Sub-Saharan Africa in 2020 would experience its lowest level growth on record, tumbling from an initial forecast of 3.6 percent before the coronavirus pandemic hit the world, to 1.6 percent from now on, the International Monetary Fund (IMF) projected in its latest economic outlook for Sub-Saharan Africa.
Last October, the IMF projected growth in sub-Saharan Africa was going to remain at 3.2 percent in 2019 and rise to 3.6percent in 2020, but the COVID-19 pandemic has completely changed all the equations with a negative growth of -1.6 percent now being expected this year.
IMF said, subject to many other factors, including adjusted fiscal and monetary policy formulations as well as global solidarity, growth in Sub-Saharan Africa is projected to recover in 2021 to about the 4percent mark.
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“The depth of the slowdown in 2020 and the speed of recovery will depend on several factors, including how the pandemic interacts with weak local health systems, the effectiveness of national containment efforts, and the strength of support from the international community,” IMF said in its economic outlook.
“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. “All indications are that the Covid-19 pandemic will exact a heavy human toll and cause an acute economic crisis.
“The region is facing “plummeting global growth, tighter financial conditions, a sharp decline in key export prices, and severe disruptions to economic activity from the measures that have had to be adopted to limit the viral outbreak. Consequently, we now project the region will shrink by 1.6 percent this year—the worst outcome on record.”
Against that backdrop, Mr. Selassie 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.
“Second, substantial and timely support is crucial. Policies could include cash transfers or in kind support to vulnerable households, including to informal workers. They could also include targeted and temporary support to 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.
“Third, monetary and financial policy can also play an important role in sustaining firms and jobs,” he said.
In support of these domestic measures, a coordinated effort by all development partners will be key, he added.
He said the Fund is working closely “with our partners—the World Bank, World Health Organization, the African Development Bank and the African Union—to respond swiftly and effectively to this crisis.”
“The Fund is set to provide some US$11 billion to 32 sub-Saharan countries that have requested assistance recent weeks, with disbursements to Burkina Faso, Chad, Gabon, Ghana, Madagascar, Niger, Rwanda, Senegal, and Togo already 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.
“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. 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,” Selassie said.
“Fiscal, monetary, and financial policies should be used to protect vulnerable groups, mitigate economic losses, and support the recovery,” IMF recommended.
“The immediate priority is for countries to do whatever it takes to ramp up public health expenditures to contain the virus outbreak, regardless of fiscal space and debt positions. Sizable, timely and temporary fiscal support is crucial to protect the most affected people and firms, including those in the informal sector,” IMF said in its regional economic outlook.
“Policies could include cash or in-kind transfers to help people under strain (including through digital technologies) and targeted and temporary support to hard-hit sectors. Once the crisis has subsided, countries should revert fiscal positions to paths that ensure debt sustainability,” it added.
Apart from the fiscal policy adjustments, IMF said “a more supportive monetary stance and injection of liquidity can also play an important role in sustaining firms and jobs by supporting demand.”
“Financial sector supervision should aim to maintain the balance between preserving financial stability and sustaining economic activity. For countries with floating regimes, exchange rate flexibility can help cushion the external shocks, while some drawdown of reserves to smooth disorderly adjustment may mitigate potential financial implications from foreign exchange mismatches.
“For countries facing sizable and disorderly capital outflows, temporary capital flow management measures could be considered as part of a wider policy package,” IMF said, adding that “economic forecasts at this juncture are subject to higher-than-usual degrees of uncertainty.”