Transcript

Press Briefing: Regional Economic Outlook for Sub-Saharan Africa

October 14, 2022

SPEAKERS:

ABEBE AEMRO SELASSIE

Director, African Department

International Monetary Fund

TATIANA MOSSOT

Senior Communications Officer

International Monetary Fund

MS. MOSSOT: Good morning, everyone. I know it's a bit early here in Washington, D.C., but good afternoon, or even good evening, to those who are connected from Africa and around the world. We are pleased to welcome you for this back-in-person release of the regional economic outlook for Sub-Saharan Africa, and I'm pleased to introduce to you the IMF's Africa Director Abebe Aemro Selassie, and he is to tell us more about Sub-Saharan Africa being on the edge. The floor is yours, Abebe.

MR. SELASSIE: Thank you, Tatiana. Very good morning to everybody. Let me begin thanking you for joining us this morning for the release of our regional economic outlook for Sub-Saharan Africa. I think about six months ago, as the world was coming to grips with Russia's invasion of Ukraine, we warned of uncertain times ahead, with risks tilted to the downside. Sad to say that many of those risks have now materialized for countries in Sub-Saharan Africa. Global inflation of course, has turned out to be higher and more persistent than expected, prompting a cost-of-living squeeze for many households, for most households, and a general tightening of monetary policy conditions worldwide. In addition, the sharp increase in global commodity prices has been felt very significantly in the region, even has countries were recovering from the effects of the COVID pandemic.

In this context, and before taking your questions, I would like to touch on a few of the points that we highlight on the regional economic outlook. As we mentioned in April, the region showed some welcome signs of recovery towards the end of 2021 as the worst of the pandemic eased. But that recovery has been interrupted. We expect growth to slow sharply this year from 4.7 percent in 2021 to 3.6 percent this year as the worldwide slowdowns, tighter global financial conditions, and volatile commodity prices spill into a region already wary from a prolonged pandemic.

Looking ahead, growth is expected to remain subdued next year at around 3.7 percent in 2023. And surprisingly, however, this outlook, of course, defers across the region, depending on country circumstances. It's not only that, oil exporters, because they stand to gain from higher oil prices, are expected to grow this year by around 3.3 percent, up from 3 percent last year. But most other countries will not be as fortunate, specifically countries which, are also resource-intense exporters, even if not oil, are only expected to grow by 3.1 percent this year, down from 5.1 percent last year. And the region's economies with much more diversified export structures, which have been extremely resilient for the last decade or so, are expected to see a significant slowdown in growth, to only 4.6 percent this year, down from 6.4 percent last year.

Against this backdrop, and with limited options, many countries find themselves being pushed close to the edge. The most recent turmoil is just the latest in a series of shocks over the past few years, all of which have taken a toll on the region's policy space. Rising food and energy prices are striking at the region's most vulnerable. Public debt has reached almost 60 percent of GDP, leaving the region with debt levels last seen in the early 2000's. In fact, 19 of the region's 35 low-income countries are now at high risk of debt distress or in debt distress, and inflation rates have accelerated to levels not seen in about 15 years.

I think it's fair to say that this is perhaps the most challenging policy environment for countries in many, many years. Policymakers in the region will need to deal immediately with economic and humanitarian crisis caused by these multiple shocks, while also seeking to strengthen resilience to future shocks as best they can. Specifically, we emphasize four areas which require policy attention promptly. The first I think is -- at this time, the first priority has to be to tackle the surge in food insecurity that we've seen in the region, protecting the most vulnerable, with a focus on channeling scarce resources to support those in need is really, goes without saying is a very important priority at the moment.

Second, there's continued need for public financing firms, amid difficult funding conditions for countries. This would require sustained revenue mobilization, a tight focus on critical spending priorities, increasing efficiency wherever that's feasible, and where debts pressures are clearly indicating, pointing to sustainability issues, readily restructuring and reprofiling debt.

Third priority I think at this time is to contain inflation, cautiously but, steadily, keeping a hawkish eye on inflation rate by tightening monetary policy. This is all the more important because, [because]inflation hurts the most vulnerable most acutely.

And then lastly, I think reforms set the stage for high quality growth, the challenges caused by accelerating climate change are also very important.

As a final comment, I would like to stress how important it is for the region to be supported by the international community. We at the IMF are of course doing our part and stand ready to do even more. Let me stop here, Tatiana, and take your questions. Thanks.

MS. MOSSOT: Thank you. Thank you. So, we'll start with the room first, and then we'll go online. Berna Namata from The EastAfrican, please?

QUESTIONER: Thank you for the opportunity. I'm Berna Namata from the East African. My first question relates to debt levels across the region that we have seen rising sharply over the last decade. And now the IMF is cautioning that the risk of default is more likely. Could you shed more light on the debt burden, but also how this challenge can be tackled? Because we've seen before, even with a debt suspension initiative, some countries were reluctant, because they were worried about being downgraded?

The second question is in relation to the impact of the appreciating dollar on servicing debt, if you could shed more light on how this can be addressed going forward? Thank you.

MR. SELASSIE: Very good questions. So, just to be very clear, even before the pandemic, debt levels were rising in the region. And what the pandemic did, of course, was to exacerbate that problem for many countries in the region. And subsequent shocks have also made it more difficult, so debt levels have continued to trend upwards. But overall, debt picture remains quite varied across the region. While you have seen debt levels rising for all countries, the picture remains varied.

As I noted earlier, there are actual countries where, out of the 45, 46 Sub-Saharan African countries which are in debt distress right now, 7, 8, and yet others, debt is at high risk, we classify at high risk of debt distress. But there are many other countries where the situation is not as acute. So, what needs to be done to address the debt challenge depends on specific country circumstances. In many cases, what is required is sustaining the medium-term reforms that countries have already been embarking on. As I noted, doing, more revenue mobilization, improving spending efficiency, should be able to contain the debt challenge. But there are cases where clearly that's not going to be sufficient, and countries would benefit from reprofiling. So, in that case, I think moving very quickly to seek debt reprofiling will be very important. So, again, really, when you talk about debt as much as many policy areas, but particularly debt, it really depends on country-specific circumstances, and the calibration of policies and the outlook.

On the impact of the strong dollar, I mean, this goes back to one of the points I was trying to make earlier, in that what we've seen is a series of adverse exogenous and overlapping shocks that are weighing on the region's economic well-being. And, so, the strength of the dollar is one of those which is associated with, of course, the the efforts the Fund is making to address the inflation problem here, tightening monetary policy, which is leading to, the scarcity of dollars.

I think for most countries in the region, it's really the -- being shut out of markets, that is a bigger risk to, a bigger risk that threatens to compound the debt difficulties more than the appreciation of the dollar per se, okay, so we see that as a higher source of alarm. So, again, it is part of, as I said, very compounding nature of the multiple shocks that countries are being hit by now.

MS. MOSSOT: Thank you. Julian Pecquet from The Africa Report, you were raising your hand.

QUESTIONER: Yeah, thank you for taking my question. So, the new outlook released today, you look at several challenges, right, for Africa, food and security, rising inflation, volatile energy prices. I was hoping you could elaborate a little bit about how the continent is faring on all these issues, the reasons for optimism and pessimism. And specifically, we've had a week of meetings now, you've met with a number of Finance Ministers. Could you share some of what you're hearing from them, both their concerns and the reasons for optimism, any new ideas they're putting forward, and any new commitments for mature countries, are you happy with you're hearing on, support for development financing, support for climate action, et cetera? Thank you.

MR. SELASSIE: Thank you. So, I think we need to distinguish between, kind of, the very short-term macroeconomic picture versus what's, happening in the private sector and other parts of the economy. So, I would say that the macroeconomic picture right now is very, very dark, very difficult one, for most countries. At the same time, countries are, from the conversations that we're having with policymakers this week. I mean, there's no people are taking it and moving aggressively forward to try and address it, seeking external assistance, more concessional financing, given the difficulty and, , tapping markets abroad, and of course also considering a whole range of domestic reforms. So, policymakers recognize how difficult the environment is, and I have no doubts that they will rise to the challenge.

And increasingly I think you’re seeing conversation is, what’s good is that there’s recognition of the very difficult macroeconomic environment and that there is a need to address the challenges head on.

I think where, conversations get a big darker and where people despair, really, must do a bit more about, just how badly vulnerable households, the urban poor, in particular, being impacted and squeezed by developments like there are sharp increase in food prices, those associated social and political challenges also, of course, come up in discussions. So, I think, that’s the area which policymakers are finding challenging and how quickly to rollout, social protection programs or whether they’re going to have to rely on more generalized subsidies and, how countries are tackling this varies from one part of the continent to the other.

So, but overall and over the medium term, I remain very optimistic about the region now. I think, as Kristalina has also been saying, it remains a form of dynamism. It’s a practical form of optimism, in my visits to the region, including just a couple of weeks ago to Niamey and Dakar. I think, you see incredible dynamism, particularly in the private sector, the informal sector. I have absolutely no doubt that, it’s really more about creating a platform for this potential to be realized then this difficult period will be overcome.

MS. MOSSOT: Thank you, Abebe. I think we are starting with countries’ focus. We’ll go quickly online to take one question from Rachel Savage from Reuters, and then we’ll come back to the room. Rachel Savage, are you online with us?

QUESTIONER: Thank you so much, everybody. Actually, if I may ask two questions, I’d be really grateful. So, Janet Yellen said, earlier this week, that China has, in some cases, argued it would not take part in debt relief unless the IMF or World Bank also took a head cut. Has this happened in any cases in Africa and, if so, which countries? And then, secondly, Chad’s official creditor said overnight that it thinks Chad no longer needs debt relief while oil prices are at their current levels. What is Abebe’s reaction to the statement by Chad’s creditors and whether it does or does not need debt relief now? Thank you.

MR. SELASSIE: Thanks. Let me start with the question on Chad. So, Chad is in an extremely, extremely difficult situation now. I was there in May, and really is what was heart wrenching to see how the country’s been impacted by the pandemic and an awful drought last year which has driven the country really to the edge.

In these circumstances, the delay by Chad’s creditors in approving the much-needed debt relief has been very problematic. From the IMF side, we have an arrangement with Chad where we’ve provided some disbursements and are hoping to provide even more disbursement, but we want to make sure that the resources we provide will go to support Chad rather than address an unsustainable debt situation.

Now, it is true that higher oil prices have stand to benefit Chad in the coming months and years but, I think, the benefits of these higher oil prices should accrue as much to the Chadian people as much as its creditors; and, so, the debt relief for Chad remains a very important component of how the country can be helped to have a strong recovery in the coming months and years.

On the question about China’s position in terms of providing debt relief. I mean, in recent years, I think, programs that come to mind where debt relief has been needed from China to help bring debt to a sustainable position have been, Angola, which China provided some [inaudible] profiling and, more recently, Zambia; and in both those cases, the required debt relief has been provided without, by China. So, I wasn’t sure what the context in which Secretary Yellen made the comments are. Thanks.

MS. MOSSOT: Thank you. We’ll stay online with Leonard Dossou from Benin. Leonard, are you with us?

I can hear you. The African Director, please.

QUESTIONER: Thank you, Mr. Selassie. My question is this. Since May 1, 2022, the IMF has created a trust fund for Resilience and Sustainability Trust (RST). So, which African countries have benefited from this newly created fund and what are the effects on their economies? And my second question regards the rise of interest rates by central banks everywhere to curve inflation. At this pace, don’t you think that the effects might be catastrophic next year with this rise in interest rates to combat inflation? There’s another concern. A few days ago, an IMF team came to Benin to assess the situation in [inaudible]. What do you think [of the assessment] of Benin’s economy? What are the weak points of Benin’s economy?

MR. SELASSIE: The first question on how the resources that have been rechanneled towards the Resilience Sustainability Trust will be used. I’m very happy to announce that, Rwanda, we’ve just reached agreement with Rwanda on a program that can be supported by resources from the Resilience Sustainability Trust. This is a first in the region and the third, globally, after Barbados and Costa Rica.

I think, again this is, makes me proud that this institution has been one of the main sources of incremental financing to help our countries have more fiscal space to address all of the effects that climate change is having on countries in the region and, this, I think, is just a start and we hope that we can reach more agreement with countries in the coming year.

Honestly, right now, the constraint is a little bit more, not having the bandwidth. This is a new facility that we’ve just created. We’re trying to get all of the skills needed to help governments put in place the required reforms to address all of the issues that arise with climate change. We’re working in partnership with the World Bank and other entities, and it’s just a little bit more of matter of scaling up, and we hope to have more such facilities and more such programs in the coming months in the region, including, at least, one other discussion on which is about to start very shortly.

On the impact of tighter monetary policy, in particular, higher interest rates on countries. I mean, I think, as I stressed earlier, inflation which, really, for the last 15, 18 years has not been a big issue in the region has now become a matter of concern in an increasing number of countries. There are quite a few countries where it’s, well over double digits, 25, 30 percent; and in many others, also, it’s been increasing mainly as a result of the impact of imported food and fuel prices and needs to be nipped in the bud.

Again, I would stress that, given how most vulnerable households have very limited means to escape to protect themselves from inflation, inflation is something that has the most vulnerable, more than other elements of society. So, addressing this inflation problem is important. Of course, it entails a little bit of, it has some tradeoffs. It’s going to have some effect on growth, on credit extension to the economy but, I think, as always, there’s a tradeoff and, I think, in general, higher inflation is more harmful as we all too often seen in our countries in the past.

Finally, on Benin and our assessment of the economic situation. I think Benin is a very positive story in terms of economic performance of recent years. Growth has been doing really very well. Macroeconomic policy calibration has also been very stronger in our assessment. Particularly, kind of the strong efforts that the government has been making to mobilize more tax revenues, I think, is commendable.

In terms of challenges going forward, I think, continuing to diversify the economy, as elsewhere, remains a very important priority and we’ll continue to work with the government on that.

MS. MOSSOT: Thank you. We’ll take a quick one again from Kenya, and then we’ll go to you, Simon, please. So, online with us, we have Julians Amboko. Are you with us, Julian?

QUESTIONER: Yes, I am.

MS. MOSSOT: Good afternoon,

QUESTIONER: Good afternoon, to you. Can I go straight to the question?

MS. MOSSOT: Yes, sure.

QUESTIONER: Thank you so much. Thank you Abebe. So, Kenya’s new President, that is William Ruto, indicated in his address to the UN General Assembly that he is pushing for debt relief for frontier markets such as Kenya. Has the IMF received any such request from the Kenyan government formally, and do you see a window for this accommodation? Thank you.

MR. SELASSIE: No, we have not received such a request from the government of Kenya, and I think it’s really important for me to explain here that, the IMF is akin to a lender of last [resort] to countries. The resources we have are revolving resources that, we need to use to help countries, from countries with stronger position, countries that are in weaker positions; and the best help we can provide countries like Kenya is providing financing when access to financing elsewhere is more problematic. We have a strongly performing program with Kenya and, of course, we hope that we continue with advancement of the reforms that the country needs; and should more financing be needed we, of course, will look at that, but there’s no request for debt relief from Kenya.

MS. MOSSOT: Thank you. Simon?

QUESTIONER: Okay. My name is Simon Ateba with Today News Africa in Washington, D.C. Over the past five days, we’ve heard that the global economy is almost going to hell, losing $4 trillion between now and 2026, and the African economic outlook is also not very positive. To use your words, you say that inflation is raging out of control in ways we have not seen in the past 15 years, and we just cut the growth for Africa from 4.7 percent last year to 3.6 percent this year, and even next year is still subdued, as you say.

With all those things, I was wondering if you could go into specific countries and cite some examples of bright spot that you can still see in Africa. In Nigeria, for instance, South Africa, Kenya, Angola, do you see anything that is being well done as examples, , that should be so still, and finally, on that, the U.S. national debt has hit over $1 trillion, but the U.S. economy is doing well. So that doesn’t seem to be a bad thing. I was wondering if you could talk about that because they say that we need more money in Africa for investment, but at the same time, you still need to confirm that. Thank you.

MR. SELASSIE: Thank you. To be very clear, I did not say inflation was raging out of control, nor as dark as the picture you are painting in other areas. So just to be clear, I tried to note this in response to an earlier question also. As I said, I think it’s important to distinguish between the macroeconomic picture that we are discussing here and our report covers, and other things that are going on in our continent. I think it’s fair to say that a lot of innovation continues to take place, a lot of areas continue to be full of [diamonds], and like I said earlier, a lot of things that are going on in foreign sector that, we really do not capture in a lot of our statistics. But all this given, I think this is a more difficult time than, five, eight years ago when the region was possible to see very strong macroeconomic outcomes, as well as strong and vibrant private sector, it’s not unique to Africa, but difficult current juncture. I think the scale of the shocks that have hit our countries are global shocks, and the multiplicity of them is, of course, harming our countries which have not just, , a conjunctional, , challenge at the moment, but also goad a development agenda to try and implement them. So that’s what makes it, compounds the difficulty.

Lastly, you mentioned the U.S. has even more debt than Africa, so why can’t Africa borrow? I think, it’s important to relate debt to service and capacity.

So, the pressure in our region comes from relatively low tax effort, so if we, wherever a country has, significant revenue mobilization, then it can, service a bigger share of debt, and I think, going back -- this is a thing that we brought out in the regional economic outlook again and again.

The big challenge with debt is not the level, but the pressures on servicing that arises at moments like this. And in our region, what we’ve seen over the years has been huge effort to do investment in health, in education, and infrastructure, but not as much effort to collect the rates of return from all of this investment through tax system, and that’s why this is an important challenge, and if we want to continue to invest more, we need to also make sure that we collect taxes.

MS. MOSSOT: Thank you. I think we’ll go to Ghana. We received so many Ghanian journalists and questions. George Wiafe from Joy FM Ghana?

QUESTIONER: Thank you so much, Abebe. So long that that’s issue, I mean, what is the approach that the Fund is trying to adopt to end the situation in Africa and Ghana, and all the rest? In one breath we first talk about pushing forward, debt relief, debt consolidation, and all the rest, but the Fund engaged in the Paris Club apart from China to look at some debt relief for these countries, or are you pushing the restructuring approach, which comes as some huge shock for some countries, and some countries have struggled to build confidence in the financial space. There are issues about the impact on pension funds, borrowing, bonds, and treasury bonds, as well. What is the fund committed to in dealing with this debt issue? Is it the relief approach or the restructuring approach and is the IMF itself committed to taking that lead in a relief program for these African countries, like Ghana’s, for the first one?

The second one on the inflation: in one breath I get the Fund pushing for some hikes in policy to check inflation, and a breath, we should careful, as well. I struggle to get the Fund to push in dealing with inflation issues in Ghana. What do you think is the best approach? Is it a marginal hike, an aggressive hike, or rather it should be a fiscal issue? Thank you.

MR. SELASSIE: I don’t know if you want me to answer this in a general context or Ghana-specific context, so just, I think, in terms of how we approach debt sustainability, how we think about debt. I think, first, why don’t we clear off the debt? Again, I go back to the earlier question. When debt becomes unsustainable, it’s unfair for a country to continue to repay it because it’s going to cause all kinds of economic difficulties, as well as use resources that could otherwise be used elsewhere, and ultimately, when debt is unsustainable, it becomes unpayable.

So, it’s an important element of the work we do with countries is to help make sure that we don’t get debt in the first place, and once it’s clear that there is debt sustainable [inaudible) is trying to find a way how it can be addressed. The way in which it can be addressed, however, is country-specific, and depends on the particularities of a country, the composition of its creditors, the scope that is to do reforms, so there’s a whole bunch of things that can be done, but above all, the lead has to be taken by the government, okay, in terms of what kind of balance between various taxes, various creditors, the government wants to take, so it’s a combination of all of those things that result in the strategy that a country will pursue to address its debt vulnerabilities, so difficult to say that the IMF approach is A or B or C because a lot depends on country-specific circumstances.

On inflation, I mean, again, there are always trade-offs when you’re doing, policy calibration, and so in our regional economic outlook, we are very careful to flag that there are some countries where inflation has clearly been driven more by domestic factors than exogenous factors. I think Ghana would fall in that camp. But there are also quite a lot of other countries where the inflation we are seeing is more important inflation, so the scope and the space and the ability of monetary policy to address that is limited. So again, it depends on country-specific circumstances, and on time.

Then lastly, particularly with monetary policy, above everything else, it is an area where calibration of monetary policy must be always agile. Why? Because the conditions that affect inflation are always changing. Exchange rates are moving, commodity prices are moving, so it’s an area where, calibration must be very, looked at again and again and again, , as the months proceed. That’s why, Central Bank can say you have to be forward-looking, data-driven, so our advice is also, very much, subject to those considerations.

MS. MOSSOT: One last question on Ghana, please, and then we’ll go to Nigeria, and then we’ll go to Senegal too. For sure, we’ll do quickly. One more on Ghana, please?

QUESTIONER: Thank you very much. My name is Manoyi. I know very well that the negotiations are ongoing between the Fund and Ghana for a package. I would like to know whether any conditionalities have been discussed yet, and Ghanian people would like to know when are we getting the package? We really need it.

MR. SELASSIE: Okay. Indeed, we are extremely, we try to be extremely responsive. I think within less than a week, for sure, with the government asking for, to engage in program discussions we had. We fielded a mission back in July, I think it was, and we agreed on a road map, in which things could move, the first step of which was the government wanting to share with us its economic reform plan, so we just had a mission to discuss the key elements of the reform plan which the government has just shared with us, and we are now assessing that and having further discussion on the plan.

So, we’re at the stage where, discussions are, proceeding well, I would say, and much will depend on how quickly this reform plan can be fleshed out and, start implementing for us to move forward with a program, so that’s what we’re waiting for. Thank you.

MS. MOSSOT: To be free from Ghana quickly, and then we move to Nigeria.

QUESTIONER: Yes. I just want to know first of all, I'm sure you've got access to the questions I sent you, but I don't have the internet, so that's the difficulty. I know that in Sri Lanka, for instance, one of the delays for the build out program is because of the debt restructuring. Zambia accessed the program during the Covid period which helped them to also cite their debt restructuring. I want to know if it is a perquisite for Ghana also to get this program going. And also, there's been a lot of talk about their impact of a domestic debt restructuring. It's impacts on [pension] funds and what have you. Do you foresee this impact?

MR. SELASSIE: So, to be clear, I mean, an important element of our engagement with Ghana is going to be, but with any country honestly, is going to be that making sure that when we provide resources, when we provide financing, the financing goes to help the country, goes to help its people. And if debt is unsustainable, the extent to which that can happen is, of course, very circumscribed. So, part of the work that's ongoing right now is to assess what exactly the debt sustainability situation is, and how the Government would like to address that once the work has been completed. So, we are waiting for that assessment.

I can tell you that we are doing our utmost, and we will do our utmost to make sure that we can provide support to Ghana as speedily as possible. So, that's why, as I noted earlier, within a few days of the Government requesting support, we fielded a mission, and we will do our utmost to avoid any kind of delay in terms of how we can support. But there are important reforms that have to be articulated very clearly, and important initiatives also that have to be taken in terms of how the program can be financed. And then we'll move forward.

MS. MOSSOT: Before going to Senegal, we'll go to Nigeria. If there are any Nigerian questions, please.

QUESTIONER: My name is Opi Najima from this day in Nigeria. I would like to get your thoughts on what you think about the massive flood, and we've seen in some states in Nigeria how does that affect the outlook of the country generally? And is there a relief package, subnational, that has that been affected by this massive flood and you can get from the IMF? Also, the new food shock window. How can Nigeria assess these other conditions? What are the conditionalities? What do we need to do to assess that forum? Thank you.

MR. SELASSIE: Thank you. Again, if we keep talking about, as an institution about climate change, it's exactly because of what you're highlighting now, right. It's not a theoretic thing for our countries, for our region, but something that's impacting people in real time as we are speaking. So, we are very conscious of that. And how we can help as an institution is twofold. The advocacy we continue to make about every country in the world trying to do its utmost to address to reduce the footprint that they have on climate change to not contribute to more global warming. We continue that advocacy. And then, of course, using our policy advice and financing role to help countries as they're being impacted by this. The Nigerian Government has not asked for support to help address this impact. But there are a couple of options, for example, for these kinds of effects which we've used in Mozambique and other cases in the past when flooding and other climatic events have affected people. Emergency financing is one option. And, of course, either is resorting to regular financing that we provide.

Food Shock Window, there again, I think it's a testament to how agile, how nimble we've tried to be in the face of all of these shocks at the IMF that we created this Food Shock Window. It increases the number of instruments that we have to engage with the countries. So, in the region, how we intend to use this is quite a few countries are eligible. So, for those countries that don't have an existing program engagement, this is the window through which we can provide support very quickly to address the pressures that countries are facing from higher food prices. And in many other cases, we have existing engagement program type relationship. In those cases, what we do is we will augment those programs to provide additional resources to deal for the food shock and other pressures that countries are facing at the moment.

MS. MOSSOT: So, we'll go online quickly before going then back. We are trying to cover everybody and then we'll go to Mozambique. We received a question about South Africa from Hilary Joffe, Business Day. She's asking if you could give your views on the economic outlook for South Africa and your recommendations for the Government.

MR. SELASSIE: I think our assessment of the outlook is now a little bit behind the curve on account of the problems with the electricity production that South Africa has encountered of late. But stepping back, I think what we see is a country that again, has been impacted quite a bit by, of course, global economic conditions. The pressures on financial markets, and this has been compounded by more internal challenges that South Africa is facing. And this is all a little bit, I would say kind of really a bit unfortunate because with higher commodity prices that we're seeing globally, this would've been a moment where if South Africa was in a better position, that's what could have exploited and benefited quite a bit from this. So, again in terms of the policy priorities, it remains to make sure that the supply side of the economy continues to be as robust and healthy as possible. The calibration of macroeconomic policies remains as sound as anywhere else.

MS. MOSSOT: Well, staying the region with a question from Mozambique, please.

QUESTIONER: Hello. My name Juan Santarita from Voice of America. I have a question related to Mozambique. There's been a report that under an agreement to be approved in December that the Mozambique Government will have to cut its civil service salaries by 17 percent by 2026. Is this true?

MR. SELASSIE: Not at the time I'm aware of, no.

MS. MOSSOT: Okay. So, let's go to Senegal now, please.

QUESTIONER: But just to clarify, there's an agreement that's going be approved by Board in December?

MR. SELASSIE: There's a program review that will be approved. Yeah, but there is no cut in wages that I'm aware of.

QUESTIONER: Yes. Hi, my name is Elhaj Dosan -- the question is it seems like with the inflation going on and crisis war between Russia and Ukraine and it seemed like that Francophone countries are more in a way in trouble when they come around to that. We would like to know how they're doing, especially in the case of Senegal. Thank you.

MR. SELASSIE: Thanks. So, countries in the two monetary unions, okay, as a result of the reflecting the exchange rate fix that they have, have been a bit more insulated in terms of the inflation pressure than countries with more flexible exchange rates, to some degree I should say. But even there, we're seeing inflation rates in both the WAEMU and CEMAC, much more elevated than we've seen in more than a decade, I would say. So, we're very, very, I think very cognizant, I think of the pressures that people are under.

And exactly because you don't have the exchange rate flexibility to insulate competitiveness. I think there's quite an important premium and going forward, making sure that there are reforms that will help sustain activity, that will help make sure that there is no erosion in competitiveness. I think we will facilitate stronger private sector growth is all going to be very important.

In the immediate term as elsewhere, I think the priority has to be, of course, doing more social protection to try and help the vulnerable households that are being impacted from the surging prices for food and fuel. So, there's some discussion around that that's taking place. And I was in Dakar a few weeks ago to discuss with ministers how best to calibrate policies, how much flexibility would be appropriate, how to continue striking a balance between avoiding that sustainability problems while creating fiscal space in the near term. So, we continue to do policy advice and, of course, provide quite a financing to countries in the region, and will continue to remain in that vein going forward.

MS. MOSSOT: We'll take a last question on Nigeria, please. Ladies?

QUESTIONER: Thank you for taking my question. My name is BUKOLA IDOWU for Leadership Newspaper in Nigeria. I know a lot has been said about support for the vulnerable during this meeting. And I would like you to tell us more of what you think Nigeria has done so far, how you think Nigeria has fed so far in support for the vulnerable? And considering the fact that poverty level in the region is going to rise with the food shock that is coming up, what do you think that should be done in supporting the vulnerable?

MR. SELASSIE: I'll give you a broad answer, which is I think again, Nigeria could have benefited even more if there was a more targeted way of supporting people, rather than the generalized fuel subsidies that are being used at the moment. So, oil prices have gone up quite significantly, but the amount of resources that are accruing to the budget, to the external accounts have been very circumscribed as a result of the very generalized subsidy that that the country has. I think we've been long on record flagging that fuel subsidies like this generalized subsidies like this one are extremely costly. Second, they're extremely regressive, so they support families and households, richer that are richer more than they do for poor households.

So, a better policy in our view would be to find a way to redirect these resources to the most vulnerable households and supplement that with investments in health and education that Nigeria so desperately needs. Now, when you have a big surge in prices, it's understandable that governments would want to do something to smooth the increase in prices, including through subsidies. But those should be temporary and phased out and communicated in a very clear way.

Fundamentally, ultimately, it's, of course, a domestic, deeply domestic, deeply political decision for Nigeria. And if that's how the country decides how resources should be used, that's how it will be used. But our role here is really to flag kind of that there are better options that could be done where economic efficiency could be facilitated in Nigeria.

MS. MOSSOT: Thank You. As we are running late, we take the very last question of this press briefing online. Ristel Tchounand, please, from La Tribune Afrique.

QUESTIONER: Okay, thank you. I will ask my question in French.

MR. SELASIE: Thank you so much. Two points I would like to make. I think first one is like, particularly related to the Sahel, I think I cannot think of a region the Sahel, the Horn that's facing all of the cumulative challenges that we've been talking about today, or climatic change, of course, security challenges, as well as droughts and particularly difficult agriculture harvest over the last year, year and a half, which really have impacted the region acutely. And I'm talking here about just the developments over the last year, but even preceding that, of course, the region has been impacted perhaps more acutely than elsewhere by changing climate conditions and very erratic weather patterns that we've seen. And really, it's countries like this that have motivated us to get into the work that we're doing as an institution on climate change. We are very, very cognizant of the need for the international community to do its part, to address these incredible challenges that are impacting these most vulnerable poorest of countries. And it's almost exactly why we've put so much effort into the creation of the Resilience and Sustainability Trust in record time and are beginning the process of rolling it out as quickly as possible into the region. I would just in the last six months I've been in Ndjamena, I've been in Niamey, all with the view to see how we can further support countries with the resources that we have through our regular facilities, but also the new ones.

So, I think at the IMF, it's fair to say that we have done our part at least up to now, and we'll continue to do more in terms of making sure that we can help countries deal with climate change. But I think this is something that extends well beyond the IMF, and really, we look forward to the COP27 in Sharm El-Sheikh in a month, I guess to be one of the occasions in which the international community comes up with much, much more resources to support the region, which is being impacted the most despite having contributed the least by to climate change. Thank you.

MS. MOSSOT: Any last thoughts before we close this press briefing?

MR. SELASSIE: Again, I think one point I would like to reiterate is, and a theme of one of the seminars here that we had earlier this week is the importance of the social contract domestically within countries at the moment. So, the most vulnerable households need to be supported at a difficult time like this. So, that's the least that governments do. But sitting where I do in this building, I think I'm always also very cognizant that there is an international social contract. One where it's stronger countries where the international community also needs to do more for the most vulnerable countries. And I think this is one of those moments for everybody to step forward and support Sub-Saharan Africa like never before.

MS. MOSSOT: Thank you very much. I guess we highlighted some of the major issues of the Sub-Saharan Africa region. You can also connect to www.imf.org or contact us at media relations because I know you have more questions. Thank you very much, Mr. Abebe Aemro Selassie, and hope to see you during the Spring Meetings.