong domestic policy measures are implemented.