The International Monetary Fund (IMF) has predicted that sub-Saharan Africa is set to enjoy a modest growth uptick in 2018 but has indicated that decisive policies are needed to both reduce vulnerabilities and raise medium-term growth prospects.
Top of the vulnerabilities is the risk of debt distress facing most countries on the continent and the IMF fears that this may risk economic recovery.
About 40 percent of low income countries in Africa are now rated to be in debt distress or at high risk of debt distress. In some countries, higher debt levels have translated into a sharp increase in debt service, diverting resources from much-needed spending in areas such as health, education and infrastructure.
“Macroeconomic vulnerabilities are rising in many countries as the required fiscal adjustment keeps getting delayed. 15 of the region’s 35 low income countries are now rated to be in debt distress or at high risk of debt distress,” a press release from the global bank quotes Abebe Aemro Selassie, Director of the IMF’s African Department as saying.
On average, the IMF expects growth in the region to rise from 2.8 percent in 2017 to 3.4 percent in 2018, with growth accelerating in about two-thirds of the countries in the region aided by stronger global growth, higher commodity prices, and improved capital market access.
On current policies, average growth in the region is expected to plateau below four percent—barely one percent in per capita terms—over the medium term.
Prudent fiscal policy is needed to rein in public debt, while monetary policy must be geared toward ensuring low inflation, the IMF said on Tuesday.
Several economies, including Côte d’Ivoire, Ethiopia, Ghana and Senegal are expected to maintain robust growth at about six percent or faster. At the other end of the spectrum, many countries that saw per capita incomes fall in 2017 could witness a further decline this year, the IMF said.
African countries have thus been asked to strengthen revenue mobilization and continue to advance structural reforms to reduce market distortions and shape an environment that fosters private investment.
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