The International Monetary Fund (IMF) has urged concerted efforts to strengthen economic recovery in sub-Saharan Africa despite its observations that growth in the region is picking up.
This is contained in its latest Regional Economic Outlook for sub-Saharan Africa report released Monday, October 30, 2017 in Zimbabwe.
The Bretton Woods institution stated that growth in sub-Saharan Africa is expected to pick up to 2.6 percent in 2017 from 1.4 percent in 2016, while growth is expected to accelerate further to 3.4 percent in 2018.
It, however, noted that momentum remains weak and growth will likely remain below past trends in 2019, adding that the underlying situation remains difficult with rising vulnerabilities.
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The IMF specifically pointed out that fiscal challenges are key policy priorities, which should go hand in hand with the implementation of polices to facilitate economic diversification.
It said one third of the economies, mostly in eastern and western Africa, would continue to grow at a brisk pace of five percent or more but it expects per capita incomes to decline in 12 countries, home to 40 percent of the region’s population or 400 million people, according to Abebe Aemro Selassie, director of the IMF’s African department.
The IMF particularly singled out public debt increases in economies adjusting to the substantial commodity price shock, and in many fast-growing economies.
“With debt now above 50 percent of GDP in half of the economies in the region, debt servicing costs have risen. Growing exposure to the sovereign and the accumulation of domestic arrears has magnified pressures in the financial sector.
“Moreover, while current account deficits have narrowed, international reserves are lower than desirable in many countries,” the multilateral institution said.
Selassie stressed that the quest for recovery rests on strong and urgent policy action to address vulnerabilities and tackle constraints to growth, adding that many countries face a period of fiscal consolidation.
“While this is already reflected in most sub-Saharan African countries’ medium-term strategies, experience shows that planned fiscal adjustments tend to be postponed; implementation needs to begin without delay if debt levels are not to increase sharply,” he said.
He said experience with past fiscal consolidations in the region shows that this is best achieved through revenue mobilization as well as better prioritization of public spending.
“Policies to promote diversification can help support growth. While there is no single path for reforms, countries such as Botswana, Rwanda, and Uganda, that have successfully diversified their economies have built on their existing strengths and tackled specific constraints,” he noted.
He said diversification strategies in those countries were supported by policies to enhance macroeconomic stability, improve education outcomes, bolster governance and transparency in regulation, and deepen financial markets.