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A Cautious Reopening

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A new dawn for Africa

What Is Expected?          –       Sub-Saharan Africa 

The regional outlook has deteriorated sharply since the April 2020 Regional Economic Outlook report release. Sub-Saharan Africa’s economy is now expected to contract by 3.2 percent in 2020 double the contraction that was expected in April.

This will contribute to poverty increase this year.

The growth rate of new COVID infections has slowed somewhat, allowing some countries to gradually ease their containment measures. However, the scope for the pandemic to spread as aggressively as elsewhere remains a very real threat.

Governments have acted swiftly to support the economy. Nonetheless, these efforts have been constrained by falling revenues and limited fiscal space.

many authorities in Sub-Saharan Africa face a particularly stark set of near-term policy choices; concerning not only the scale of support they can afford but also the pace at which they can reopen their economies

Africa’s resilience is being tested. The Continent has come through much and will come through this crisis also. But with stepped-up support from the international community, the region will be able to boost local containment efforts and healthcare capacity and also enjoy a robust recovery in the coming months.

Abebe Aemro Selassie, Director of the IMF’s African Department noted “Authorities in sub-Saharan Africa face a distinct challenge in getting support to those who need it most. Around ninety percent of non-agricultural employment is in the informal sector, where participants are usually not covered by the social safety net. Moreover, a large proportion of this activity centers on the provision of services, which have been particularly hard hit by the crisis.

Further, informal workers typically have few savings and limited access to finance. So staying at home is often not an option complicating the authorities’ efforts to maintain an effective lockdown. In response, many authorities have done what they can to temporarily expand their safety nets; using home-grown, often innovative approaches to ensure that transfers reach as much of their population as possible. But again, resources are limited, and these efforts cannot hope to offset the full impact of this crisis.

A new dawn for Africa

In sum, many authorities in Sub-Saharan Africa face a particularly stark set of near-term policy choices; concerning not only the scale of support they can afford but also the pace at which they can reopen their economies.”

Against this backdrop, Selassie pointed out some policy priorities going forward.

“First and foremost, the immediate priority remains the preservation of health and lives. But as the region starts to recover, authorities should gradually shift from broad fiscal support to more affordable, targeted policies; concentrating in particular on the poorest households and those sectors hit hardest by the crisis.

Looking even further forward, and once the crisis has waned, countries should refocus their attention on transforming their economies, creating jobs, and boosting living standards—clawing back some of the ground lost during the current crisis.”

As before the crisis, part of this effort will require putting fiscal positions back on a path consistent with debt sustainability; which will in turn require a renewed determination to implement revenue-mobilization, debt-management, and public financial management reforms. In addition, sustainable, job-rich, and inclusive growth will require private-sector investment, along with a business environment in which new ideas and projects can flourish, and where new opportunities (such as from the digital revolution) can be developed fully.

Felicity Gitonga

Award Winning Airline – Jambojet

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