Chapter

1. Building Momentum in a Multi-Speed World

Author(s):
International Monetary Fund. African Dept.
Published Date:
May 2013
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Introduction and Summary

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.

The near-term outlook for the global economy is improving, but the road ahead is unlikely to be smooth. Although significant risks remain, policymakers in advanced economies have largely defused the main near-term threats to economic recovery, and international financial markets have recorded a significant rally since mid-2012, as concerns about adverse tail risks eased. Recent high-frequency indicators point to a firming of the recovery in the United States, while Japan will get a fillip from fiscal and monetary stimulus; meanwhile, activity remains weak in the euro area, where improving financial indicators have yet to translate into a boost to economic activity. Emerging markets are expected to record strong growth, with the exception of those in Europe, and fears of a hard landing in China have dissipated. In aggregate, the IMF’s April 2013 World Economic Outlook projects global growth to increase slightly in 2013, from 3.2 percent to 3.3 percent, and more substantially to 4.0 percent in 2014. Benchmark interest rates in advanced economies are expected to remain at historically low levels, while commodity prices are expected to ease modestly (by a cumulative 6 percent) through 2014.

Sub-Saharan Africa has performed strongly and should continue to do so. Output grew, on average, at a rate of 5.1 percent in 2012, and is projected to accelerate to 5.4 percent in 2013 and 5.7 percent in 2014.1 Drivers of growth include investment and exports on the expenditure side, with the production side led by construction, agriculture, and new extractive industry capacity coming onstream. Upper-middle-income countries, with economic structures that differ significantly from most of the region and closer ties to the troubled euro area—notably South Africa—are expected to grow at a slower pace than average.

Inflation in the region dropped from more than 10 percent in 2011 to 7.9 percent in 2012 and is anticipated to maintain its downward trend in 2013–14. The slowing pace of inflation reflects a number of factors, including some moderation of world food and fuel prices, prior tightening of monetary policies in high-inflation countries, and improved weather conditions in both East Africa and the Sahel.

With continued global growth likely but not assured, we examine economic prospects for sub-Saharan Africa under two adverse scenarios, both drawn from the April 2013 World Economic Outlook. One scenario envisages continued near-stagnation in the euro area for several years, with moderate spillover effects on the global economy; a second scenario entails a sharp drop in investment levels in major emerging market economies (including South Africa) in 2013, albeit with full recovery by 2016. Analysis of the spillover impact on sub-Saharan Africa points to a slowing of the regional growth rate in both cases, but not by a large magnitude. Countries with limited policy buffers and reliant on a narrow range of export commodities could experience more severe adverse effects, if sizable declines in export and/or budgetary revenues were to have a destabilizing effect on the exchange rate or interest rates.

Domestic risks to the economic outlook include such factors as climate developments and internal conflict. Such events, though potentially severe in their impact domestically and on close neighbors, usually do not have significant effects on the region as a whole.

The generally positive outlook for the region is conditional on the implementation of sound macroeconomic policies. Fiscal deficits are large in several countries, pointing to the need for significant fiscal adjustments, although the pace of adjustment will need to take account of weak demand conditions in some cases. Maintaining hard-won gains in reducing inflation in several countries will require continued policy tightness in some cases, appropriately cautious easing in others. Surging current account deficits in some low-income and fragile countries, although coinciding with large inflows of foreign direct investment, warrant careful monitoring. And, with sizable medium-term risks to the global outlook, actions to rebuild policy buffers are warranted in fast-growing economies.

Robust Performance and Strong Outlook

Output in sub-Saharan Africa expanded by 5.1 percent in 2012. A moderate acceleration is expected in 2013 and 2014, with growth gradually rising as the global environment improves. Middle-income countries will likely continue to expand more slowly than the rest of the region, with South Africa recovering only gradually from the weak growth recorded in 2012. On average, inflation in the region has eased to near 8 percent by end-2012 and, on current trends, could fall below 6 percent by end-2014. The policy aspects of realizing these forecasts are discussed throughout.

Recent Developments

Activity

With 5 percent average growth in 2012, economic activity remained strong in sub-Saharan Africa, slowing only marginally from the pace observed in 2010–11 (Table 1.1); the slowdown was concentrated in Nigeria and South Africa, the region’s two largest economies, with growth picking up by 0.5 percentage point in the rest of the continent. Investment has played an important role in driving growth in much of the region—most notably in fragile states, where mineral projects and political stabilization in Côte d’Ivoire were key factors at work. Exports supported demand in many low-income countries (LICs): in over half of the countries in the region, oil, mining, export-oriented agriculture, and tourism were among the leading growth sectors in 2012.

Table 1.1.Sub-Saharan Africa: Real GDP Growth(Percent change)
2004-0820102011201220132014
Sub-Saharan Africa (Total)16.45.45.35.15.45.7
Of which:
Oil-exporting countries18.56.66.16.46.66.8
Middle-income countries25.04.04.73.33.64.0
Of which: South Africa4.93.13.52.52.83.3
Low-income countries27.36.45.65.76.36.6
Fragile countries2.54.22.47.06.86.5
Memo item:
World4.65.24.03.23.34.0
Source: IMF, World Economic Outlook database.

Excluding South Sudan.

Excluding fragile countries.

Source: IMF, World Economic Outlook database.

Excluding South Sudan.

Excluding fragile countries.

Growth was relatively stronger on average in oil-exporting and low-income countries in 2012. Among oil exporters, Angola experienced a visible acceleration owing mostly to a significant recovery in the oil sector and improved electricity production, although Nigeria’s growth remained strong on the whole, in spite of the slowdown as a result of the adverse effects of the 2012 floods on both oil and nonoil production. In general, LICs maintained the robust track record of previous years. Niger (oil) and Sierra Leone (iron) registered significant accelerations related to new extractive operations. Uganda experienced some deceleration as a result of tighter policies designed to reduce high inflation.

Economic growth in middle-income countries (MICs) slowed significantly in 2012, led by developments in South Africa partly caused by labor unrest in the mining sector, but also reflecting continuing problems in Europe, still the country’s most important export destination. Among fragile countries, the most significant development was the rebound in Côte d’Ivoire, where output growth is estimated to have reached almost 10 percent in 2012. Conflict-affected states, unsurprisingly, experienced significant economic setbacks in 2012, with output declining in both Guinea-Bissau and Mali.2

The quality of national accounts data in sub-Saharan Africa has come under increasing criticism of late, with analysts pointing, inter alia, to the implications of using long-outdated base years in the compilation process. A detailed country-by-country review (Box 1.1 and Appendix Table) suggests that the problems may be less widespread than might be feared, given the efforts already undertaken to update base years in many countries—but there are many countries, including Angola and Nigeria, where forthcoming revisions of compilation bases could produce significant upward revisions to the estimated level of GDP; the impact on growth rates is harder to predict.

Inflation and monetary policy

At end-2012, 12-month inflation across the region averaged 7.9 percent, down from the 10.1 percent recorded at end-2011, with food inflation declining as the year proceeded (Figure 1.1). Disinflation was particularly marked in eastern Africa, including in Ethiopia (down from 36 percent in 2011 to 13 percent by end-2012), Uganda (from 27 percent to 6 percent), and Kenya (from 19 percent to 7 percent).3 The sharp slowing of inflation in the subregion reflected several factors, including good harvests, tight monetary policies (discussed below), and, in some cases, the appreciation of local currencies, reversing the movements observed in 2011. The extent of disinflation in 2012 has been broadly comparable to the rise in inflation that preceded it (Table 1.2 and Box 1.2). Malawi, where a sharp currency depreciation contributed to a large jump in prices (about 35 percent in 2012) despite the tightening of the monetary policy stance, is one noteworthy exception to the generally favorable trend.

Figure 1.1.Sub-Saharan Africa: Food and Nonfood Inflation

Sources: IMF, African Department database; and IMF, International Financial Statistics.

Table 1.2.Sub-Saharan Africa: Other Macroeconomic Indicators
2004-0820102011201220132014
(Percent change)
Inflation, end-of-period8.87.210.17.96.95.8
(Percent of GDP)
Fiscal balance1.9−3.9−1.3−1.7−2.7−2.8
Of which: Excluding oil-exporters−0.7−4.6−3.7−4.5−4.1−3.2
Current account balance0.6−1.3−1.7−2.8−3.5−4.1
Of which: Excluding oil-exporters−5.1−4.7−5.0−7.9−7.8−7.9
(Months of imports)
Reserves coverage4.84.24.54.74.95.1
Source: IMF, World Economic Outlook database.Note: Excludes South Sudan.
Source: IMF, World Economic Outlook database.Note: Excludes South Sudan.

Monetary policy has made an important contribution to reducing inflation when used decisively. Facing rising inflation and depreciating currencies, the central banks of Uganda and Kenya adopted an aggressive policy-tightening strategy in late 2011, in coordination with their partners in the East African Community (Box 1.2); as inflation fell significantly, both banks began to reduce policy rates gradually, although current levels remain significantly positive in real terms. In Tanzania, where the monetary authorities followed a similar but less aggressive approach, inflation has come down somewhat more slowly and policy rates remain at peak levels.

Box 1.1.Revisions to National Accounts Estimates among Sub-Saharan African Countries

There has been considerable interest in the extent to which output and growth estimates in sub-Saharan African countries adequately capture the level and pace of growth of economic activity. One factor raising concerns about the quality of recent estimates is that, for many countries, the base year used as the foundation for constructing accounts over time has not been updated for many years—implying that growth rates are being estimated on the basis of an economic structure that bears little resemblance to the present-day structure of the economy. The extent to which updating of base years can change national output estimates was shown to be quite dramatic, when the updating of national accounts statistics in Ghana yielded a 60 percent increase in the estimated size of Ghanaian GDP. Given the scale of this revision, some have asked how much confidence we can have in the national account statistics of many countries in the region (see Jerven, 2013).1

An analysis of the national accounts systems of countries in the region (see Appendix Table) shows that the median base year is around the year 2000, which, although now 13 years ago, is more recent than had been suggested by Jerven (2013); in addition, several countries intend to rebase their GDP statistics to the 2005–10 period over the next year. That said, a few countries have base years dating back to the 1980s (e.g., Democratic Republic of the Congo and Equatorial Guinea), while Nigeria has national accounts constructed using 1990 as a base year.

In recent years, rebasing has led, for most countries, to upward revisions in the estimates of the nominal magnitude of GDP; the size of the revisions varies considerably, from a slight decline of 1 percent for Ethiopia to an increase of 106 percent for Guinea-Bissau. Common explanations for the upward revisions are i) inclusion of imputed rents for owner-occupied housing; ii) improved estimates of government investment; iii) better capturing of the formal (e.g., Guinea) and informal (e.g., Guinea-Bissau) sectors; and iv) incorporation of new activities previously not included (e.g., Sierra Leone, South Africa).

While rebasing of national accounts can have striking implications for the magnitude and the composition of national output, its impact on estimates of growth rates is less clear-cut. At any rate, that sub-Saharan Africa continues to systematically lag behind developing countries in other regions in statistical capacity, as shown, for example, by the Bulletin Board’s Statistical Capacity Indicator, is a source of concern. As suggested by Devarajan (2013), to address such weakness, a mix of higher funding, clearer delineation of responsibilities, and more accountability for the production of statistics, and better coordination between national statistical offices and donors is needed.2

This box was prepared by Rodrigo Garcia-Verdu, Alun Thomas, and IMF staff from the Statistics Department.1Jerven, Morten (2013), Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It, Ithaca, NY: Cornell University Press.2Devarajan, Shantayanan (2013), “Africa’s Statistical Tragedy,” Review of Income and Wealth, first published online on January 10, 2013.

Box 1.2.Changing Monetary Policy Frameworks in East Africa

The targeting of monetary aggregates has long been the central element of monetary policy frameworks (MPFs) in much of sub-Saharan Africa, an approach that contributed significantly to achieving disinflation and macroeconomic stabilization. However, narrow reliance on monetary targeting to guide policy formulation has become much less useful as inflation has receded, fiscal dominance has been reduced, financial deepening has proceeded, and the effective handling of external and domestic supply shocks has become more important. As occurred earlier in developed and emerging market economies, central banks in financially developing economies have begun to look elsewhere for MPFs better suited to their needs.1

Three East African countries—Kenya, Tanzania, and Uganda—provide an interesting illustration of developments underway, with the Bank of Uganda (BoU) and the Central Bank of Kenya (CBK) having moved away from an MPF based on monetary targeting.

In July 2011, the BoU adopted an inflation targeting “lite” MPF, in which the BoU announces publically a policy interest rate every month to signal the monetary policy stance. The framework is forward looking, with the policy rate set on the basis of a forecast of inflation intended to anchor expectations; the bank includes its inflation forecast for the next 12–18 months in its monetary policy statement.

In October 2011, the CBK adopted a new MPF that gave greater prominence to the role of its policy rate in guiding its liquidity operations. Containing inflation is a key priority in the setting of policy, but the inflation forecast plays no explicit role as yet, and only the 5 percent medium-term inflation target is cited in the monetary policy statement, leaving the bank with significant flexibility to change its objectives.

Facing surging inflation in the second half of 2011, the three East African countries moved, in varying degrees, to tighten monetary policy. The BoU raised its policy rate by a cumulative 1,000 basis points (to 23 percent) during the tightening cycle, with the CBK increasing its policy rate by a cumulative 1,100 basis points (to 18 percent). The Bank of Tanzania moved more slowly, adjusting its policy rate (440 basis points), while also increasing reserve requirements and reducing the limits on net open foreign exchange positions. Kenya and Uganda experienced rapid disinflation in 2012, albeit at some cost to output in Uganda. Disinflation in Tanzania has been more gradual.

Figure 1.East African Countries: Inflation and Policy Interest Rates

Source: IMF, African Department database.

This box was prepared by Hamid Davoodi.1 See Calderon and Schmidt-Hebbel (2008); Samarina (2012); and Andrle and others (2013).

Monetary policy easing has been possible in places where inflation remains well grounded at moderate levels. In South Africa, the inflation outlook through 2012 remained contained within target levels; with a sizable output gap and sluggish growth, the Reserve Bank opted to reduce its policy rate by 50 basis points in mid-year. Monetary policy in the West African Economic and Monetary Union (WAEMU) was eased modestly in 2012 and early 2013; in the context of continued moderate inflation and falling liquidity in the banking system, the central bank injected substantial amounts of liquidity and cut policy rates by a small margin. The policy rate in the Economic and Monetary Community of Central Africa (CEMAC) remained steady at 4 percent in 2012 despite spikes of inflation in the Republic of Congo, which are expected to be transitory (the regional CPI reached 3.9 percent in December 2012, above the 3 percent convergence criterion).

Nominal private sector credit growth slowed in much of the region in 2012, most noticeably in those countries where monetary policy had been tightened and inflation has been falling. Among oil exporters, Nigeria provided an exception to this trend, with strong output expansion being accompanied by a pickup in credit growth. Unsurprisingly, credit fell in conflict-affected countries.

Public finances

In much of the region, fiscal balances deteriorated in 2012 (Figure 1.2), in some cases reflecting underlying conditions, and in others looser policies—which must be taken into account in considering policy adjustments.4 Sluggish economic activity in South Africa saw the fiscal deficit rise to near 5 percent of GDP, up almost 1 percentage point from 2011, while spending overruns in a preelection environment yielded a large increase of the fiscal deficit in Ghana, to some 11 percent of GDP. Budget surpluses declined in many oil exporters, reflecting sharp increases in public spending—most marked in the Republic of Congo, where the public spending-to-GDP ratio rose by about 10 percentage points (as the authorities addressed the damages from the March 2012 explosions). Nigeria continued to record a modest surplus (about 1 percent of GDP) in 2012, with spending restraint offsetting a decline in the revenue take.

Figure 1.2.Sub-Saharan Africa: Overall Fiscal Balance, 2007–14

Source: IMF, World Economic Outlook database.

Note: Excludes South Sudan.

1 Average excludes São Tomé & Príncipe and Sierra Leone because of debt relief received in 2007.

Fiscal balances improved marginally among low-income and fragile countries during 2012, albeit with no noticeable trends: the (weighted) average deficit level of the group in 2012 was 3.2 percent of GDP, up from 2.6 percent of GDP in 2008.

Given sluggish growth and high deficit levels, the scale of government debt (relative to GDP) has been increasing steadily in many middle-income countries since the onset of the global recession (Figure 1.3). Among upper middle-income countries, the effect has been especially marked in South Africa, where the debt-to-GDP ratio has risen from a trough of 28 percent in 2007 to 42.3 percent in 2012. Debt burdens in non-fragile low-income countries have tended to drift upward during the same period, with fast-growing Ethiopia being an important exception. Among fragile states, the average debt-to-GDP ratio has fallen over time, reflecting in good part the impact of debt relief—although this effect will largely disappear in future years, given the completion of the Heavily Indebted and Poor Countries (HIPC) process by almost all eligible (and interested) countries.5

Figure 1.3.Sub-Saharan Africa: General Government Debt, 2007–14

Source: IMF, World Economic Outlook database.

The evolution of debt levels in countries that received debt relief under HIPC and Multilateral Debt Relief Initiative (MDRI) before 2007 is examined in Box 1.3, while Chapter 2 contains a broader examination of trends in debt levels in sub-Saharan Africa and the extent to which they constrain, or raise the cost of, new borrowing.

External sector

Current account deficits widened in much of the region in 2012—on average, from 1.7 percent of regional GDP to 2.8 percent (Figure 1.4). Widening deficits of MICs reflected continued sluggish performance of exports in several cases, including in South Africa (Figure 1.5, left panel). Import demand has also been contained in some of these economies as a result of moderate income growth, although there have been some exceptions such as Ghana and Zambia (Figure 1.5, right panel). Oil exporters typically recorded improved trade and current account positions, whereas non-oil mineral exporters tended to see these balances deteriorate. Robust import demand in low-income and fragile countries has led to widening deficits, with strongly rising imports observed in Burkina Faso, Guinea, and Mozambique among others. Export levels have risen significantly in some cases as new resource projects come onstream (as in Sierra Leone). Grant aid, though holding up in nominal terms, has been declining gradually as a share of GDP since the crisis year 2009. The large current account deficits observed in a number of low-income and fragile countries warrant careful monitoring, especially in situations where errors and omissions are large (Box 1.4).

Figure 1.4.Sub-Saharan Africa: External Current Account Balance, 2004–14

Source: IMF, World Economic Outlook database.

Figure 1.5.Sub-Saharan Africa: Exports and Imports by Regional Groups

Source: IMF, Direction of Trades Statistics.

Box 1.3.Debt Trends in Selected Sub-Saharan African Countries

Beginning in 2000, many highly-indebted low-income countries benefited from significant debt relief under the HIPC and MDRI Initiatives. For countries seeking to service heavy debt burdens, debt relief provided extra fiscal space to finance development-related spending; for countries not servicing these debts, debt relief implied the opportunity to “wipe the slate clean” and gain access to new sources of funding for development spending. The presumption was that new borrowing space would be managed prudently.

We look here at the evolution of debt levels in countries that benefited from HIPC/MDRI debt relief prior to 2007. Table 1 provides summary indicators on those countries where the debt-to-GDP ratio has risen by more than 5 percentage points since obtaining debt relief.

Table 1.Sub-Saharan Africa: Government Debt Ratios and Ratings
Year of MDRI debt reliefPre HIPC general gov. debt level (% of GDP)Lowest gen. gov. debt level following MDRI (% of GDP)General gov. debt level, 2012 (% of GDP)Risk of debt distress1Debt management performance assessment2 (1=low to 6=high)
Benin200645.812.532.5Low3.5
Burkina Faso200648.722.027.7Moderate4.2
Cameroon200651.59.514.9Low3.7
Gambia, The2008142.466.477.2High3.5
Ghana3200682.826.251.7Moderate3.8
Guinea-Bissau2010234.150.859.8Moderate3.0
Madagascar200696.031.938.3Low3.5
Malawi2006132.432.454.9Moderate3.2
Mali200654.220.432.0Moderate4.2
Niger200689.721.331.1Moderate3.8
Rwanda200790.821.428.0Moderate3.7
São Tomé and Príncipe2007265.960.075.5High2.8
Senegal200645.721.845.0Low4.0
Tanzania200659.228.441.4Low4.2
Uganda200677.622.134.5Low4.2
Sources: IMF, Debt Sustainability Analyses; and IMF, World Economic Outlook database.

The risk of debt distress is carried out by the Joint World Bank/IMF Debt Sustainability Analysis for the latest available year which differs by country.

The debt management performance assessment (DeMPA) is carried out by the World Bank. Latest data is for 2011.

For Ghana in 2012, the debt ratio was updated in April 2013, and includes securitized and non-securitized arrears.

Sources: IMF, Debt Sustainability Analyses; and IMF, World Economic Outlook database.

The risk of debt distress is carried out by the Joint World Bank/IMF Debt Sustainability Analysis for the latest available year which differs by country.

The debt management performance assessment (DeMPA) is carried out by the World Bank. Latest data is for 2011.

For Ghana in 2012, the debt ratio was updated in April 2013, and includes securitized and non-securitized arrears.

In most of the 15 cases, government debt levels remain clearly below pre-HIPC levels—although the increase in debt-to-GDP ratios since the post-HIPC/MDRI trough has been quite marked in several cases, including Benin, Ghana, Senegal, and Malawi (where the surge in the debt ratio largely reflects sharp exchange rate depreciation in 2012, rather than new borrowing).

Are these developments a cause for concern? Clearly significant debt accumulation is a concern if the burden of carrying this debt is not offset by the growth payoffs from the additional investment that the borrowing is often intended to finance—an issue that requires looking at country cases in detail, and indeed at the payoffs to large individual projects. The joint IMF-World Bank assessment of a country’s risk of experiencing external debt distress, which takes into account the outlook both for growth and for debt servicing capacity, is a useful tool for judging whether, looking ahead, the path of external debt accumulation is a serious cause for concern. This approach is now being expanded to cover all public debt and indicates that all but two of the countries in Table 1 face either low or moderate risk of debt distress. But it does not provide any insight into whether the previous accumulation of debt has yielded the results that had been expected.

This box was prepared by Andrew Jonelis, Borislava Mircheva, Bakar Ould Abdallah, and John Wakeman-Linn.

Foreign direct investment (FDI) remained a key source of external financing for the region, although its importance varied significantly across countries, in good part linked to the presence of oil/mineral resources. Such investment was of particular importance in low-income and fragile economies, where current account deficits have widened significantly over the past several years (Box 1.4): noteworthy country examples include Mozambique and Sierra Leone, where current account deficits of 26 percent and 21 percent of GDP, respectively, were almost entirely financed by direct foreign investment inflows.

Foreign portfolio investors returned to the South African bond market in 2012, with such inflows accounting for the bulk of the financing of the current account deficit. There were also sizable inflows into bond markets in several frontier economies, including Ghana and Nigeria. Although stock markets are of limited importance in the region, other than in South Africa, the search for yield among international investors meant that even modest-sized markets in countries with solid growth prospects attracted new inflows that boosted share price indices, most notably in Kenya, Nigeria, and Uganda (Figure 1.6). In a relatively favorable environment, Zambia placed a US$750 million 10-year sovereign bond in September 2012, at a yield of 5.625 percent (see Chapter 3).

Figure 1.6.Sub-Saharan Africa: Stock Market Indices

Source: Bloomberg, L.P.

Box 1.4.The Financing of Current Account Deficits in Low-Income Countries

In about one half of low-income and fragile countries in sub-Saharan Africa, current account deficits appear relatively large or have been widening significantly over the past several years. The average current account deficit in low-income and fragile countries increased from less than 6 percent of GDP in 2007 to about 11 percent by 2012. Gross investment ratios in these countries have increased by similar amounts over the same period. However, the information on the financing of these deficits does leave some room for concern.

Data quality issues pose a challenge, given both the importance of “errors and omissions” in many countries and the mixed character of “other inflows” (Figure 1), but some general points can be made. Direct foreign investment plays a lead financing role in both low-income and fragile states—with the bulk of these flows used to finance the imports of capital goods and equipment needed by the investment projects. “Other inflows”—primarily loan disbursements, whether concessional or commercial in nature—are of equivalent importance, but no breakdown is available between the different forms of credit. Portfolio inflows, unsurprisingly, are of little significance for most low-income and fragile countries, although this could change in some countries, such as Côte d’Ivoire, which are attracting foreign interest. By contrast, MICs (such as Ghana and South Africa) and some oil exporters (such as Nigeria) attract sizable inflows into external (sovereign) and domestic bonds and, to varying extents, into equity markets.1

Figure 1.Sub-Saharan Africa: Balance of Payments, 2012

Source: IMF, World Economic Outlook database.

Note: Excludes South Sudan.

This box was prepared by Masafumi Yabara.1 Portfolio inflows to South African financial markets are an order of magnitude larger than those to other sub-Saharan Africa economies.

International reserve levels in the region increased relative to (prospective) imports in 2012, approaching an average reserve coverage level of close to five months of imports. But the movement in the aggregate masked marginal declines in reserve coverage levels among low-income and fragile economies, where the average level now hovers at around 3 months of imports (Figure 1.7). The vast majority of countries in the region have reserve coverage ratios of at least two months of imports, with the most noteworthy exception being Ethiopia, where a weakening of the trade balance during 2012 saw the reserve coverage ratio drop to 1.7 months.

Figure 1.7.Sub-Saharan Africa: Reserve Coverage and Current Account Balance

Source: IMF, World Economic Outlook database.

Real exchange rates tended to appreciate across the region over the course of 2012, with IMF staff analyses typically, but not always, pointing to currencies being broadly aligned with economic fundamentals. Significant nominal and real appreciations were seen in Kenya and Uganda, helped by tight monetary policies put in place to reduce inflation and positive domestic productivity shocks in agriculture. Oil exporters, including Angola and Nigeria, also experienced real appreciations, in this case reflecting inflation differentials with trading partners in contexts where the bilateral exchange rate with the U.S. dollar has been tightly managed. MICs, by contrast, tended to see some real depreciation, with country-specific shocks playing a role: turmoil in the mining sector in South Africa in the second half of 2012 had an adverse effect on both exports and investor sentiment, contributing to a weakening of the rand—which had been judged to be on the strong side prior to the onset of the depreciating trend.

Looking Ahead: Baseline Scenario

The near-term outlook is positive, with aggregate output growth in sub-Saharan Africa projected to accelerate to 5.4 percent in 2013 and 5.7 percent in 2014 (Figure 1.8). The projection reflects in part the gradually improving outlook for the global economy discussed in the April 2013 World Economic Outlook, which sees advanced economies, including in Europe, moving toward firmer growth in 2014, albeit at differentiated speeds, and emerging economies maintaining their momentum. In sub-Saharan Africa, investment remains a key driver of growth, with the region’s investment-to-GDP ratio forecast to rise by 1½ percentage points between 2012 and 2014, with most countries in the region participating in this trend, seen for example in buoyant construction activity. Relative to 2012, some one-off factors that will support growth in 2013 include rebound effects from last year’s floods in Nigeria, recovery of agriculture in regions affected by drought in 2011/12 (such as the Sahel and the horn of Africa), and gradual normalization of economic activity in Guinea-Bissau and Mali.

Figure 1.8.Selected Regions: Real GDP Growth, 2008–14

Source: IMF, World Economic Outlook database.

Note: Excludes South Sudan.

Despite the strong track record of recent years and the good prospects for continued growth, underemployment and unemployment are still important challenges in the region (Box 1.5). In the absence of major structural changes and/or a significant acceleration of real GDP growth, informal and agricultural sector work will remain dominant in low-income countries for a long time.

The outlook for inflation is favorable for 2013–14 (Figure 1.9), with inflation for the region forecast to fall to 5.8 percent by end-2014, from 7.9 percent at end-2012. Gains made in combating inflation in eastern Africa are expected to be consolidated, while slowing inflation is projected for countries that experienced inflation flare-ups in 2012, such as Malawi. The 2014 forecast for inflation has only one country with double-digit inflation in the entire region, with more than half the countries in sub-Saharan Africa posting inflation rates of 5 percent and below on an end-of-period basis. Underlying this forecast is a projection for moderating non-oil commodity prices and good conditions for the food staples grown and consumed in the region, as well as an expectation of continued inflation-focused monetary policy; unanticipated large spikes in food and fuel prices would likely derail this disinflation, at least on a temporary basis, as would premature monetary easing.

Figure 1.9.Selected Regions: Inflation, 2008–14

(End of Period)

Source: IMF, World Economic Outlook database.

Note: Excludes South Sudan.

Fiscal projections for 2013–14 envisage some deterioration in the fiscal position of the region as a whole, albeit with the entire deterioration stemming from an easing of policies in oil exporters, notably Angola, Cameroon, and Chad, coupled with a swing from modest surplus to modest deficit in Nigeria (Figure 1.2). While easing oil prices contribute to these developments, marked increases in government spending levels are a key factor at work (except for Nigeria), raising concerns about absorption capacity and the effectiveness of spending. Among countries with elevated deficit levels, planned fiscal adjustment in Ghana (where the deficit more than doubled in 2012) is relatively modest, with the deficit projected to still exceed 8 percent of GDP in 2014. Sluggish recovery in South Africa means that deficit levels (4.8 percent of GDP in 2012) begin to decline only in 2014.

Some widening of current account deficits in the region is expected in 2013–14, reflecting in part the rising rates of gross capital formation (Figure 1.4), but also weakening terms of trade. Oil exporters and other mineral producers are projected to see modest adverse movements in their terms of trade during 2013–14, with exports falling in relation to GDP over the period. For the many low-income/fragile states with current account deficits exceeding 10 percent of GDP in 2012, no improvement is anticipated in 2013–14; if these deficits reflect export-oriented or export-supporting investment, the imbalances should correct themselves over time as exports begin to come onstream—but the scale of the deficits is such that careful analysis is warranted in individual country cases.

Box 1.5.The Sectoral Distribution of Employment in Sub-Saharan Africa

Creating productive employment opportunities and, in the richer countries, reducing open unemployment are among the most pressing challenges that policymakers in the region face. We use new employment estimates developed jointly by IMF and World Bank staff, along with a specific projections methodology, to see how the structure of the labor force and employment is evolving over time (Fox and Thomas, forthcoming).

Estimates of the composition of employment in 2010 showed that the majority of the labor force in the region lived in countries with an income per capita below US$1,000, and of those, 60 percent declared their primary economic activity to be agriculture (low-income and resource-rich countries, Figure 1). Employment had started to shift out of agriculture in lower-middle-income countries, but the transformation to a wage economy had not taken place. Resource-rich and low-income countries had the lowest ratio of wage employment to the labor force at about 13 percent, compared with about 18 percent for lower-middle-income countries. Mineral rents drove up employment in services in the resource-rich countries through high public employment and the growth of household enterprises operating in the trading and other service sectors.1

Figure 1.Sub-Saharan Africa: Labor Force Distribution, Age 15–64

Sources: Country household survey data; and World Bank and IMF, staff calculations and projections.

Consistent with past trends, employment in the agricultural sector is projected to gradually shrink but still remain at more than 60 percent of the labor force in low-income countries in 2015 (Figure 1). Resource-rich countries will experience the largest decline in agriculture, mainly reflecting a sharp increase in services from spillovers emanating from the natural resources sector. Low-income countries are projected to experience little change in wage employment, with the ratio of wage employment to the labor force rising only by 1 percentage point to 14 percent of the labor force through 2015. The slow improvement is associated with high labor force growth, which the small non-farm sector cannot absorb quickly.

Economic growth in low-income countries is expected to remain robust over the medium term, but the structure of their labor markets is expected to change slowly. Informal sector work will remain a reality in low-income countries for a long time.

This box was prepared by Alun Thomas.1 Household enterprises are defined as those employed in the informal sector in either services or industry and are projected on the basis of industry and services growth rates.

The combination of continued interest in the region among international investors and lower yields in global markets is expected to facilitate the financing of current account deficits in frontier market economies in the next few years. Angola, Tanzania, and Zambia have recently tapped global capital markets, while portfolio inflows are surging in Côte d’Ivoire, Ghana, Nigeria, and other countries in early 2013, contributing to stock price rallies (Figure 1.6).

Average reserve-import coverage ratios are expected to change only marginally over the next two years, except in some oil exporters (Figure 1.7). Fragile states will continue to operate with relatively low levels of reserves (2½ months of import cover), low-income countries with somewhat higher levels (3 months of cover), and middle-income countries with higher levels again (about 4¼ months cover).

Risk Scenario Analysis

The robust growth path projected for sub-Saharan Africa is subject to downside risks, stemming both from the external environment and domestic factors. Here we consider the effects on the region of two possible global downside scenarios, taken from the IMF’s April 2013 World Economic Outlook.6T he analysis reveals that adverse shocks to the global economy would slow sub-Saharan Africa’s growth but not derail it. Although the impact on regional output is not especially marked, individual countries could be more severely affected—notably those with a narrow export base and limited policy buffers. Countries with significant exposures to the source of likely risk that are enjoying solid growth would be well advised to consider strengthening their capacity to face adverse shocks.

The IMF’s April 2013 World Economic Outlook notes a significant reduction in the near-term risks to the global economy, although important downside risks remain in the euro area and the United States. Medium-term risks are seen as still high. Reflecting the improved situation in the short term, uncertainties around the economic outlook for sub-Saharan Africa have become more balanced (Figure 1.10).

Figure 1.10.Sub-Saharan Africa: Growth Prospects, 2013 and 2014

Sources: IMF, World Economic Outlook database; and IMF staff calculations.

Note: Excludes South Sudan.

This section discusses the effects on sub-Saharan African economies of two downside scenarios—a euro area downside scenario and an emerging markets downside scenario—drawn from the April 2013 World Economic Outlook. As in the October 2012 Regional Economic Outlook for sub-Saharan Africa, separate macroeconomic projections under these scenarios are developed for the 11 largest economies in the region, which collectively account for more than 80 percent of regional output.7

The euro area downside scenario is characterized by a persistent weakening of GDP growth in the euro area, driven by heightened concerns about fiscal sustainability in the euro area periphery, rising risk premiums, and additional tightening of fiscal policies. Under these conditions, the level of output in the euro area would be 4 percent lower than the baseline forecast by 2018, with global output falling 1 percent or more below the baseline forecast by 2018. Commodity prices (both fuel and non-fuel) would ease over time, ending the period about 5 percent lower than in the baseline.

The impact on sub-Saharan Africa would be modest, but persistent (Figure 1.11). GDP growth in the region would be lower by about ¼ percentage point each year over the medium term (2013–18), mainly owing to reduced export receipts and foreign direct investment. Fiscal balances would worsen, on average, by about ½ percent of GDP by 2018, with the impact on individual countries being manageable in most cases. Current account balances for the region would also deteriorate slightly, with the improved payments position of oil importers partly offsetting the adverse impact on oil exporters.

Figure 1.11.Sub-Saharan Africa: Downside Scenarios

Sources: IMF, World Economic Outlook database; and IMF staff estimates.

Adverse effects would be most marked in countries more closely integrated into the global trading system (such as Ghana and South Africa); oil exporters would be only modestly affected, given the small drop in the world oil price. Among low-income/fragile countries, the aggregate impact would be modest, but could be more visible in some countries with narrow export bases, sizable dependence on countries in the euro area, and/or limited policy buffers (such as Burundi, Madagascar, and São Tomé and Príncipe).

The emerging markets downside scenario is one in which there is a large shock to private investment in the BRICS (Brazil, Russia, India, China, and South Africa)—specifically, a 10 percent drop relative to the baseline, with investment gradually returning to baseline levels by 2016. The key feature of this shock is that it is concentrated in the first year, with gradual recovery (in levels) over three years. World output growth would drop by about 1 percentage point in 2013, with fuel and non-fuel prices declining by 13.6 percent and 6.5 percent, respectively, relative to the baseline levels. Output and price levels would gradually recover to baseline levels by 2016.

The impact on sub-Saharan Africa in this scenario is sharper but also short-lived (Figure 1.11). GDP growth for the region (excluding South Africa for this exercise) would fall below the baseline by ½ percentage point, with inflation easing modestly but temporarily. Fiscal balances would deteriorate by about 1.9 percent of GDP and 1.6 percent of GDP in 2013 and 2014, respectively. Oil exporters would be hit hardest, but are also best positioned (in most cases) to absorb the shock; some countries with limited buffers and high vulnerability to commodity price shocks, such as Chad, would face a more difficult situation (see Chapter 2).

Our projections for the region are, of course, vulnerable to potential domestic shocks. By contrast with shocks to the global economy, which have effects across the region, adverse domestic shocks tend to be relatively localized in their impact, even if the effects on individual countries can be severe. Plausible risks at the current juncture include the possible intensification of conflict in countries such as the Central African Republic, Guinea-Bissau, Mali, and the eastern region of the Democratic Republic of the Congo; the spillover effects of such conflict on neighboring countries can be large in terms of economic impact. From the political side, the electoral calendar for the next year is relatively thin, with the evolution of national elections in Zimbabwe one possible risk factor. Much of the region is, of course, vulnerable to adverse weather developments, the impact of which is typically most marked in the rural areas; recent floods in Mozambique and Mauritius are examples of such shocks.

Policy Issues and Recommendations

Growth is robust across most of sub-Saharan Africa, with only the bloc of upper-middle income countries grappling with the problem of sluggish economic activity. Inflation developments are generally favorable, except for a handful of countries where inflation is stuck in double digits. External current account deficits are large for many low-income countries, but export-oriented direct foreign investment appears to be playing a central role in financing these imbalances. Frontier markets are gaining access to international bond markets at what are narrow spreads by historical standards. Under such apparently benign conditions, what should policymakers be concerned with?

First, the generalizations hide significant policy challenges in individual countries, including:

  • Ghana has large fiscal and current account deficits that cannot be sustained: fiscal consolidation is an imperative to rein in the “twin deficits” and halt the steady build-up of public debt.
  • Angola, having rebuilt pre-crisis fiscal buffers, plans a fiscal stimulus in 2013–14 of about 10 percent of GDP—a stimulus that raises concerns about absorption capacity and the ability to spend very large amounts effectively.
  • Similar concerns are warranted in the case of the Republic of Congo, where very large spending increases raise serious absorption capacity and value-for money concerns.
  • Chad, which has a relatively short time period before oil output begins to decline, continues to spend heavily on high-cost investments of uncertain productivity, with the associated deficits preventing the accumulation of balances at the regional central bank—its most effective fiscal buffer.
  • Even with an improvement in receipts from the Southern African Customs Union (SACU), Swaziland’s elevated level of spending is unsustainable, with major retrenchment needed to put spending levels on a sustainable path.

Second, although disinflation has been the norm across the region, there are a number of exceptions to this trend, where inflation remains in double digits or is exceptionally volatile (Ethiopia). Sustained monetary tightening will be needed to continue the steady disinflation underway in Guinea and Sierra Leone since 2011 and to achieve the sharp reduction in inflation targeted in Malawi. The marked volatility of inflation in Ethiopia in good part reflects weaknesses in the monetary transmission mechanism, with financial markets distorted by large-scale directed lending and artificially low treasury bill rates.

Third, as seen in Box 1.3, public debt ratios have been rising in many post-HIPC countries. In most cases, this trend does not raise concerns about the risk of renewed debt distress at this juncture—but it throws into relief the question as to whether this debt accumulation is delivering strong investment and growth, rather than elevated levels of consumption.

Fourth, with the risk of a significant global slowdown still present, policymakers need to assess the extent to which they have sufficient policy room to manage an adverse shock—the ability to finance larger deficits (avoiding procyclical fiscal contraction), and, where relevant, to ease monetary policy without triggering inflation and manage exchange rate pressures appropriately. Chapter 2 examines the adequacy of fiscal policy space across the region, concluding that, although debt burdens may be low, economies with thin financial markets have little room to finance larger deficits in a downturn and would need to turn to external donors for financing. For such economies, the route to building policy space is to contain domestic financing in normal times and build financial assets that can be drawn upon in a crisis—an approach that involves making difficult trade-offs between addressing public investment needs and building precautionary savings.

Fifth, growth in low-income sub-Saharan Africa has been strong for an extended period, but it has not been stellar by developing-country standards; it is not producing strong growth in wage employment; and it is not achieving poverty reduction at the pace needed to meet the relevant Millennium Development Goals (MDGs). Reorienting the composition of the government budget to areas that help accelerate growth and employment creation is needed—a shift toward public investment and quasi-investment activities (such as segments of the health and education budgets), financed either by a reduction in the resources going to current spending or an increase in tax revenue.8 With new energy generation a centerpiece of any growth strategy, energy subsidy reform can be an important tool for creating fiscal space while encouraging investment in electricity (Chapter 4).

Sixth, the newfound ability of frontier market economies in the region to tap global capital markets at reasonable terms provides a potentially important new source of funding for these countries. Developing the capacity to effectively manage the issuance process and handle ensuing debt management and investor relations issues will be important (Chapter 3); developing a clear understanding of the pros and cons of a sovereign bond issue, as compared with alternative sources of funding, is essential.

Seventh, several frontier economies in sub-Saharan Africa, such as Ghana, Kenya, and Nigeria, are attracting increasingly large volumes of portfolio inflows into domestic bond and equity markets. There are benefits generated by these inflows, including downward pressure on the government’s cost of borrowing—but, as the extended debate on the impact of monetary easing in the advanced economies on emerging market economies has hown, such inflows, typically volatile, create significant policy challenges of their own for domestic central banks. Policymakers will need to be alert to the dangers of asset price bubbles,9 while also being well positioned to handle a sudden reversal of these inflows in the event of shifts in investor risk appetite. Macroeconomic policy adjustments may be warranted in due course, although there are no obvious such cases at this juncture.

Finally, while short-term risks to the global outlook have eased, we touch briefly on the question of how African policymakers should react were there to be a significant downturn in the global economy—a topic discussed in some detail in the October 2012 edition of this publication (Chapter 1). In the event of a downturn, countries with fiscal policy space (many mineral exporters, countries with deep financial markets and moderate debt levels) will be able to let fiscal deficits increase, at a minimum by allowing automatic stabilizers to work. Countries with monetary autonomy and strong track records of containing inflation (such as South Africa) can ease monetary policy to provide support to demand. Countries with market-determined exchange rates (such as Kenya) can allow exchange rate depreciation to act as a shock absorber, adjusting monetary policy settings if inflation objectives are seriously threatened. By contrast, countries lacking policy buffers and appropriate instruments will likely need to seek official external financing, from bilateral or multilateral institutions. The IMF is well positioned to assist countries handling adverse shocks.

Concluding Remarks

Sub-Saharan Africa has been growing strongly for more than a decade. The near-term outlook is for growth to gain further traction, boosting living standards. But with the size of the labor force, already characterized by significant open unemployment and under-employment, set to surge as Africa experiences its demographic dividend (falling dependency ratios), there is clearly no room for complacency. Maintaining strong macroeconomic policy frameworks, while strengthening financial systems, will be essential as policymakers seek to address broader development challenges—but they are, of course, not sufficient for success, and should be complemented by robust solutions targeted at the challenge of employment creation.

Sub-Saharan Africa: Country Codes
Country codeCountry name
AGOAngola
BENBenin
BWABotswana
BFABurkina Faso
BDIBurundi
CMRCameroon
CPVCape Verde
CAFCentral African Republic
TCDChad
COMComoros
CODCongo, Dem. Rep. of
COGCongo, Republic of
CIVCôte d’Ivoire
GNQEquatorial Guinea
ERIEritrea
ETHEthiopia
GABGabon
GMBGambia, The
GHAGhana
GINGuinea
GNBGuinea-Bissau
KENKenya
LSOLesotho
LBRLiberia
MDGMadagascar
MWIMalawi
MLIMali
MUSMauritius
MOZMozambique
NAMNamibia
NERNiger
NGANigeria
RWARwanda
STPSão Tomé and Príncipe
SENSenegal
SYCSeychelles
SLESierra Leone
ZAFSouth Africa
SSDSouth Sudan
SWZSwaziland
TZATanzania
TGOTogo
UGAUganda
ZMBZambia
ZWEZimbabwe
Appendix Table.Sub-Saharan Africa: National Accounts Base Years
Country codeCurrent SNA base yearProjected new base year and expected year of completion (in parenthesis)SNA basis; expected year of SNA revision if different from base year (in parenthesis)GDP based on supply-use frameworkNumber of years between most recent base year revisionGDP revision (in percent of current GDP estimate)Rationale for revision to GDP estimate
AGO19872002 (2013)1993 SNAYes15
BDI19962005 (Not available)1993 SNAYes10
BEN19851999 (2014)1993 SNAYes14New recording for cotton. General government investment.
BFA2006Yes
BWA20061993 SNAYes10 (1996–06)
CAF19852005 (2014)1993 SNAYes20
CIV1996Yes
CMR20002005 (2013)2008 SNAYes510%Better implementation of the 1993 and 2008 SNA (2%) and better sources of data (8%).
COD19872002 (2014)1993 SNANo15
COG19902005 (2013)1993 SNAYes159% (for 2005)Imputed rents and general government investment.
COM19992007 (2013)1968 SNAYes17
CPV2007Not available28 (1980–07)
ERI2004Not compiled after 2005Not availableYes
ETH2000/012010/11 (2013)2008 SNA (2015)No10−1%Downward revision in industry and services.
GAB2001Yes
GHA2006Yes13 (1993–06)60%Improvement in allocating value added to forestry and livestock. Application of updated supply and use table to wholesale and retail trade. Expansion of services activities.
GIN20032006 (2013)No34% (for 2006)Better estimates of missing information in the formal sector (upward and downward). Imputed rents. General government investment.
GMB2004No28 (1976/77--2004)128%Latest data from Economic Census 2004/05 and HIES 2003/04.
GNB2005Yes19106% (for 2005)Better coverage of the economy, including informal sector. Imputed rents. General government investment..
GNQ19852007 (2013)No22
KEN20012009 (2013)2008 SNA (2015)Yes8
LBR19922008 (2015)AFR Desk calculations16
LSO20042013 (2015/16)Some of the requirements of 2008 SNAPartially applied10New data sources used.
MDG1984Yes
MLI19871997 (2013)1993 SNAYes1067%New methods for recording agriculture. Better coverage of formal (estimates for missing data) and informal (1.2.3 Survey) activities. Imputed rents. General government investment.
MOZ20032009 (2013)6
MUS20072012 (2015)Most of the requirements of 2008 SNA in 2015For base years5
MWI200920142008 SNA (2015)Yes5 (2002–07)37%Inclusion of the small holder production and production for own use.
NAM20042009 (2013)1993 SNANo6Not availableNot available.
NER2006Yes1922%Better coverage of the economy (ISBL, formal sector). Change in the calculation of general government investment.
NGA19902010 (2013)Not availableNoNot knownNot availableNot available.
RWA20062011 (2013)2008 SNA (2015)Yes5Not availableNot available.
SEN19992010 (2014)2008 SNAYes11New methods for recording agriculture. Salaries paid to technical assistants. General government investment.
SLE2006No5 (2001–06)13 %Updated source data and inclusion of new activities.
SSD20092008 SNANo
STP19962008 (Not available)1993 SNA (Not available)No12
SWZ19852011 (2014)Some of the requirements of 2008 SNA (2015/16)
SYC20061993 SNA
TCD19952005 (2014)Yes10
TGO20001993 SNA (2013)No225%Better estimates for the formal sector. Imputed rents. General government investment.
TZA200120072008 SNA (2015)No6Not availableNot available.
UGA20022009/10 (2013)2008 SNA (2015)Yes8Not availableNot available.
ZAF20052010 (2014)1993 SNA (Partial implementation of SNA 2008 will commence in 2014)Yes51.7 % (for 2006)New activities included and estimates for existing activities broadened (eg. financial services; household final consumption). New data sources introduced. Techniques for deriving volume estimates improved.
ZMB19942011 (2013)
ZWE19901993 SNA
Source: IMF Statistics Department with data from the corresponding National Statistics Offices.Note: The current SNA version is 1993 except for Angola, Burundi, Benin, Democratic Republic of Congo, Equatorial Guinea, Madagascar, Mali, São Tomé and Príncipe, and Togo, all of which use SNA 1968.
Source: IMF Statistics Department with data from the corresponding National Statistics Offices.Note: The current SNA version is 1993 except for Angola, Burundi, Benin, Democratic Republic of Congo, Equatorial Guinea, Madagascar, Mali, São Tomé and Príncipe, and Togo, all of which use SNA 1968.
1

All averages cited in the text exclude South Sudan—owing to the volatility in its main macroeconomic aggregates. This explains small discrepancies relative to the presentation in the IMF’s World Economic Outlook. Countries are grouped using the Regional Economic Outlook classification, as described in the explanatory notes to the Statistical Appendix.

2

Staff forecasts for the Central African Republic have not been updated to reflect the impact of the conflict in the country since December 2012.

3

End-of-period basis in all cases.

4

The figures in this section typically refer to general government balances. The operations of state-owned enterprises, which are significant in some countries, are not covered by these figures.

5

2012 saw the completion of the HIPC process by Côte d’Ivoire, Guinea, and Comoros, leaving Chad as the only African country still to “graduate” after having reached the so-called Decision Point.

6

The region could also benefit from upside risks, but these are not analyzed here.

7

Angola, Cameroon, Côte d’Ivoire, Ethiopia, Ghana, Kenya, Nigeria, Senegal, South Africa, Tanzania, and Uganda.

8

Infrastructure provision need not be the sole purview of the state; public-private partnerships offer an alternative vehicle, albeit one that requires the acquisition of capable negotiation capacity by the state.

9

The stock market crash in Nigeria in 2009, which helped to bring down one-third of the banking system, is a good illustration of how things can go badly wrong.

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