IMF: SSA economies projected to rebound by 3.2% in 2021

The IMF has projected a rebound in Sub-Saharan Africa's growth at 3.2 per cent in 2021, 0.2 percentage points higher than the October forecast, according to their latest economic outlook. Abebe Aemro Selassie, Director of the African Department at the IMF, highlighted the performance of East African economies in this context. He mentioned that these economies are among the most diversified in the region, not solely reliant on a single commodity like oil or metals. The expectation is that due to their diversified economic base, East African countries are likely to perform better in terms of growth compared to the rest of the region. The IMF anticipates an aggregate growth of around five to five and a half percent for the five East African Community countries. However, Selassie emphasized caution regarding these projections, as they were made before the impact of the second wave of the pandemic, which has caused some attenuation in business activity. The IMF will be revisiting these projections in the coming weeks to account for the evolving situation. Despite the challenges faced last year with widespread closures, the IMF is optimistic about a rebound in these economies in 2021. Selassie acknowledged that the road ahead is not without obstacles, particularly concerning vaccine access and the ongoing impact of the pandemic. He likened the current situation for economies to 'three steps forward, two steps back,' highlighting the uncertainties and setbacks caused by the pandemic. Selassie addressed concerns about the rising debt levels in many Sub-Saharan African countries due to borrowing during the emergency phase of the pandemic. He explained the need to distinguish between short-term emergency measures and long-term debt sustainability. The IMF provided emergency financial support to many countries, including Kenya, to mitigate the economic impact of the pandemic. Selassie emphasized the importance of restoring economic stability and ensuring that the debt incurred can be repaid. Moving forward, he stressed the need for robust recovery efforts, increased revenue mobilization, and reduced reliance on deficit financing to maintain debt sustainability. The conversation then shifted to Kenya, the largest economy in the region, with Selassie addressing concerns about the country's borrowing from the IMF. He refuted claims of 'arm-twisting' and clarified that Kenya had requested financial support from the IMF to manage the economic challenges posed by the pandemic. Selassie highlighted Kenya's proactive efforts to balance the need for support with maintaining fiscal prudence. He underscored the importance of external financing for Kenya to fund its development agenda and sustain economic growth. Selassie emphasized that the IMF's assistance aims to provide affordable financing to prevent a contractionary fiscal stance that could impede economic recovery. In response to the characterization of the current situation as 'warlike,' Selassie acknowledged the unprecedented challenges faced by Sub-Saharan African countries amidst the pandemic. He described last year's shock as a 'brutal,' once-in-a-century event that severely impacted the region's less resilient economies. Selassie emphasized the need for a robust and immediate response to address the health and economic crises. He reassured that the IMF's support is tailored to help countries navigate through the emergency phase and pave the way for sustainable recovery and growth. Selassie's insights shed light on the complex economic landscape in Sub-Saharan Africa and the IMF's role in supporting countries to overcome the challenges posed by the pandemic.