This year’s slump in commodity prices and the end of a flood of cheap dollars has pegged back African growth to its weakest in six years and things could get worse if the global economy continues to flounder, the IMF said on Tuesday.
In its latest African Economic Outlook, entitled “Dealing with the Gathering Clouds”, the Fund said the poorest continent was likely to grow 3.75 percent this year and 4.25 percent next, a big drop from the years before and after the 2008/2009 financial crisis.
“The strong growth momentum evident in the region in recent years has dissipated,” the report said. “With the possibility that the external environment might turn even less favourable, risks to this outlook remain on the downside.”
Hardest-hit have been sub-Sahara’s eight oil exporters – led by top producers Nigeria and Angola – although others such as Ghana, Zambia and South Africa were also suffering from weak minerals prices, power shortages and difficult financing conditions.
However, the Fund noted some bright spots, most notably Ivory Coast, which is scheduled to expand as much as 9 percent this year due to an investment boom that followed the end of a brief civil war in 2012.
This weekend’s overwhelmingly peaceful election, which President Alassane Ouattara – a former IMF official – is widely expected to win, has reinforced hopes Francophone Africa’s biggest economy has put its worst years behind it.
With commodities revenues forecast to remain depressed for several years, governments have to work quickly to diversify revene sources by improving domestic tax collection, said Antoinette Sayeh, head of the IMF’s Africa department.
“Mobilising more revenues is an urgent matter – as is being more exacting in choosing expenditure,” she told Reuters. “It’s a difficult patch, but we definitely think that countries can move out of the very difficult terrain and grow more robustly.”
Public debt levels have been rising, in part because of access since 2007 to international capital markets, and Sayeh said governments needed to be “very careful” in how they managed dollar financing to ensure it is invested wisely.
Some governments, such as Ghana, have been accused of frittering away Eurobond revenues on state salaries. Sayeh said Accra was doing “reasonably well” in its efforts to curb public spending under a $918 million IMF programme agreed in April.
Zambia, another country struggling with the rising cost of servicing dollar debt after a halving in the value of its currency this year, has so far chosen not to asked the IMF for financial assistance, Sayeh said.
“If Zambia feels that it can benefit from fund financial assistance, we stand ready to look at that,” she said.