As African
countries commence the re-opening of their economies, the International
Monetary Fund (IMF) has advised them to proceed cautiously because the COVID 19
pandemic is still in its exponential phase.
This was
contained in IMF’s latest Regional Economic Outlook for Sub-Saharan Africa
released on Monday.
According
to Abebe Aemro Selassie, Director of the IMF’s African Department, “The growth
rate of new cases has slowed slightly since April, and a number of countries
have cautiously eased some of their containment measures.
“But
region-wide, the pandemic is still in its exponential phase—Sub-Saharan Africa
has recently exceeded more than a quarter of a million confirmed cases, and new
cases are still doubling every 2-3 weeks. Given the region’s already-stretched
healthcare capacity, the immediate priority is still to protect lives and to do
whatever it takes to strengthen local health systems and contain the outbreak.”
On the
outlook for the region, Selassie said African economy would shrink by 3.2 per
cent, double the contraction predicted in April.
He said:
“This is a fast-moving crisis. And recent developments suggest that the
downturn will be significantly larger than we had anticipated only 10 weeks
ago. The risks we highlighted in April all continue to be a concern, but the
deterioration of the global outlook has been particularly striking.
“In line
with this new outlook, and consistent with local high-frequency indicators,
output in Sub-Saharan Africa is now projected to shrink by 3.2 per cent this
year, more than double the contraction we had outlined in April. Again, this is
set to be the worst outcome on record.”
While
commenting on the steps taken by governments to mitigate the effects of the
pandemic on the economy, IMF said while the monetary policies had been
effective, same could not be said of the fiscal policies because of the
continent’s heavy debt burden.
“On
economic policies, sub-Saharan African countries have acted swiftly and
aggressively to support the economy. Monetary and prudential policies have been
eased, with countries adopting a mix of reduced policy rates, added injections
of liquidity, greater exchange-rate flexibility, and a temporary relaxation of
regulatory and prudential norms, depending on country circumstances.
“On the
fiscal side, however, country responses have often been more constrained. Even
before the crisis, debt levels were elevated for many countries in the region.
In this context, and in light of collapsing tax revenues, the ability of
governments to increase spending has been limited. To date, countries in the
region have announced COVID-related fiscal packages averaging 3 per cent of
GDP. This effort has been indispensable. But it has often come at the expense
of other priorities, such as public investment, and is markedly less than the
response seen in other emerging markets or advanced economies.”
IMF then
called on African countries to make preserving lives and reducing poverty a
priority.
It added
“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.”
(Today.ng)
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