ADDIS ABEBA – Sub-Saharan Africa is facing an unprecedented health and economic crisis, the International Monetary Fund (IMF) said, projecting the region’s economy to shrink by 1.6 percent in 2020.
The fund, which released its Regional Economic Outlook for Sub-Saharan Africa today, projects the real per capita income of the region could “fall by even more — 3.9 percent on average”.
IMF’s top official in Africa says the crisis threatens to reverse recent development progress across the region and may weigh on growth for years to come.
“The world is facing a serious challenge, and sub-Saharan Africa will not be spared,” said Abebe Aemro Selassie, Director of the IMF’s African Department.
Abebe said all indications are that the COVID-19 pandemic will exact a heavy human toll and cause an acute economic crisis.
The regional director said Africa is facing plummeting global growth, tighter financial conditions and a sharp decline in key export prices.
Severe disruptions to economic activity from the measures that have had to be adopted to limit the viral outbreak could also have a negative impact on the economy.
“Consequently, we now project the region will shrink by 1.6 percent this year—the worst outcome on record,” he said.
According to the IMF, shrinking incomes will worsen existing vulnerabilities, while containment measures and social distancing will inevitably jeopardize the livelihoods of many Africans.
“Also, the pandemic is reaching the continent at a time when many countries have little room for maneuver in their budgets, making it more difficult for policymakers to respond,” Abebe said.
Against this backdrop, Abebe called for decisive measures to limit the human and economic costs of the crisis.
“First and foremost, the immediate priority is to do whatever it takes to ramp up public health spending to contain the outbreak, regardless of a country’s budget,” he said.
Secondly, he said substantial and timely support is crucial.
“Policies could include cash transfers or in-kind support to vulnerable households, including to informal workers,” he said adding the polices should also target hard-hit sectors.
“The ability of countries to mount an adequate response will depend in large part on their access to concessional funding from the international community,” he said.
Thirdly, Abebe said monetary and financial policy can also play an important role in sustaining firms and jobs.
“In support of these domestic measures, a coordinated effort by all development partners will be key.
IMF announced it would provide some US$11 billion to 32 sub-Saharan countries that have requested assistance in recent weeks.
Disbursements to Burkina Faso, Chad, Gabon, Ghana, Madagascar, Niger, Rwanda, Senegal, and Togo have already been made.
“Immediate debt relief is also being provided for the poorest and most vulnerable countries through the IMF’s Catastrophe Containment and Relief Trust, freeing up resources for health and social protections spending,” Abebe noted.
Together with the World Bank, the IMF is also making the case for debt relief from official bilateral creditors for those low-income countries that request forbearance.
“This is an unprecedented crisis. And our member countries need us now more than ever,” the regional director said. “Together with our partners, we aim to help the region smooth the worst of this shock, ensuring that peoples’ lives and livelihoods are not destroyed forever.”