The spread of the coronavirus into sub-Saharan Africa will hit the region’s economic growth hard, with direct disruptions to people’s livelihoods, tighter financial conditions, reduced trade and investment and a steep drop in commodity prices, the International Monetary Fund said on Wednesday.
In a blog posting on the IMF’s website, top officials in the Fund’s Africa Department said they have received requests for emergency financing from over 20 nations in the region and expect at least 10 more soon.
On Tuesday, the Fund announced that Ghana had requested a rapid-disbursing emergency loan to fight the coronavirus pandemic.
IMF Managing Director Kristalina Georgieva on Monday said some 80 countries had requested loans from emergency facilities, under which some $50 billion is available, with at least 20 more requests expected.
“Across the region, growth will be hit hard. Precisely how hard is still difficult to say. But it is clear that our growth forecast in April’s regional outlook will be significantly lower,” Abebe Aemro Selassie, director of the IMF Africa Department, and Karen Ongley, mission chief for Sierra Leone, wrote in the blog posting.
During the global financial crisis more than a decade ago, African countries were spared the brunt of the economic impact, because many were less integrated with global financial markets and supply chains, Selassie and Ongley wrote. Debt levels were lower too and countries had more room to increase spending to boost growth.
In the coronavirus pandemic, a number of countries have closed borders and limited public gatherings, which will cut many off from paid work.
“For society’s most vulnerable in the region, ‘social distancing’ is not realistic. The notion of working from home is only possible for the few,” Selassie and Ongley wrote.
IMPACT ON OIL EXPORTERS
The disruptions to livelihoods will mean less income, less spending, and fewer jobs. Closed borders mean that travel and tourism will dry up, along with trade and shipping.
The partial shutdown of major economies means that global demand will fall, further disrupting supply chains and trade. And tighter global financial conditions will limit access to finance and delay investments and development projects, they wrote
With oil prices down 50% since the start of 2020, the impact on oil exporters in Africa will be substantial.
“We estimate that each 10% decline in oil prices will, on average, lower growth in oil exporters by 0.6% and increase overall fiscal deficits by 0.8% of GDP,” they wrote.
Nonetheless, they recommended increased fiscal spending – first on public health, but also to provide broad economic support, including cash transfers to individuals and households under strain.
“Where feasible, governments should consider targeted and temporary support for hard-hit sectors such as tourism. For instance, temporary tax relief through targeted reductions or delays in paying taxes could help address cashflow shortfalls for affected businesses,” they wrote.