One Planet

The world remains in the grip of an ongoing pandemic and an accelerating pace of climate change, both of which underscore the need for increased global cooperation and dialogue. Solutions to these global problems must involve all countries and all regions, including sub-Saharan Africa, with the world’s least vaccinated population, most promising renewable energy potential, and critical ecosystems.

Two Worlds

Sub-Saharan Africa is set to grow by 3.7 percent in 2021 and 3.8 percent in 2022. This rebound is most welcome and largely results from a sharp improvement in global trade and commodity prices. Favorable harvests have also helped lift agricultural production. But the recovery is expected to be slower than in advanced economies, leading to a widening rift in incomes. This divergence is expected to persist through the medium term—partly reflecting different access to vaccines, but also stark differences in the availability of policy support.

The outlook remains extremely uncertain, and risks are tilted to the downside. In particular, the recovery depends on the path of the global pandemic and the regional vaccination effort, and is also vulnerable to disruptions in global activity and financial markets.

Three Stories

First, divergence and inequality at a global level have also been mirrored within sub-Saharan Africa. Differences across the economies of the region again partly reflect differences in vaccination and policy support. But the crisis has also highlighted key disparities in resilience, amplifying preexisting vulnerabilities and worsening divergence across the region. Comparing resource-intensive countries with non-resource-intensive countries, the diversified economic structure of the latter has not only muted the impact of the crisis, but also allowed them to adapt relatively swiftly.

Moreover, widening divergence between countries has been accompanied by divergence within countries, as the pandemic has had a particularly harsh impact on the region’s most vulnerable. With about 30 million people thrown into extreme poverty, the crisis has worsened inequality not only across income groups, but also across subnational geographic regions, which may add to the risk of social tension and political instability. In this context, rising food price inflation, combined with reduced incomes, is threatening past gains in poverty reduction, health, and food security.

Second, as the pandemic has continued, authorities in sub-Saharan Africa have faced an increasingly difficult and complex policy environment. Policymakers face three key fiscal challenges: (1) tackle the region’s pressing development-spending needs, (2) contain public debt, and (3) mobilize tax revenues in circumstances in which additional measures are generally unpopular.

Meeting these goals has never been easy and entails a difficult balancing act. But the crisis has made all even more demanding.

Monetary policy has also been constrained. Regionwide, average inflation will edge up slightly in 2021, but should then ease in 2022 once pandemic-induced mismatches resolve and commodity prices moderate. Looking ahead, however, as economies start to recover, the context for monetary policy will change and will likely reflect growing regional heterogeneity.

Third, the crisis has underscored the critical importance of international solidarity and support. On COVID-19 in particular, the threat of new variants highlights the need for a global response, with a particular focus on the unvaccinated people of Africa. The IMF has proposed a plan to vaccinate at least 40 percent of the total population of all countries by the end of 2021 and 70 percent by the first half of 2022. For sub-Saharan Africa, these goals are ambitious and will require a marked change in strategy by both advanced economies and sub-Saharan African countries.

More broadly, without external financial and technical assistance, the divergent recovery paths of sub-Saharan Africa and the rest of the world may harden into permanent fault lines, jeopardizing decades of hard-won progress. So far, international organizations and donors have mobilized swiftly to support the region. But further multilateral action is critical, considering the region’s elevated financing needs and a widening gap with the rest of the world. The special drawing rights (SDR) allocation in August has boosted the region’s reserves, easing some of the authorities’ burden as they guide their countries’ recovery. Moving forward, the voluntary channeling of SDRs from countries with strong external positions to those most in need can further magnify the new SDR allocation’s impact. Furthermore, the Debt Service Suspension Initiative has provided much-needed breathing space and has been extended until the end of 2021. But the time is ripe for making the Common Framework fully operational.

Looking ahead, the region’s potential remains undiminished. Over the next three decades, the global population is set to grow by about 2 billion people, with half of that increase in sub-Saharan Africa alone. This represents the region’s single greatest challenge, but it also presents perhaps its greatest opportunity: it embodies a growing pool of human talent and ingenuity, with a billion more individuals all interacting and seeking new ways to better themselves and their communities.

Capitalizing on this potential will require bold transformative reforms. But the threat of climate change and the process of global energy transition also means that sub-Saharan Africa may need to adopt a significantly different growth model.

Although the region is the world’s smallest contributor to carbon dioxide emissions—less than 3 percent of the global total—it is perhaps the most vulnerable to climate-related shocks. So policymakers in sub-Saharan Africa will have to address climate change through a mix of adaptation and mitigation. Unfortunately, both are costly.

Though these costs are large, they are significantly smaller than the costs of inaction. Without this spending, sub-Saharan Africa may find itself responding to a mounting series of climate-related humanitarian emergencies, diverting authorities’ focus from longer-term development and constraining the region’s ability to integrate into the global economy. Faced with few options, mobilizing external financing from both public and private sector sources will be a key priority for most sub-Saharan African nations. If successful, the region will be poised to fulfill the promise of the African century, contributing to a more prosperous, greener future.