Countries in the Sub-Saharan Africa (SSA) region are facing “major financial difficulties,” forcing some to cut spending on health, education and infrastructure. According to Abebe Aemro Selassie, people in the region are already “feeling the effects of the financial crisis,” and the IMF says countries in the SSA region should also consider having a “well-functioning debt resolution framework.”
A region facing rising borrowing costs and declining “access to cheaper financing”
According to the International Monetary Fund (IMF), the Sub-Saharan Africa (SSA) region faces “significant funding shortfalls” due to “shrinking aid budgets and reduced inflows from partners.” Without this funding, countries in the region will be forced to cut spending on health, education, and infrastructure, “hampering the development of the region’s true potential,” according to a statement released by the IMF.
Noting that the region’s share of funds is declining, Abebe Aemro Selassie, the financial institution’s director for Africa, argued that people in the SSA region are already beginning to feel the effects of the crisis.
“People in sub-Saharan Africa are feeling the effects of the funding crisis. Since the Russian invasion of Ukraine, the cost of living has become more expensive, borrowing costs have risen, and access to cheaper funds has decreased. Coupled with a decrease in long-term aid and a recent decrease in investment from partners, there is less money available for critical services such as health, education, and infrastructure,” Selassie argues.
Cerassier also warned that unless measures are taken to mitigate these risks, the region will hinder its goal of becoming “a driving force in the global economy in the coming years.”
IMF: SSA region countries should consider allowing their currencies to depreciate
Meanwhile, in an April 14
press release
, the IMF said it has already done its part by providing more than $50 billion to SSA countries for the 2020-2022 period. It also revealed that it has “loan agreements with 21 countries” and that more program requests are under consideration.
The IMF said that in addition to waiting for financial bailouts, countries in the SSA region should also consider having a “well-functioning debt resolution framework.” Countries should also consider allowing their respective exchange rates to depreciate.
“The ultimate priority is to ensure that critical climate change efforts do not overwhelm basic needs such as health and education. Climate change funding provided by the international community must be on top of current aid flows,” the IMF added.
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