Director of the IMF’s African Department Abebe Aemro Selassie

IMF: SS African Economy Will Expand by 3.4% in 2021

ADDIS ABABA – Sub-Saharan Africa economy is projected to expand by 3.4 percent this year, recovering from the 1.9 percent contraction in 2020 – the worst on record – that resulted in a large increase in poverty, according to the International Monetary Fund (IMF).

Yet, the path to recovery and overcoming the long-lasting effects of the pandemic will be difficult, says IMF’s latest Regional Economic Outlook for Sub-Saharan Africa

Policymakers must strive to deliver vaccines while restoring the health of public balance sheets harmed by the crisis, the Outlook suggests.

According to the Fund, transformative reforms and renewed external support are more important than ever to rekindle the region’s growth.

“Sub-Saharan Africa is continuing to grapple with an unprecedented health and economic crisis,” stressed Abebe Aemro Selassie, Director of the IMF’s African Department.

“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,” said Abebe.

“And many countries continue to face or are bracing for further waves, particularly as access to vaccines remains scant,” he said.

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,” Abebe said.

“The economic hardships have caused significant social dislocation, with far too many being thrust back into poverty,” he added.

According to the IMF, per capita incomes will not return to pre-crisis levels until 2025 in many countries while extreme poverty in sub-Saharan Africa is projected to have increased by more than 32 million.

As a result, Abebe said the region “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”.

Possible interventions

Against this backdrop, Abebe highlighted the policy priorities should immediately be given to “to save lives”.

“This will require more spending to strengthen health systems and containment efforts, and cover vaccine procurement and distribution,” he said.

But 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.

“The next priority is to reinforce the recovery and nurture the region’s growth potential through bold and transformative reforms,” said IMF’s Africa department director.

“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,” Abebe said.

According to IFM, 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,” Abebe added.

Besides, the IMF official said 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.

These issues will be discussed in May at the High-Level International Summit on Financing for Africa, according to IMF.

Featured Image: Director of the IMF’s African Department Abebe Aemro Selassie [Photo File]