Nigeria and other countries in Sub-Saharan Africa need to invest about $890 billion by 2023 to fully recover from the economic impact of the COVID-19 pandemic, according to the International Monetary Fund.
Abebe Selassie, Director of the African Department of the IMF, disclosed this in an article posted on the IMF website.
Selassie, in the article, titled: “Sub-Saharan Africa’s Difficult Road to Recovery,” and dated October 22, however, noted that even with support from the private sector and international institutions and bilateral donors, African countries might not be able to meet the funding requirements.
He said: “Sub-Saharan Africa faces additional financing needs of $890 billion through 2023. Private financial flows are expected to fill less than half of that need, while current commitments from international financial institutions and bilateral donors will cover only one-quarter of the need.
“Under that scenario, the region still faces a projected financing gap of $290 billion through 2023.”
The IMF Africa Department Director said countries in the region require assistance.
Selassie wrote: “No country should have to choose between paying their debt or providing food and medicine for their people. To prevent the loss of decades-worth of development gains, the region will need access to more grants, concessional credit, and debt relief.”
In its latest Regional Economic Outlook, IMF projected that Sub-Saharan Africa’s GDP would contract by 3 per cent in 2020, a development which would amount to the worst contraction on record for the region.
According to the Regional Economic Outlook, the contraction would be worse for economies dependent on tourism and commodity exports.
However, the IMF also predicted that growth should rebound modestly in the region in 2021 by 3.1 per cent, although it also noted that for many countries, a return to 2019 GDP levels won’t occur until 2022–2024.
“The COVID-19 pandemic represents an unprecedented health and economic crisis for sub-Saharan Africa. Within months, the spread of the virus has jeopardized years of development and decades-long gains against poverty in the region while threatening the lives and livelihoods of millions of people,” Selassie further observed.
According to him, policymakers in sub-Saharan Africa now face the added challenge of rekindling their economies with fewer resources and more difficult choices.
“Countries in the region acted swiftly to protect their people from the worst of the crisis, but lockdown measures came with high economic and social costs,” he added, noting that as the region looks toward the future, uncertainty over the path of the pandemic continues to loom over an enduring recovery.
The IMF further observed that unlike the advanced countries, those in Sub-Saharan Africa entered the COVID -19 pandemic with significantly less fiscal space than they had prior to the global financial crisis of 2008-09.
“Advanced economies have had the space to do ‘whatever it takes’. In sub-Saharan Africa no such luxury exists, as countries struggle to do ‘whatever is possible’ with their scarce resources,” Selassie said.
He noted that fiscal policies needed to boost the economy will have to be balanced against debt sustainability, which is already a daunting challenge for many countries in the region.
“The need to support growth through monetary policy will need to be matched against maintaining external stability and longer-term credibility. Financial regulation and supervision measures are needed to address crisis-affected banks and firms but should not compromise longer-term growth,” he said.
Canvassing support for Nigeria and other countries in the region, the IMF official noted that “without significant additional financial assistance, many sub-Saharan African countries will struggle to simply maintain macroeconomic stability while meeting the basic needs of their populations”.
Already the IMF has provided about $16 billion in financial assistance to 33 countries in 2020.
It also provided immediate debt service relief to 22 of the poorest, most vulnerable Sub-Saharan African countries.