IMF
EHIME ALEX, Lagos
The International Monetary Fund (IMF) has suggested that sub-Saharan Africa governments prop up local businesses, as the Covid-19 could reverse growth across the region.
According to a report by Commercial Risk Africa, IMF African department director who spoke at the launch of its spring forecast, Abebe Aemro Selassie said, “Unsurprisingly, the outlook this spring is tightly focused on the impact of the Covid-19 pandemic on the region, an unprecedented crisis that is threatening to reverse the region’s recent development and policy gains.
“The outlook in sub-Saharan Africa is expected to contract by 1.6% in 2020 and at worst in per capita terms, this would be higher still at close to 4%. This is the lowest growth number that we can find for the region going back at least to 1970.”
He furthered, “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, and 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, it is 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.”
Mr Selassie also warned: “Coupled with this, plummeting global demand will exacerbate the economic impact greatly by reducing demand for the region’s goods and services, tourism and remittance flows, while 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, he cautioned.
“As elsewhere, the region faces a synchronised and deep economic downturn with less diversified economies. Against this difficult backdrop, several urgent and decisive measures 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.”
Mr Selassie suggested, “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 are needed to support people whose livelihoods are being upended by the containment and mitigation measures governments have adopted. Where feasible, consideration also needs to be given to temporary and targeted support for hard-hit small and medium-scale enterprises.
“Critically, the ability of the countries to mount an adequate response will depend on assistance from the international community. This crisis is unprecedented and equally calls for bold and decisive support from the international community,” he added.