Transcript

Transcript of Sub-Saharan Africa Regional Economic Outlook Press Briefing, April 2020

April 15, 2020

ABEBE AEMRO SELASSIE

Director, African Department, IMF

GEDIMINAS VILKAS

Communications Officer, IMF

MR. VILKAS:  Good morning, and welcome to the IMF virtual spring meetings.  My name is Gediminas Vilkas, and I am with IMF Communications Department.  We are rolling out for you different press briefings, and now this is time for a briefing on the African region.  This is also a special briefing because we are launching a regional economic outlook for Sub-Saharan Africa.  I am pleased to announce to introduce Mr. Abebe Aemro Selassie, IMF African Department Director who will be giving introductory remarks and presenting the main outcomes, the main results of the outlook.  Now, after the introduction we will have some time for questions and answers.

As this is somewhat different press briefing, a virtual one, we will be taking your questions online.  We have some, but will be encouraging you to send those questions online.  So, without further ado, I give the floor to Mr. Selassie, please.

MR. SELASSIE:  Gediminas, good morning, and thank you so much.  Good morning.  Before taking your questions, I would like to briefly summarize some of our, some aspects of the outlook that as we see them today. 

First, thank you for joining us remotely for the launch of our regional economic outlook for Sub-Saharan Africa.  Unsurprisingly, the outlook this spring is tightly focused on the impact of the COVID-19 pandemic on the region, an unprecedented crisis which is threatening to reverse the region's recent development and policy gains. 

To summarize briefly, the impact that this crisis is having on the region and the policies that are needed to protect lives, and allow a swift recovery, I would like to make a few points.  First, outlook in Sub-Saharan Africa is expected to contract by 1.6 percent in 2020, and highest, you know, in per capita terms, this would be higher still at close to 4 percent.  This is the lowest growth number that we can find for the region going back at least to 1970. 

The possibility that growth could be contracted more still is quite high, and even if the contraction is limited to this level, it is worth nothing that it represents a 5 percentage points downward revision since last October.  And it is, as I noted, the worst performance that we've seen going back at least to 1970. 

The hit to growth reflects a poisonous cocktail of shocks that is affecting livelihoods and economic activity.  Swift and decisive measures, closing borders, shattering businesses, requiring people to stay at home have had to be adopted to halt the advance of the virus before it overwhelms already stretched health services, but will also disrupt production and reduce demand sharply.

Of course, worth bearing in mind is that these measures will have the greatest impact on the region’s most vulnerable.  People, who in many cases, have to go out every day to earn income to put food on the table are now being required to stay at home now. 

Coupled to this plummeting global demand will exacerbate the economic impact greatly by reducing demand for the region's goods and services, tourism, remittance flows, tighter global financial conditions have already triggered significant capital outflows from the region, and will also adversely impact the prospect for investment going forward.  And commodity exporters, will suffer from an additional sharp decline in key commodity prices adding significantly to the region's difficulties.

As a result, no country will be spared.  As elsewhere, the region faces a synchronized and deep economic downturn with less diversified economies.  All exporters' tourism dependent economies set to be very hard.  Against this difficult backdrop, several urgent and decisive measured are needed to limit the humanitarian and economic cost of this crisis.  The immediate priority is to do whatever it takes to protect people's health, boosting health spending as needed regardless of fiscal space concerns. 

We also see a significant role for fiscal policy in this crisis to mitigate the impact of the crisis.  Targeted cash transfers and similar measures to support people whose livelihoods are being upended by the containment and mitigation measures government's adopted are needed.  Where feasible, consideration also needs to be given to temporary and targeted support for hard-hit small and medium scale enterprises.

It is only when the health and acute part of the economic crisis have subsided that fiscal policy can revert to medium-term past consistent with debt sustainability considerations. 

Critically, the ability of the countries to mount an adequate response will depend on assistance from the international community.  With domestic savings and financing options severely limited, as countries have been shut out of capital markets, excellent financing on concessional and grant terms has an inordinate important role to play.

Looser monetary policy can complement these fiscal efforts and financial measures can help minimize credit or liquidity disruptions for businesses.  Countries with flexible exchange rates can consider a combination of currency movement and the drawdown on reserves, while countries facing sizeable and disorderly outflows might consider temporary capital flow measures as part of a wider policy package.  This crisis is unprecedented and equally calls for bold and decisive support from the international community.

I will stop here Gediminas.

MR. VILKAS:  Yes, thank you very much.  So, I would encourage journalist to submit questions online.  Some of them are coming in.  We also had some questions that's sent by email.  So, I will start with Simon Ateba from Today News Africa, and he has a question on outlook.  He is quoting IMF projection for Sub-Saharan Africa and saying that the continent's lowest growth record in 2020 coming from additional forecast of 3.6 percent before the corona pandemic hit the world to -1.6 percent from now on.  So, he is asking in terms of losses, what does that translate into.  He also added to that the projection is somehow bigger for the growth of about 4 percent in 2021; and he also wants to know in terms of gains, what does that translate into.  Thank you.

MR. SELASSIE:  Good question.  So, as I noted in my opening remarks, contraction in the size of the economy means that there's less income that's being generated, and that will translate into a decline in standard of living.  Now, going back to at least 1970, we have not seen the region's economy contracting because the region, you know, has a lot of potential growth possibility because there's been a lot of catch-up growth.  In general, throughout the last 40 or more, 50 years, we've seen positive growth for the region as a whole.  So, the fact that the region's economy is contracting, itself, means that, you know, there's less income; and per person, per capita terms because population is growing very rapidly, fairly rapidly each year of the order of 2-1/2 percent for the region as a whole, what it will mean is that per person in the region income levels are going to be dropping by around 4 percent.  So, it really is a grave, as bad a economic hit as the region has had, has seen for decades.

Now, for next year, our projection is, indeed, for growth to recover to around 4 percent.  This is subject to a lot of uncertainty.  It will really depend on how the pandemic plays out through the region.  Our assumption now is that the impact on the region will be limited to the closed, you know, the shutdowns that we've seen in the region, mitigation measures that countries have adopted will be limited to about 1 quarter, about 12 weeks or so, followed by a gradual recovery into next year, and this is what the reason behind our expected pickup in growth next year.  That will still not mean that the losses this year will be made up for but, at least, you know, subject to this crisis being behind us, we can see some recovery and growth over the medium term.

MR. VILKAS:  Thank you.  There is still one more question on positive outlook for some of the countries.  Jean-Pierre Boris from Radio France International, he's asking why African countries such Ethiopia, Cote d’Ivoire, Senegal, and Uganda have positive trade growth for the year 2020 in spite of a current world economic crisis.

MR. SELASSIE:  I think that’s a very good question.  Important to note that the economies that were mentioned were all growing very robustly until very recently, growing of the order of 7-8 percent in some cases.  So, a decline to 1-2 percent is still a very, very sharp deceleration in activity.

A second factor is having a betting on these countries having somewhat positive growth is that they have sizable subsistence farming sectors, which we hope will not be impacted as much by the pandemic.  So, this will also contribute to a somewhat positive growth.

Again, for these economies too, the hit will be as bad because, you know, whereas they were growing at a fairly rapid clip, now growth is going to be slumping down to 1, 2, 3 percent, and that will feel like, really, a recession for these countries that have growing at this rapid pace also.

MR. VILKAS:  Thank you.  Now I go to a different set of questions. What policy advise IMF is offering for the countries. Question from Kemi Osukoya from Africa Bazaar Magazine - within the current latest decades alone African countries, particular those in Sub-Saharan Africa Region have experienced multiple strikes to their economies: climatee-related disasters, Ebola outbreak, now we have COVID-19 pandemic -- also, slowdown in commodity prices, which affect all exporting countries like Congo and Nigeria, and all the different things that relates to that. 

Based on this uncertainty, what top long-term monetary and fiscal policy measures would cushion against unexpected return on external shocks, and what short-term actions can we take now during this current crisis that can be leveraged later on?  Thank you.

MR. SELASSIE:  Thank you.  I think it's important to note, I mean, what differentiates this particular crisis from the previous ones that were cited, commodity price declines, or the Ebola outbreak in Western Africa which impacted Guinea, Liberia, and Sierra Leone and the like, is the fact that no country is going to be left untouched by this crisis.  Every country in the region will be impacted.

In previous cases we've often seen countries that have commodity exporters, or you know, Ebola, those being impacted by the outbreak of Ebola, or natural disasters like Mozambique last year, it's been country-specific, or impacting a handful of countries.

Even the global financial crisis really largely impacted those countries that were much more integrated into the global capital markets, into global supply chains, and there were still quite a lot of countries that continued to sustain reasonable growth.

This time, however, because the shock is so widespread -- because beyond the external impact on the region, we are also seeing domestic supply and demand being disrupted -- the shock will be, really, quite widespread.

That’s why to deal with this shock, I think extraordinary type of policy interventions are needed, including the ones I laid out earlier:  very supportive fiscal stance, resources being put on the health aspect of the crisis -- this is really, really, very important.

Then, once the crisis is behind us is when policies can be recalibrated to more medium-term considerations.

I think, going forward, these are going to have to include deep thinking about how to have more resilient economies to the more medium-term threats that our economies face also, like climate change. 

So, how do we build an economy that’s going to be resilient to more detail events, I think, is going to be one of the policy issues that are going to have to be discussed and thought through in the coming days.

MR. VILKAS:  Thank you very much.  And thank you for the journalists submitting their questions online, it is much appreciated.  And we will try to answer to them as much as possible.

So, this is a follow-up question to this one, and this comes from Eleni Giokos of CNN International.  So, she is adding to that, should countries consider capital controls?  Are you concerned about liquidity crunches in oil production countries, and others who are reliant on commodities for forex earnings?

MR. SELASSIE:  So, just to tackle the second question first, indeed, in addition to the measures countries are having to take to contain the pandemic -- the domestic measures, which as I noted earlier are quite disruptive to economic activity -- plus the decline in external demand for the region’s goods and services, oil exporting countries are also facing, you know, really, one of the sharpest declines in oil prices that we've seen in many decades.

The hit to those economies is going to be much more severe, still, and they will face a much bigger challenge.

In terms of policy measures, both for these countries and others, really, you have to go back to, first and foremost, focusing on what’s required to put this threat -- the mortal threat, really -- to many of our economies behind us.  And that’s devoting whatever resources are needed to get the crisis behind us.

Over and above this, in those instances where capital outflows could, indeed, engender imbalances, or exacerbate the crisis, there could be scope for that.  But the first thing I would stress is that sound macroeconomic policies are the best way, really, to forestall a crisis. 

If macroeconomic policy settings are sufficient, are supportive, and still you're seeing pressure for capital outflows, it's only then that you want to be thinking about these kinds of extraordinary measures.

MR. VILKAS:  Thank you.  We also are getting a lot of questions on the Catastrophe Containment and Relief Trust, that was adopted this Monday.  We have a question from Mathew Lee from Inner City Press, from Eleni Giokos of CNN International, from Jeune Afrique, all of them asking about this trust.

And, their questions are concentrating on, so how did you come up with the list of those countries?  What are the criteria that certain countries got into the list, others are not, maybe out on this list? 

And so, they are citing countries like Zambia, Burundi, Zimbabwe, which are not on the list, Congo, Cote d’Ivoire.  They are asking to explain what are the reasons for that?

And also, what are the members contributing to this trust, if you can name them?  And is it realistic that this trust could be expanded for the two years debt relief?  Thank you.

MR. SELASSIE:  Thank you.  So, indeed, one of the measures that the IMF is supporting countries at this particular time in two ways. 

First and foremost, of course, is the financing we’re providing to countries to be able to pursue the supportive policies that I highlighted earlier; have more resources to spend in health, have more resources to provide social protection to populations.  And I'm happy to say that in the next 6-8 weeks, we will be -- for the 32 countries that have already made requests and we are processing those requests -- we will be providing of the order of about $11.5 billion for those 32 countries in Sub-Saharan Africa that are in the process of -- the discussions are well underway.

Over and above this, what we have done is to look for resources that would allow us to provide grants to countries that have debt service payments falling due to the IMF for the remainder of this year.  And these grants will offset the debt service payments that would otherwise have had to be made to countries.

So, what this will do, of course, is create more fiscal space for countries to devote to higher health spending, higher social protection, that needs to be spent.

So, whether you're a beneficiary of this grant depends, first and foremost, on countries -- you know, we have enough resources for the poorest, most vulnerable countries; 25 or so countries -- so, a per capita income threshold.  And then second, whether you have debt service payments due falling this year.

Should we be able to generate more money in the coming months, we hope to extend the horizon.  But right now, we have enough resources, really, to provide this debt relief for this year.  And the resources for this have come from donations from member countries of the IMF, including the United Kingdom and Japan, amongst others.

MR. VILKAS:  Thank you very much.  Now, maybe we will go to the questions on different countries. 

So, we will touch upon on Zimbabwe, and Simba Chikanza from ZimEye news network is asking, does the IMF now uphold Zimbabwe’s credit worthiness seeing that it has cleared its arrears, or it still needs to work on it?

MR. SELASSIE:  So, unfortunately, Zimbabwe continues to have arrears to the World Bank and African Development Bank, which is a constraint on our abilities to lend to the country.

This hasn’t stopped us, of course, from engaging on policy dialogue, and we are also actually having discussions on other means in which Zimbabwe can be helped by development partners, including grant support.

We've been very much highlighting the complexity of the policy environment and the tremendous policy constraints that the government has in terms of being able to mount the kind of response that other countries, to whom we will be able to lend, can. 

So, it is a case which we worry about and are doing our utmost to get the support that Zimbabwe needs from development partners.

MR. VILKAS:  Thank you.  We go now to Nigeria.  There are a lot of questions on Nigeria, and one of those is from Leah Katung-Babatunde from the Nigerian Television Authority, and she's asking, what do you see as Nigeria’s most critical solution to the economic impact of the pandemic as it affects the people and government resources?  And, is our country self-sufficient enough to address COVID-19 as the borders are closed?

And, if I may also add, there's one more question coming on Nigeria online now -- and thank you very much journalists, for submitting those questions. 

It is from Oluseyi Awojulugbe, from The Cable.  So, he's asking us, Nigeria’s economy is projected to rebound by 2.4 percent in 2021.  What are the risks to these growth projections?

And also, one more question from him, The Fund has talked about Nigeria removing fuel subsidy and raising tax revenues.  Both has been done by the government, what next should be done by the Nigerian government?  Thank you.

MR. SELASSIE:  Thanks.  So, Nigeria very much falls into the category of countries that are going to be hit the hardest as a result of the outbreak of the pandemic, plus the sharp decline in oil prices.

Already, their economy was contending with the decline in oil prices that we saw in 2015.  So, over and above that, of course, oil prices have declined further, complicating policy making environment.

I think the challenges are, really, well-known and articulated really well in the government’s economic growth and recovery plan.

So, for the medium-term, the challenge for Nigeria, we feel, is really prioritizing revenue mobilization.  The government has enough resources that it can devote, really, the infrastructure; building the network of universities, and public education entities, that Nigeria so badly needs.  So, that really is the number 1 medium-term priority.

So, the focus, we feel, has to be over the next 4 or 5 years to try and put Nigeria in a position where the Federal government has sufficient revenues to address the development spending needs the country has.

In the near-term, of course, no resource should be spared to be able to put the health crisis, the health threat, that Nigeria faces from the COVID-19 pandemic.  So, we see scope for more supportive policies.

In the fiscal side, Nigeria has requested for support under the rapid financing instrument.  So, this is a very quick dispersing resource that government can use to strengthen health spending to provide social protection to people.

There's also scope for having a monetary exchange rate policy framework that will be supportive of the fiscal stance.  So, we look for those policies to be adopted to support Nigeria put this crisis behind it.

MR. VILKAS:  Thank you.  We go to a little bit different question on the China and Africa angle.  And we have a question from Kemi Osukoya from Africa Bazar Magazine.  And the question goes about how do you think the pandemic will affect China/Africa relations in terms of financing and loans.  Thank you.

MR. SELASSIE:  So I think time will tell how this will play out.  My strong sense is that, you know, the relations between China and Africa really go a long way back, not just financial, but also exchange of, you know, know-how, policy advice that China's been providing to countries from the micro -- I mean, how to build better bridges and roads, you know, transfer of knowledge that happens when Chinese enterprises open factories in the region.  So I think those kind of exchanges are going to continue going forward.

China's the second largest economy.  It historically had very large surpluses that it has needed to invest.  And, of course, Africa is a very important and attractive business destination.  So I think those ties will continue, but will they change and could they take some time to revive to recent levels?  Possibly.  But I do over the medium term see those ties continuing and maybe even strengthening.

MR. VILKAS:  Thank you.  Now we go to a different country, Kenya, and David Herbling from Bloomberg, he's asking about when is the board meeting to consider Kenya's request for emergency funding for COVID-19 is scheduled?  And then you also can add the Simon Ateba question from Today's News Africa on how the pandemic affecting this country?

MR. SELASSIE:  So Kenya, we are discussing with the authorities on how we can be of help, and as soon as we're able to finalize those discussions, we're happy to present that case to the Board. 

In recent weeks, we really have been moving requests extremely rapidly.  Just to cite one example, in the case of Madagascar, we received a request on March 19 and we had disbursed resources, you know, by April 4.  So we are moving requests as rapidly as possible, so just a matter of having the discussions that we need to have with the Kenyan authorities, and as soon as those are finalized we can go to the board relatively quickly.

Second question was?

MR. VILKAS:  It was on the pandemic impact for Kenya.

MR. SELASSIE:  Yes, I mean I think, again, Kenya, because it relies significantly on tourism, exports, you know, things like flowers to Europe, it's going to be impacted, you know, quite sharply, quite adversely by the pandemic.  And many of the policy discussions, the policy recommendations that I applied earlier will be important to strengthen the Kenyan's economy resilience to this crisis.

MR. VILKAS:  Thank you.  A question on Congo from Laura Gardner from Debt DebtWire.  And she would like to know the latest related to the Republic of Congo.  Have all traders and SNPC reached a debt agreement that is satisfactory to the IMF?  And if not, what's the timeline from them?  And she just wants updated information on the latest IMF and Congo relations.

MR. SELASSIE:  So, you know, with Republic of Congo, we, of course, had agreed on a program and disbursed some funds to support the country, but the debt level needs to be brought back to a sustainable level.  And this is not so much to please the IMF, but really to avoid the burden of adjustment falling on the people of Congo.  This burden of adjustment needs to be shared by the creditors also who extended those loans.  So we are awaiting the outcome of those discussions and as far as I'm aware, there's been no agreement to date.

MR. VILKAS:  From the same journalist, a question on South Africa, and she would like to know about the IMF financing discussions.  Are there any financing discussions being held with South African government?  Thank you.

MR. SELASSIE:  There are no discussions on financing with South African government.  You know, South Africa has always had pretty good international capital access.  Over and above that though, the country's, you know, big strength is, of course, the fact that it has very deep and liquid domestic capital markets.  Relative to most emerging market countries, actually, it generates its financing need for the government largely domestically and its own currencies.  So that is really a major source of strength that South Africa has.

Of course, debt levels have been going up and, you know, the access to international markets right now has been disrupted for a broad suite of countries.  But I think the resilience that South Africa has should see it through a while, subject to policies, of course, being recalibrated to take into account medium term growth and sustainability considerations as soon as this crisis is behind us.

MR. VILKAS:  Thank you.  We have a question of IMF assistance and different tools that we are applying there.  And it is from Prinesha Naidoo from Bloomberg News. Thank you for submitting the questions on line.  He is asking, the IMF will provide 11 billion to 32 countries in the region.  Is this part of that 100 billion emergency assistance, and does it include the debt relief announced this week, or is a separate provision?

MR. SELASSIE:  So, indeed, it is part of the -- you know, a lot of the financing that we are providing is through rapid disbursing facility.  For countries that are eligible, we provide this resource at zero interest and payable over ten years.  And, therefore, countries above that cutoff also is fairly low interest rate.  So the 11 1/2 number that I mentioned I, indeed, the sum that we're providing through new financing and debt relief to the tune of around $300 million dollars, I believe, for the remainder of this year that would due to be repaid to The Fund.

MR. VILKAS:  Thank you very much.  Still a question on debt from Eleni Giokos CNN international.  So she's asking, many countries have issueD Eurobonds over the last few years.  That debt will be unsustainable, she says.  What is your message to other bond holders and creditors?  While IMF is able to offer debt relief should other creditors do the same?  Are you at all worried about the defaults?

MR. SELASSIE:  So, you know, debt sustainability, first and foremost, has to be undertaken on a country by country basis.  You know, you don't do debt sustainability assessments continent-wide.  As well, of course, really is important to note that this assessment various from country to country.

What is true is that going into the crisis, the region had elevated debt level, many countries had elevated debt levels, and the crisis, the affect this is going to have on growth, on fiscal accounts is going to see debt levels rise further for many countries across the region. 

Which is why, kind of, we were very proactive in indicating that any debt relief that official bilateral creditors could provide would give countries room, at this exceptional time, to be able to devote resources that would otherwise go to servicing this debt to be devoted to address really pressing health and other spending needs.

We're very happy that this is being taken on by the G-20 and discussions are underway. And happier still that private sector creditors are also considering such relief to countries that are being most impacted.  You know, again, these are exception times.  Really, I cannot express how significant the threat to the region is, as elsewhere really.  So whatever support the international community can provide to give countries room to maneuver at this difficult time I think is welcome.

And it's also with that frame of mind that we have done what we can with the CCRT and the debt relief that we announced earlier this week.

MR. VILKAS:  As we are pressed by time, I think we're going to take one or two last questions and wrap us this press briefing.  So now is a question also submitted online on Mozambique.  And this question comes from Mario Batista from Lusa News Agency  So he's asking, why is a prediction unchanged from last year forecasting 2.2 growth?  So he just wants to know about the latest figure for Mozambique.

And then he asks, why doesn't the IMF support a debt pardon from the bond creditors?  IMF supports only the official creditors, but why not private investors?  I think he just wants to know what the latest discussions on IMF and Mozambique on this.

MR. SELASSIE:  Okay.  So in the case of Mozambique, prior to the outbreak of the pandemic, we were actually in discussion on the medium term program that the government had requested to be able to support the country, but those discussions were likely to take, you know, a few months.  So when the pandemic hit, what we have done is to switch to our rapid disbursing facility, rapid credit facility.  And we're holding discussions under that, and we'll be publishing the outcome of our discussion projections in the next couple of weeks, once we've processed that request.

Of course, before proceeding with lending to Mozambique, we have to ascertain that debt is sustainable.  And that is, of course, a factor that we will take into account in our discussions with the government in the coming days.

MR. VILKAS:  And the last question will be on Ghana, so a general question.  Just a comment on how this pandemic will affect the Ghanaian economy.

MR. SELASSIE:  Again, you know, Ghana's economy was growing robustly before the pandemic.  You know, macroeconomic health of the economy had been restored, inflation trending downwards.  A lot of the issues in the banking sector had been addressed, and fiscal accounts were, by and large, you know, under control. 

So this pandemic really comes at a very difficult time for the economy as it was trying to move forward after, you know, the last five, six years of macroeconomic pressures.  So it will have abetting on growth.  It will impact the fiscal accounts also.

But, you know, Ghana has been through a lot.  And, really, as elsewhere in the region, it will also put this behind it.  And, you know, I'm hopeful it's a resilient economy, a resilient country.  And I think, you know, we're providing some support to allow the government to be -- to have it support the fiscal stance.  And I'm sure that in the coming years the economy will recover from this.

MR. VILKAS:  Thank you very much.  Thank you very much for taking all these questions and presenting the main outcome, the main result of the regional economic outlook of Sub Saharan Africa.  We have still some press briefings lined up for you, so thank you for watching and thank you for submitting the questions online. 

Thank you one more time and stay safe.

MR. SELASSIE:  Stay safe.