SUB-SAHARAN Africa’s economic growth is set to recover in 2021. Yet, the path to recovery, and overcoming the long-lasting effects of the pandemic will be difficult. Policymakers must strive to deliver vaccines, while restoring the health of public balance sheets harmed by the crisis, says the International Monetary Fund (IMF) in its latest Regional Economic Outlook for Sub-Saharan Africa, quoted in a press release on Thursday, April 15, 2020.
Transformative reforms and renewed external support are more important than ever to rekindle economic growth in the region, said the IMF, which predicted that this year, the region is projected to grow by 3.4 per cent, recovering from the 1.9 percent contraction in 2020, which it said is the worst on record, which had resulted in a large increase in poverty.
The IMF also predicted that in many countries, per capita income will not return to pre-crisis levels until 2025 and that the near-term outlook is subject to considerable uncertainty related to the course of the pandemic, access to vaccines, and the more challenging external financing environment. Economic and social dislocation caused by the crisis will further complicate policymaking.
Against this backdrop, accelerated access to vaccines is critical to boost the region’s health and growth prospects. This requires increased spending for vaccine rollouts, stronger local health systems and vigilant containment efforts.
It recommended a three-pronged effort to unleash the region’s immense potential: bold reforms to boost economic growth and diversification; fiscal measures, particularly to boost revenues and contain debt vulnerabilities; and significant additional external concessional financing to support this reform agenda.
The press release quoted Mr Abebe Aemro Selassie, IMF’s Director of African Department, to have further stated:
“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.
“The pandemic has had a devastating impact on the region’s economy. The estimated ‑1.9 percent 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 percent in 2021, 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. 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.
“Sub-Saharan Africa will be the world’s slowest growing region in 2021, 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.”
Against this backdrop, Mr. Selassie highlighted the policy priorities going forward:
“The immediate priority is 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 percent of the population will require up to 50 percent increase in health spending, and could exceed 2 percent of GDP 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.
“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 seventeen countries in the region that are at high risks of, or already in, debt distress will need deeper support. For some, the G-20 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 G-20 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.
“Moreover, to help boost spending on the pandemic response, maintain adequate reserves, and accelerate income convergence, sub-Saharan Africa’s low-income countries face additional external funding needs of about $245 billion over the next 5 years or $425 billion for the whole region. These issues will be discussed in May at the High-Level International Summit on Financing for Africa.”