Rising prices, slow supply chains and mounting debt. All these things have harmed economies around the world, but Africa has been hit the hardest.
A new report by the International Monetary Fund found that Sub-Saharan Africa’s economic recovery from COVID-19 is projected to be the world’s slowest in 2021. Although the region’s economy is expected to grow by 3.7% this year, the rate for the rest of the world is up to 6%, according to the IMF. In 2020, Sub-Saharan Africa’s economy contracted 1.9%, the worst performance the region has ever recorded.
Analysts say measures to contain the pandemic, such as lockdowns, curfews and travel restrictions, have hampered economies as debt increased. Rising food prices and loss of income for households also having exacerbated the region’s food security challenges.
“As sub-Saharan Africa navigates through a persistent pandemic with repeated waves of infection, a return to normal will be far from easy,” Abebe Aemro Selassie, director of the IMF’s African Department, said in a news release.
To accelerate economic growth, policymakers must handle development spending needs, contain public debt and “mobilize tax revenues in circumstances where additional measures are generally unpopular,” Selassie said.
“Meeting these goals has never been easy and entails a difficult balancing act,” Selassie said. “For most countries, urgent policy priorities include spending prioritization, revenue mobilization, enhanced credibility, and an improved business climate.”
Throughout Africa, faster economic recovery can be achieved by implementing policies that spur the growth of large companies and improving agricultural productivity, according to analysis by the Brookings Institution, a nonprofit public policy organization.
In 2020, Africa’s agricultural sector outperformed the broader economy, continuing a 20-year trend in which the continent’s yearly growth rate of agricultural production was the world’s fastest, according to the Brookings report, which argued that growth in the agricultural sector is critical in reducing poverty.
“Importantly, success in both of these strategies would improve employment opportunities across Africa and strengthen poverty reduction at a time when progress on both has stagnated,” the institution wrote in October.
In August, the IMF announced it would allocate $650 billion in reserves known as Special Drawing Rights (SDRs) to help ease the debt burdens of developing economies hit hardest by the pandemic.
It was the largest allocation in the IMF’s history, Managing Director Kristalina Georgieva said in a story by Africa Renewal, a magazine published by the United Nations.
But only $33.6 billion was assigned to African nations.
“It’s not enough,” French President Emmanuel Macron said in the Africa Renewal story.
Senegalese President Mickey Sall agreed, calling the amount “a drop of water” for 55 countries.
Macron later pledged to allocate France’s $27.5 billion SDR quota to Africa and urged other countries to follow suit.
“We are ready, and Portugal is ready,” Macron said in the Africa Renewal report. “We must reach up to $100 billion for Africa and together triple the amount of SDRs allocated to the continent.”
Portugal’s SDR quota is $2.8 billion.
Macron also announced creation of the Alliance for Entrepreneurship in Africa, which will mobilize $1 billion to support small and medium businesses. U.N. Undersecretary-General Vera Songwe lauded the gesture.
“Between 70% and 80% of African economies are made up of small and medium enterprises,” Songwe said in the Africa Renewal story. “We are looking at SDRs of billions of dollars, but those billions eventually trickle down to small businesses. These kinds of alliances can help boost growth.”