Speech

Sub-Saharan Africa: Navigating A Long Pandemic

April 15, 2021

Good Morning!

Thank you all for joining us for the release of the April Regional Economic Outlook for Sub-Saharan Africa.

Before I come to our assessment of the economic outlook, challenges, and policy priorities, I want to take a moment to...

… reflect on the pandemic and health developments in the region.

Since our October 2020 Regional Economic Outlook, sub‑Saharan Africa has confronted a second wave of the coronavirus pandemic. This second wave outpaced the scale and speed of the first.

At the same time, we have seen a truly exceptional global effort to develop an effective vaccine. However, the process of manufacturing, procuring, and deploying vaccines is off to a slow and highly unequal start.

Some advanced economies have secured enough vaccine to cover their populations several times over. In contrast, many sub‑Saharan Africa countries are struggling to simply vaccinate essential frontline workers. Few countries in the region will achieve widespread vaccine availability before 2023.

With such scant access to vaccines, that leaves many countries in the region bracing for the risk of additional waves of infection.

This is not just a local or regional concern. Ensuring vaccine coverage for sub‑Saharan Africa is a global public good.

The international community needs to come together to avoid restrictions on the dissemination of vaccines or medical equipment, to ensure that multilateral facilities such as COVAX are fully funded, and to quickly redistribute any surplus vaccine doses from wealthy countries.

The economic and human costs for the region are truly unprecedented

We estimate that the regional economy contracted by ‑1.9 percent in 2020. While somewhat less severe than projected last October, this is still the worst outcome on record. Fortunately, the region will recover some ground this year and is projected to grow by 3.4 percent. Even so, per capita output is not expected to return to 2019 levels until after 2022.

This economic hardship has caused significant social dislocation. In many countries, per capita incomes will not return to pre-pandemic levels until 2025. The number of people living in extreme poverty in sub‑Saharan Africa is projected to have increased by more than 32 million. There has also been a tremendous ‘learning loss’ for young people. Students in the region have missed 67 days of instruction, more than four times the days missed by children in advanced economies.

This risks reversing years of progress, and the region falling behind the rest of the world.

The outlook for sub‑Saharan Africa is expected to diverge from the rest of the world, with constraints on policy space and vaccine rollout holding back the near-term recovery. While advanced economies have deployed extraordinary policy support that is now driving their recoveries, for most countries in sub‑Saharan Africa this is not an option.

As we’ve observed throughout the pandemic, the outlook is subject to greater-than-usual uncertainty. The main risk is that the region could face repeated COVID-19 episodes before vaccines become widely available. But there are a range of other factors—limited access to the external financing, political instability, domestic security, or climate events—that could jeopardize the recovery. More positively, faster‑than‑expected vaccine supply or rollout could boost the region’s near-term prospects.

That brings me to policies and the priorities for nurturing the recovery.

The immediate priority is to save lives. This will require more spending to strengthen local health systems and containment efforts, as well as to cover vaccine procurement and distribution. For most countries, the cost of vaccinating 60 percent of population will require increasing health spending by as much as 50 percent.

The next priority is to reinforce the recovery and unlock sub‑Saharan Africa’s growth potential. Bold and transformative reforms are therefore more urgent than ever. These include reforms to strengthen social protection systems, promote digitalization, improve transparency and governance, and mitigate climate change.

Delivering on these reforms, while overcoming the scarring from the crisis will require difficult policy choices. Countries will have to tighten their fiscal stance to address debt vulnerabilities and restore the health of public balance sheets—especially so for the seventeen countries in the region that are in debt distress or at high risk of it.

By pursuing actions to mobilize domestic revenue, prioritize essential spending, and more effectively manage public debt, policymakers can create the fiscal space needed to invest in the recovery.

But the region cannot do this alone, which brings me to my final point—the role of the international community and the crucial need for further support.

Along with the international community, the IMF moved swiftly to help cover some of the region’s emergency funding requirements. This included support via our emergency financing facilities, increased access under existing arrangements, and debt relief for the most vulnerable countries through the CCRT.

The G-20 Debt Service Suspension Initiative also delivered valuable breathing space for many countries in the region, alleviating debt service pressures in excess of $6½ billion from mid‑2020 to what is in the pipeline through mid‑2021. For countries where deeper relief may be needed, the G-20 Common Framework for Debt Treatment could provide a mechanism to tailor solutions to each economy’s circumstances.

However, much more is needed. To boost spending on the pandemic response, to maintain adequate reserves, and to accelerate the recovery to where the income gap with the rest of the world is closing rather than getting wider. To do this, countries in sub‑Saharan Africa will need additional external funding of around $425 billion over the next 5 years.

An SDR allocation by the IMF would be an important step, providing liquidity to most vulnerable sub-Saharan African countries.

However, meeting the region’s total needs will require significant contributions from all potential sources: private capital inflows; international financial institutions; debt-neutral support via ODA; debt relief; and capacity development to help countries effectively scale up development spending. We will discuss these issues at the forthcoming High-Level International Summit on Financing for Africa in May.

Thank you for your attention and I am happy to answer your questions.