July 21, 2024

20 takeaways for Sub-Saharan Africa from the IMF and World Bank Spring Meetings 2023 as continent faces funding squeeze and projected economic slowdown

Minister of Finance of the Democratic Republic of the Congo Nicolas Kazadi talks with Abebe Aemro Selassie, IMF Director of the African Department, during a Governor Talk event on Democratic Republic of the Congo, during the 2023 Spring Meetings of the World Bank Group and International Monetary Fund in Washington on April 12, 2023. IMF Photo/Allison Shelley

The International Monetary Fund (IMF) has published its regional economic outlook for sub-Saharan Africa, which predicts the region’s growth will decelerate to 2.6% from 3.9% last year. External market access has been curtailed, overseas development assistance is trending downward, and the region has seen a recent reduction in other investments.

IMF African Department Director, Abebe Selassie, said the big funding squeeze is hitting countries hard and will lead to difficult investment decisions, impacting the region now and in the years to come. Selassie stated that the funding squeeze will impact the region’s ability to provide vital skilled and educated workers.

Below are 20 takeaways for Africa from the IMF and World Bank Spring Meetings 2023 in Washington DC, USA.

  1. The Sub-Saharan Africa region’s growth is projected to decelerate to 2.6 percent, down from 3.9 percent last year.
  2. The region is facing a big funding squeeze, with external market access being sharply curtailed.
  3. Overseas development assistance continues to trend downward.
  4. Many countries in the region are facing tough decisions when it comes to investing in crucial areas like health, education, and infrastructure.
  5. The funding squeeze may impact the region’s ability to provide skilled, educated workers.
  6. The IMF is playing its part by providing lending arrangements with countries in the region, emergency financing, and special drawing rights allocation.
  7. There is a need to consolidate public finances and strengthen public finance management.
  8. Continued revenue mobilization is essential, along with the management of fiscal risks and more proactive debt management.
  9. Where debt levels are elevated and debt is clearly unsustainable, restructuring is going to be unavoidable.
  10. A well-functioning debt resolution framework will be vital to creating the required fiscal space.
  11. There is a need to contain inflation.
  12. Monetary policy needs to focus on keeping inflation firmly on a downward trajectory and make sure it pertains to Central Bank’s target range.
  13. There is a need to allow exchange rates to adjust while mitigating adverse effects on the economy.
  14. Climate change is increasingly weighing on policymakers in the region, and tackling this will be very important.
  15. Pursuing policies to help with climate adaptation and mitigation will be important going forward.
  16. Fuel subsidies tend to be a regressive use of government spending in many countries.
  17. Governments need to make transparent the cost of fuel subsidies, whether to sustain them or remove them.
  18. The mere fact that a country has Eurobonds maturing in the future does not mean that they need debt restructuring.
  19. Debt sustainability depends on a combination of factors, including economic indicators, expectations on how those will evolve, and what kind of financing is available.
  20. The IMF is comfortable with the measures taken by Ghana over the last several months, but challenges in the country need to be addressed over the course of the program period over the next three to four years to bring the fiscal deficit to the level it requires.
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