"The region's resilience is under severe test," said Abebe Aemro Selassie, Africa Director of the International Monetary Fund (IMF), when briefing journalists on the latest macroeconomic outlook for the southern Sahara on Friday. April 14. The Washington institution is concerned about a "significant tightening" of the means of financing available to African states. In combination, three major sources have contracted in recent years, in the context of the Covid-19 epidemic, the war in Ukraine and the global economic slowdown. Official development assistance, first, has fallen from around $53.7 billion in 2020 to $47.4 billion (€43.4 billion) in 2021, according to the IMF. A few days earlier, the Organization for Economic Co-operation and Development (OECD) had for its part reported a drop of nearly 8% in official aid to sub-Saharan Africa in 2022, to around 30 billion dollars.
Second source of financing affected: loans contracted with China, massive in the mid-2010s and in particular earmarked for infrastructure. They went from $9.1 billion in 2019 to $2.8 billion in 2021.
Finally, financial markets have become more expensive and more difficult to access since 2020. When several countries, including Ghana, resorted to them at the start of the pandemic, none of the "frontier" states - these are poor countries with an established financial market, but whose market capitalization and liquidity remain low. They represent two-thirds of the regional gross domestic product – have not been able to finance themselves on the markets since the spring of 2022. Among them, Kenya, a solid economy, tried to issue a billion dollar eurobond in June, before giving up due to excessive costs.
Less funding available means less social spending, on a continent where at least a third of the inhabitants live in extreme poverty according to World Bank criteria. “Many countries face tough decisions when it comes to investing in crucial sectors like health, education, infrastructure. This will not only affect them now, but also in the years to come,” Mr. Selassie insisted, welcoming that the IMF had, he said, “done its part” by providing more than 50 billion dollars in financing. between 2020 and 2022. "I have always said that this is Africa's century, but if action is not taken now to respond to this funding crunch, the region could be prevented from developing its potential", said he added, calling on governments to, in particular, consolidate public finances, adapt their monetary policy and contain galloping inflation.
Lack of resources
The current price hike has aggravated "at the worst time" the lack of resources, for States as well as for African households. In February, the median inflation rate in sub-Saharan Africa was around 10% – more than double compared to the start of the pandemic. In Nigeria, the continent's largest economy and largest population, the rise in food prices - from bread to yams, oils and vegetables - peaked at 24.5% in March, according to official figures. released Saturday, April 15. As a result, poverty and hunger are exploding on a regional scale. In October 2022, the IMF estimated that 123 million Africans faced severe food insecurity. Today there are 132 million.
Admittedly, inflation is set to slow this year. But this decline will not be immediately visible in some countries, notes the IMF, citing in particular the case of Cameroon or Ethiopia, which must end subsidies on fuel and food products.
For African states, the lack of funding, inflation and also the depreciation of currencies against the dollar amplify other already worrying crises. Starting with that of the external debt: not only are the maturities of these loans, generally contracted in greenbacks, more difficult to repay, but they cost more in local currency. Of the 35 low-income countries in the region, 19 are now considered over-indebted or at high risk. Debt represents 56% of sub-Saharan GDP, a level not reached since the debt crisis of the early 2000s.
A shortage of dollars
While some countries face "a solvency problem," which could sometimes require debt restructuring, others face "a liquidity problem" instead, Mr. Selassie noted. Many States are in fact facing a shortage of dollars and must increasingly draw on the reserves of their central bank. In 2022, Ghana, Ethiopia, Zimbabwe and even South Sudan had in front of them the equivalent of less than a month of imports, according to IMF data, an extremely low ratio.
In this difficult context, the institution forecasts average growth of 3.6% this year in sub-Saharan Africa (compared to 3.9% in 2022). The latter is characterized by very strong disparities: from 0.1% for South Africa, entangled in massive power cuts, up to 8.3% for Senegal, which is starting to export gas. Another characteristic, notes the IMF, is the preponderance of the public sector. "What we've seen over the last ten, fifteen years is growth much more influenced by government spending, investment in infrastructure, health, education. And we need a takeover (by) the private sector”, added the Ethiopian economist, insisting, despite the gloomy picture previously drawn, on the potential of the region, “probably the least exploited in the world”.
