The IMF has stated that countries in sub-Saharan Africa will need additional external funding of around $425 billion over the next 5 years to recover fully from the pandemic. According to the IMF, this will help boost spending on the pandemic response. Moreover, the IMF notes that this will also help them maintain adequate reserves, and to accelerate the recovery.
By and large, the IMF expects sub‑Saharan Africa to diverge from the rest of the world with regards to the income gap. However, it believes the external assistance will help close this gap within the next five years.
Also, the Fund forecasts that constraints on policy space and vaccine rollout will hold back the near-term recovery. It also indicates that most countries in sub‑Saharan Africa are not able to deploy the extraordinary policy support to drive their recoveries. Yet, the Fund believes this is what has helped their counterparts in the developed world.
SSA faces greater-than-usual uncertainty
Meanwhile, the IMF considers that its SDR allocation would be an important step as it will provide liquidity to the most vulnerable sub-Saharan African countries.
“As we’ve observed throughout the pandemic, the outlook is subject to greater-than-usual uncertainty. The main risk is that the region could face repeated COVID-19 episodes before vaccines become widely available”.
However, the IMF has cited several other factors that casts uncertainty of the outlook. Some of which include limited access to the external financing, political instability, domestic security, or climate events. More positively, faster‑than‑expected vaccine supply or rollout could boost the region’s near-term prospects.
Also, the IMF has outlined several some potential sources that can contribute significantly to meeting the region’s total needs. These comprise private capital inflows, international financial institutions, debt-neutral support via ODA, and debt relief. It also notes that capacity development could help countries to effectively scale up development spending.
“We will discuss these issues at the forthcoming High-Level International Summit on Financing for Africa in May”.
Unsurprisingly, the IMF states that the immediate priority is to save lives. It however, notes that this will require more spending to strengthen local health systems. This will be in addition to containment efforts, as well as to cover vaccine procurement and distribution.
“For most countries, the cost of vaccinating 60% of population will require increasing health spending by as much as 50%”.
Also, the IMF notes that the next priority is to reinforce the recovery and unlock sub‑Saharan Africa’s growth potential.
“Bold and transformative reforms are therefore more urgent than ever”.
These include reforms to strengthen social protection systems, promote digitalization, improve transparency and governance, and mitigate climate change. However, the Fund believes delivering on these reforms, while overcoming the scarring from the crisis will require difficult policy choices.
It adds that countries will have to tighten their fiscal stance to address debt vulnerabilities. This will also help them restore the health of public balance sheets. More especially for the 17 countries in the region that are in debt distress or at high risk of it.
Extreme poverty in sub‑Saharan Africa
This economic hardship has caused significant social dislocation. In many countries, per capita incomes will not return to pre-pandemic levels until 2025.
The IMF indicates that more than 32 million people are now living in extreme poverty in sub‑Saharan Africa. There has also been a tremendous ‘learning loss’ for young people. Students in the region have missed 67 days of instruction. This, the IMF notes, is more than four times the days children in advanced economies have missed.