IMF outlines Africas economic recovery

 The IMF outlines focus areas for strengthening Africa's economic growth.

In the midst of a deteriorating global crisis and lowering growth estimates, the International Monetary Fund (IMF) has identified four key areas for policymakers in Nigeria and other Sub-Saharan African nations to focus on in order to increase economic growth in the medium to long term.

The Fund's Head of, the Regional Studies Unit, African Department, Luc Eyraud, underlined the important areas to strike a balance at a webinar Monday titled 'Living on the Edge: IMF Outlook for Sub-Saharan Africa,' hosted by the Institute for Security Studies (ISS) in collaboration with the IMF.

Policymakers, he says, must address food shortages, consolidate public finances, manage monetary policy shifts, and accelerate sustainable and greener growth.

"Policies enacted in an emergency, including untargeted, expensive, and distortive fiscal support measures," he said. "Countries must strike a delicate balance in conducting monetary policy to handle the rise in inflation and fight exchange rate pressures without damaging recovery."

Eyraud explained that regional growth was likely to fall from 4.7% in 2021 to 3.6% in 2022, reflecting the global economic downturn, rise in global prices, and other crises.

In terms of inflation and food insecurity, he noted that 80 percent of the region's governments chose transitory and primarily temporary measures taken in reaction to price increases in food and gasoline.

He emphasized that food, which accounts for 40% of the consumption basket, was responsible for half of the rapid inflation.

Eyraud expressed sorrow that the quick rise in global inflation, fueled by increases in energy and critical food prices, has put a strain on most people in the region, particularly the most vulnerable.

Furthermore, he stated that 19 of the region's 35 low-income nations are either in debt distress or are at high danger of debt distress and that countries are now approaching the edge of buffers.

"The limited policy space with limited room for error and judgments must often strike a delicate balance between opposing objectives," he said.

"Policies implemented in an emergency, such as untargeted, costly, and distortive fiscal support measures, should be gradually phased out, and countries must strike a delicate balance in conducting monetary policy to address rising inflation and resist exchange rate pressures without jeopardizing recovery."

In terms of public finance, Eyraud emphasized the region's growing debt profile in the face of rising financing costs, emphasizing that governments needed to keep their debt below 70% of GDP.

"It is critical to ensure effective and transparent public debt management while maintaining credible and clearly articulated medium-term fiscal frameworks," he said, adding that countries must consolidate public finance by increasing revenue mobilization, prioritizing, and increasing the efficiency of public spending wherever possible.

Eyraud further stated that Sub-Saharan Africa accounts for two to three percent of global CO2 emissions and requires between $30 billion and $50 billion in yearly climate adaptation funding, adding that international help would be important in financing climate adaptation needed for sustainable growth.

"High-quality growth will necessitate investment in robust green infrastructure to capitalize on the region's significant endowment of renewable energy resources while harnessing private sector innovation, activity, and funding," he says.

In her remarks, Cathy Pattillo, Deputy Director of the IMF's African Department, stated that the region was experiencing substantial problems ranging from high public debt to the impact of the ongoing crisis, as well as double-digit inflation, among other issues.

Pattillo went on to say that measures such as political stability, a supportive global environment, and assistance from the government can help, and also recognize that the late 1990s' use of the worldwide community was no longer available.

"The reality is that most countries are teeming with these imbalances and will have to live with them," she said. "More countries will find themselves in a kind of grey zone and there will be extreme uncertainty, as vulnerabilities and imbalances will remain high and it will be difficult to calibrate."