IMF outlines four policy priorities for Africa to attain 4% GDP growth in 2024
In its October 2023 Regional Economic Outlook Report, the International Monetary Fund (IMF) emphasizes the formidable challenges faced by sub-Saharan African economies in 2023.
Against a backdrop of global economic headwinds triggered by Russia’s war in Ukraine, the region has experienced higher interest rates, diminished international demand, and persistent exchange rate pressures.
However, the IMF points to a potential turnaround, outlining crucial policy priorities for achieving a targeted GDP growth rate of 4% and revitalizing economic prospects.
Addressing Inflation
The IMF recommends a nuanced approach to inflation management. For countries with high but declining inflation, a cautious “pause” in monetary policy may be warranted. In contrast, nations facing rising inflation may require further tightening until clear signs of inflation cooling emerge.
Managing Exchange Rate Pressures
The report underscores the need for tailored policies based on exchange rate regimes. Pegged countries should align their monetary policies with anchor countries to preserve external stability, while countries with floating exchange rates should allow currencies to adjust in response to fundamentals.
This adjustment should be complemented by targeted measures such as tighter monetary policy, support for vulnerable populations, structural reforms, and fiscal consolidation.
Managing Debt Obligations
The IMF stresses the importance of adapting fiscal policies to tighter financing conditions and elevated debt vulnerabilities. This involves mobilizing domestic revenue, prudent borrowing, strategic spending, and anchoring fiscal policies through credible medium-term frameworks.
For countries with unsustainable debt, debt restructuring may be necessary, with a call for increased financial support from donors.
Improving Living Standards and Potential Growth
The report advocates comprehensive structural reforms to enhance income per capita, particularly in resource-intensive countries. These reforms include investments in education, improved natural resource management, fostering a favorable business climate, prioritizing digitalization, and committing to trade integration.
Despite the challenging economic backdrop of 2023, the IMF remains cautiously optimistic, projecting a rebound in growth to 4% in the following year. The outlined policy imperatives serve as a roadmap for policymakers in sub-Saharan Africa to navigate the complexities of the global economic landscape and foster sustainable economic resurgence.
