Growth in sub-Saharan Africa has remained generally robust and is expected to gradually pick up in the coming years. Although near-term risks to the global economy have receded, recovery in the advanced economies is likely to be gradual and differentiated, acting as a drag on global growth, which is set to increase slowly from a trough in 2012. The factors that have supported growth in sub-Saharan Africa through the Great Recession—strong investment, favorable commodity prices, generally prudent macroeconomic management—remain in place, while supply-side developments should be generally favorable. Macroeconomic policy requirements differ across countries, but rebuilding policy buffers to handle adverse external shocks remains a priority in many countries.
Macroeconomic outcomes in sub-Saharan Africa continue to strengthen, reflecting domestic policy adjustments and a supportive external environment, including continued steady growth in the global economy, higher commodity prices, and accommodative external financing conditions. Growth is expected to increase from 2.7 percent in 2017 to 3.1 percent in 2018; inflation is abating; and fiscal imbalances are being contained in many countries.
In the aftermath of the global financial crisis, there has been a spectacular increase in nonofficial cross-border capital flows to sub-Saharan Africa.1 With official development assistance to the region on a declining trend, these flows could provide much-needed financing for development initiatives and boost economic growth and welfare. However, large inflows could also pose macroeconomic and financial stability challenges such as economic overheating, currency overvaluation, and unsustainable domestic credit and asset price booms. In the absence of adequate fiscal and macroprudential frameworks, inflows may also encourage excessive borrowing by the public and private sectors, and exacerbate currency, maturity, and capital structure mismatches on balance sheets—leaving countries vulnerable to a sudden reversal of capital flows that may be triggered by factors extraneous to the recipient economy.
Fiscal balances weakened in most sub-Saharan African countries with the onset of the global economic crisis, with increases in deficits in the early stages of the crisis being partly offset by consolidation efforts as growth rebounded in 2010–12. Concern has been frequently expressed that governments may now be more constrained in their ability to provide fiscal support for economic activity in the event of adverse shocks.1
This chapter examines the rise in international sovereign bonds issued by African frontier economies and recommends policies for potential first-time issuers. Maintaining prudent fiscal frameworks consistent with debt sustainability is crucial for deriving lasting benefits from additional financing. Beyond that, first-time international sovereign bond issuers should focus on improving the composition and profile of their public debt under an appropriate debt management framework; adhering to best operational practices for first-time issuance; and locking in low interest rates while smoothing the maturity profile of the entire public debt portfolio. International sovereign bonds may not be the best option for financing infrastructure investment, and other funding options may need careful consideration.
The current wave of technological advances is set to shake up the landscape for jobs within countries and across the world. Previous periods of technological change have led to higher living standards, but transition periods were marked by fears over the future of work as existing jobs were made obsolete and it took time for new and different jobs to arise. Today again, there are fears that the Fourth Industrial Revolution will be disruptive, as technology replaces workers, possibly leading to lower income shares and rising inequality.1 While most countries are facing this wave of technological change at a time of declining working populations—and are keen to embrace the opportunity to sustain or increase output levels with fewer workers—the challenge for sub-Saharan Africa, where working populations continue to grow rapidly, is very different.
Energy subsidy reform1 has been a long-standing policy challenge for both advanced and developing countries. In sub-Saharan Africa, the fiscal cost of subsidising energy is estimated at about 3 percent of GDP, equivalent to total public spending on health care. For many countries, explicit and implicit subsidies continue to crowd out more efficient spending on much-needed social and infrastructure projects. Moreover, energy subsidies are often poorly targeted, with the bulk of the benefits accruing to the better-off. Finally, pervasive energy subsidies have discouraged investment and maintenance in the energy sector in many countries in sub-Saharan Africa, leading to costly and inadequate energy supply that is increasingly a bottleneck for economic growth. This note explores why policymakers have found energy subsidy reform so difficult and draws lessons from global experience in designing a successful energy reform strategy.
Nigeria’s 2002 Article IV Consultation highlights that major macroeconomic imbalances had emerged as a result of sharp increases in government spending and expressed concern at the risks of a further acceleration of inflation and continuing instability in the exchange market. The overall fiscal balance deteriorated sharply in 2001, the external accounts worsened, and inflation accelerated. The overall stance of fiscal policy remains highly expansionary in 2002, notwithstanding efforts by the authorities to contain capital spending. Lax financial policies have led to a sharp fall in international reserves.
This paper examines ways to summarize the maturity structure of public debts using a small number of parameters. We compile a novel dataset of all promised future payments for US and UK government debt from every month since 1869, and more recently for Peru, Poland, Egypt, and Nigeria. We show that there is a unique parametric form which does not arbitrarily restrict debt issuance – portfolios of bonds with exponential coupons. Compared to the most popular alternative, this form 1) more accurately describes changes in debt maturity for these six countries and 2) gives a quite different interpretation of historical debt maturity. Our work can be applied not just to analyze past debt movements, but – because parameter estimates are relatively similar across countries – also for monitoring changes in debt maturity, including in countries where data are partial or incomplete.