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At the Hamarweyne market in Mogadishu, Somalia April 2, 2022. FEISAL OMAR/ REUTERS
It’s “a shock added to a shock,” summarizes Kristalina Georgieva, executive director of the International Monetary Fund (IMF). As the Covid-19 pandemic begins to ebb, African economies are bearing the brunt of the fallout from the war in Ukraine. Energy and food prices have skyrocketed since the start of the Russian offensive on February 24, exacerbating inflationary tensions already affecting most African countries. And according to the Economic Outlook published by the IMF on Thursday, April 28, that “inflation in the region should remain elevated at 12.2% in 2022 and then gradually decline to 9.6% in 2023.”
Sub-Saharan Africa was granted only a brief respite. “At the end of 2021, there was very strong momentum of economic recovery in the region,” explains the report’s director, Papa N’Diaye, head of department in the IMF’s Africa department: “Growth forecasts have been revised upwards, from 3.7% to 4.5%. But that momentum has stopped. Only 3.8% growth is forecast for 2022. Of course with great heterogeneity between the countries. »
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Of the 45 countries in sub-Saharan Africa, eight are oil exporters and can hope to turn the rise in fuel prices into a financial boon. The budget revenues for 2022 of the affected countries, led by Nigeria and Angola, were revised upwards by 2.1 points by the IMF. But the other 37 will bear the brunt of the negative consequences of this increase.
“All populations will suffer, the economist warns. And without well-established social safety nets, we can expect worsening poverty, inequality and social tensions, with the risk of political instability. That worries us. »
The example of Togo
Usually reticent with public money, the IMF is for once urging governments to protect the most vulnerable households with targeted aid. “We need to reallocate certain existing budget items to countries that don’t have fiscal space,” admits Papa N’Diaye. Or fall back on subsidies, as in Togo. »
Lomé established the Novissi system in 2020, a social assistance program through cash transfers to support informal sector workers deprived of their income by the pandemic. By using satellite imagery and artificial intelligence, Novissi was able to create a map of the most vulnerable households. According to program data, 11.4 billion CFA francs (about 17.4 million euros) were distributed to 567,000 people between April and June 2020.
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But be careful, the IMF warns, to stick to time-limited targeted subsidies to limit the negative impact on debt dynamics. Public debt, exacerbated further by the pandemic, is at its highest level since the turn of the century, the report recalls, and 20 low-income countries are currently experiencing a debt crisis or are at high risk of a debt crisis. Under these conditions, it is difficult to obtain credit from capital markets or international institutions. “Governments will have to strike a delicate balancing act,” acknowledges Papa N’Diaye.
The Debt Question
The countries of the continent will not be able to overcome this new crisis without the direct support of the international community: first in the form of aid to restructure their debts, but also in the form of financial donations in the case of the most indebted countries. “The $23 billion allotment [environ 21,7 milliards d’euros] for special drawing rights [DTS] IMF support to the region in 2021 has provided much-needed support to shore up external positions and fund urgent spending during the pandemic, the report said. Another milestone is the G20 pledge to transfer $100 billion in SDRs to vulnerable countries. »
Then it will be time to think long-term about the resilience of African economies. According to the IMF, this will inevitably pass by a massive industrialization of the continent, which is still heavily dependent on its raw material exports. To support emerging industries, the report advocates harnessing the potential of the private sector in the form of research and development aid or support for start-up incubators.
“All of these strategies have worked in the past,” explains Papa N’Diaye. Mauritius has managed to diversify its economy in this way, as have Rwanda and Burkina Faso. In the case of loans to public or semi-public companies, on the other hand, experience is far less convincing. »
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Finally, the IMF is pinning its greatest hopes on the Continental Free Trade Area (ZLEC). ” [Sa] successful implementation would greatly boost the growth and competitiveness of the region,” the report emphasizes. The CFTA could become the largest free trade area in the world, with a market of 1.2 billion consumers and a GDP of $2.5 trillion. Above all, however, it would enable sub-Saharan Africa to integrate into global value chains, not only as a supplier of raw materials, but ultimately also as an exporter of goods and finished products.