Updated: March 4, 2021
Sub-Saharan, the International Monetary Fund said on Friday.
However, even as recovery continues, there are considerable differences in countries’ growth prospects with seriously warning signs that the projections could he thwarted by bad policies.
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Briefing journalists in Washington D.C. on the state of the African economy,said African nations should focus on raising domestic revenues, bolstering trade integration, facilitating investment, raising productivity, and strengthening resilience to shocks.
“External and domestic headwinds are weighing on growth prospects”, he said, adding that the global expansion is losing steam, including in key trading partners such as China and the euro area.
This is happening, he explained, while trade tensions persist at the same time that there are volatile global financial conditions and commodity prices.
“Public debt vulnerabilities remain elevated in some countries and non-performing loans remain high, partly due to large public sector domestic arrears,” Selassie added at a press briefing in Washington D.C. during the IMF-World Bank Spring Meetings.
According to him, debt vulnerabilities complicate further the challenge of financing development and investment in Africa.
Yet, region-wide growth masks wide differences in prospects across countries, the IMF said in its
Some 21 countries, mainly the region’s more diversified economies, are expected to grow at more than 5 percent and see income per capita rise faster than the rest of the world on average over the medium term. However, the remaining countries, comprising mostly resource intensive countries, including the largest (Nigeria and South Africa), are expected to see slower improvements in standards of living.
Mr. Selassie pointed to two broad implications for policies. For the fast-growing economies, such as Benin, Ethiopia, and Senegal, there is need to hand over the reins of growth from the public to the private sector. In many of these countries, public investment had helped spur high growth, while also steadily increasing public debt levels.
In the more resource-intensive and slower growing economies—such as Angola, Nigeria, and South Africa—there is an urgent need to press ahead with much-needed policies to adjust to lower commodity prices and facilitate economic diversification. Prompt action would also help address the policy uncertainties that are holding back growth.
Overall, sub-Saharan African countries need to strike a delicate policy balance between containing public debt levels, investing in human and physical capital, and raising revenue.
This calls for urgent action on the fiscal front to improve tax revenue collection, public financial management, and spending efficiency, and on the trade front to reduce non-tariff barriers and deepen intra-trade integration (including in the context of the African Continental Free Trade Area, AfCFTA).
Reforms are also needed to facilitate greater private investment, raise productivity, including by promoting diversification and export competitiveness, and strengthen resilience to climatic shocks. The crippling effects of Cyclone Idai—decimating physical infrastructure and farmland, and bringing enormous suffering for the 2.6 million people affected in Southeast Africa—underscores the region’s vulnerability to weather-related disasters.