IMF Cuts Sub-Saharan Africa Growth Forecast to 3.8% Amid Global Instability

The International Monetary Fund (IMF) has urged countries in sub-Saharan Africa to increase their domestic fiscal revenues to mitigate the impact of global economic instability. The IMF's Africa Department Director, Abebe Aemro Selassie, emphasized that relying on debt financing may not be the optimal path for development in the face of global economic turbulence. He noted that policymakers must also find new sources of cheaper funding.

In response to the potential impact of U.S. trade policies, the IMF has revised its economic growth forecast for the region from 4.2% to 3.8% for this year. Selassie highlighted that the region must leverage domestic resources to drive development and meet social expenditure needs. Policies aimed at enhancing resilience have become increasingly important.

The IMF reported that the region's average debt-to-GDP ratio remained stable below 60% last year, but countries like Kenya continue to struggle with high debt servicing costs. Selassie pointed out that while the U.S. is not a major trading partner for many countries in the region, its trade policies have put pressure on their currencies. He also noted that the recent drop in oil prices could lead to economic slowdowns in major oil-producing countries like Nigeria and Angola.

The IMF warned that the expected economic setback could disrupt the region's recovery from global challenges such as the pandemic, inflation, and rising interest rates. The region includes countries like Tanzania and Senegal, which have shown economic diversification and achieved a growth rate of 4% last year, exceeding the IMF's previous forecast of 3.6%. The IMF also noted that the region's strong economic expansion last year was accompanied by improvements in macroeconomic imbalances, with average inflation rates decreasing and debt levels remaining stable.

Selassie acknowledged the region's resilience, noting that 11 of the 20 fastest-growing economies in the world are from sub-Saharan Africa. He emphasized the need for the region to continue its efforts to increase domestic revenue and reduce reliance on external debt to build a more sustainable economic future.