International Monetary Funds (IMF) has projected that the Sub Saharan Africa’s economic growth is going to pick up from 2,67 percent to 3,5 percent in 2018 in its latest Regional Economic Outlook for Sub-Saharan Africa.
Countries are expected to maintain growth at about 6 percent or faster according to IMF press release.
Abebe Aemro Selassie, Director of the IMF’s African Department commented on the report, “The growth pickup has been largely driven by improved policies in some countries, and a more supportive external environment, including stronger global growth and higher commodity prices”.
“these factors have supported high volumes of capital inflows into the region, facilitating external adjustment and a buildup of reserves in some countries.”
Although there is going to be growth delayed fiscal adjustment are causing some challenges for countries in Africa.
Selassie said that 15 of the countries in the Sub Saharan Africa region are now rated to be in debt distress or at risk of debt distress, a condition caused by heavy borrowings and gaping deficits.
“in some countries, higher debt levels have translated into a sharp increase in debt service, diverting resources from much-needed spending in areas such as health, education, and infrastructure,” said Selassie.
Six countries categorised as in debt distress last year include Chad, Eritrea, Mozambique, Congo Republic, South Sudan and Zimbabwe last year.
Selassie went on to comment on the regional report and said that policymakers need to seize the opportunity provided by favourable external conditions to turn the current recovery into durable strong growth by taking domestic policy steps to reduce fiscal imbalances and raise medium-term growth potential.
“Prudent fiscal policy, especially domestic revenue mobilization, is critical to make room for key infrastructure and social spending,” IMF Director said.
“On average, there is scope to raise tax revenues by 3-5 percentage points of GDP over the next few years.”
“Reforms to nurture a dynamic private sector are needed to provide the foundations to raise the low level of private investment, for example by boosting intra-Africa trade and deepening access to credit,” Selassie went on.
Zimbabwe, which has been judged by the economic report as in debt distress is making a two-year plan to reduce fiscal deficit.
Minister of Finance, Patrick Chinamasa said that Government is implementing a comprehensive expenditure management programme which will see the gradual containment of the Budget deficit from 2017 levels of -14% of GDP to -3.5% of GDP by end of 2018, and subsequently capping it to below -0.3% by 2020, in line with best practices and financing capacity of the economy.
“Attaining the above targets will primarily depend on the progressive reduction of the share of Employment Costs in the Budget, to initially 70% in 2018, 65% in 2019, and below 60% of the total Budget by 2020,” Zimbabwe’s Finance Minister said.
Zimbabwe’s fiscal deficit, which widened to US$1.8 billion in 2017 from $US1.4 billion is expected to be reduced to US$675.8 million.
On average, there is scope to raise tax revenues by 3-5 percentage points of GDP over the next few years according to Selassie commenting on the Regional Economic Outlook for Sub-Saharan Africa.
“Reforms to nurture a dynamic private sector are needed to provide the foundations to raise the low level of private investment, for example by boosting intra-Africa trade and deepening access to credit,” IMF Director for Africa’s department said.