Luc Eyraud, Director of Regional Studies for Africa at the International Monetary Fund (IMF), presented the findings of the report on the economic outlook for sub-Saharan Africa at a press conference in Abidjan, Ivory Coast, last Monday, April 29. At this event, Mr. Eyraud highlighted the persistent challenges facing the region despite an improving trend.
According to the report, after four years of economic turbulence, sub-Saharan Africa is seeing a gradual improvement in its outlook. Economic growth is expected to increase from 3.4% in 2023 to 3.8% in 2024, with almost two-thirds of countries forecasting higher growth. This dynamic is expected to continue beyond 2024, with growth projected at 4.0% in 2025. Additionally, inflation has fallen significantly, public debt ratios are stabilizing and several countries have managed to issue bonds. Eurobonds, thus regaining access to international markets after two years of absence.
However, challenges remain. The region continues to face a financing shortage, with high borrowing costs and looming debt repayment deadlines. The economic outlook remains vulnerable to external shocks, including increased risks from political instability and climate disasters.
The report notes that the funding shortage partly reflects a reduction in the region’s traditional financing sources, including official development assistance. Gross external financing needs for low-income countries in sub-Saharan Africa are estimated at more than $70 billion per year (or 6% of GDP) over the next four years. As concessional sources become scarcer, governments are turning to alternative financing options, typically associated with higher costs, less transparency and shorter maturities.
The cost of borrowing, both domestic and external, has increased and remains high for many. In 2023, government interest payments represented 12% of its revenue (excluding grants) for the median sub-Saharan African country, more than double from a decade ago. The private sector is also starting to feel the effects of higher interest rates.
Risks to the outlook remain tilted to the downside. The region remains more vulnerable to global shocks, particularly weaker external demand and elevated geopolitical risks. Additionally, sub-Saharan African countries face increasing political instability and frequent climate shocks. The region faces a critical year with 18 national elections scheduled for 2024. Likewise, climate shocks are becoming more frequent and widespread, including droughts of unprecedented severity.
The report identifies three strategic measures to help countries in the region address these challenges: restoring the financial health of states without hindering development, pursuing a monetary policy focused on price stability, and implementing structural reforms to diversify the economy and sources of financing. According to the report, increased international cooperation is needed to support efforts to build a more inclusive, sustainable and prosperous future for sub-Saharan Africa.
){kind=link}