IMF list 4 policy priorities for Africa amid global economic challenges
Amid the global economic challenges, Africa faces four (4) key policy priorities the IMF has said in its 2022 October Sub-Saharan Africa Regional Economic Outlook Report.
According to the IMF, the four key policy priorities for African countries amid the global crisis should focus on; addressing food insecurity, managing shifts in monetary policies, consolidating public finances and ensuring sustainable and greener growth.
The IMF in its report notes that, with 123 million acutely food-insecure people across the region, rising food and energy prices mean that lives are at risk, hence tackling this issue is a clear priority for African governments.
“The ability to rapidly expand social safety nets is constrained in many cases, so some countries have turned to expensive and poorly targeted support measures. While these measures, especially food support, may be necessary in the current emergency, they should eventually be phased out and replaced with better-targeted alternatives, ensuring that scarce resources go to those who need them most,” said the IMF.
Regarding shifts in monetary policy rates, the IMF asserts that with increased inflation and rising global interest rates, most monetary authorities have started to tighten monetary policy. But in a context of fiscal consolidation and a fragile recovery, authorities face a difficult balance.
“Monetary authorities should increase policy rates gradually and cautiously, keeping a close eye on inflation expectations and the level of foreign exchange reserves,” the IMF added.
In consolidating public finances amid tighter financial conditions, the Continent’s regional debt is approaching levels last seen in the early 2000s before the impact of the Heavily Indebted Poor Countries Initiative, and in the context of rising global interest rates, access to funding will likely become much less forgiving.
“To build resilience and absorb the cost of a higher interest bill, authorities will need to continue consolidation. Further, credible medium-term fiscal frameworks—including effective debt management—can reduce exposure to shifts in risk sentiment and can lower borrowing costs. For some countries, debt reprofiling or restructuring may be needed, requiring improved implementation of the G20 Common Framework,” it noted.
In setting the stage for sustainable and greener growth, the IMF says high-quality growth has long been a priority, but the context for reform is changing dramatically in the context of accelerating climate change.
“Investment in resilient, green infrastructure is increasingly important. And capitalizing on the region’s sizable endowment of renewable energy sources—and potentially leapfrogging fossil-fuel-based models – will require both innovating private finance and energy sector reforms,” it added.
Per the 2022 October Sub-Saharan Africa Regional Economic Outlook Report, Sub-Saharan Africa’s recovery has been abruptly interrupted.
In 2021, activity finally bounced back, lifting GDP growth in 2021 to 4.7 percent. But growth this year is expected to slow sharply by more than 1 percentage point to 3.6 percent, as a worldwide slowdown, tighter global financial conditions, and a dramatic pickup in global inflation spill into a region already wearied by an ongoing series of shocks.
Rising food and energy prices are striking at the region’s most vulnerable, and public debt and inflation are at levels not seen in decades.
