- International Monetary Fund. African Dept.
- Published Date:
- May 2013
©2013 International Monetary Fund
Regional economic outlook. Sub-Saharan Africa. — Washington, D.C.: International
Monetary Fund, 2003–
v. ; cm. — (World economic and financial surveys, 0258-7440)
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- In Brief
- 1. Building Momentum in a Multi-Speed World
- 2. Strengthening Fiscal Policy Space
- 3. Issuing International Sovereign Bonds: Opportunities and Challenges for Sub-Saharan Africa
- 4. Reforming Energy Subsidies
- Statistical Appendix
- Publications of the IMF African Department, 2009–13
- 1.1. Revisions to National Accounts Estimates among Sub-Saharan African Countries
- 1.2. Changing Monetary Policy Frameworks in East Africa
- 1.3. Debt Trends in Selected Sub-Saharan African Countries
- 1.4. The Financing of Current Account Deficits in Low-Income Countries
- 1.5. The Sectoral Distribution of Employment in Sub-Saharan Africa
- 2.1. Public Debt Sustainability Threshold
- 2.2. Do Vulnerable Low-Income Countries Have Fiscal Policy Space?
- 3.1. Sub-Saharan Africa: Local Currency Bond Markets
- 3.2. Zambia: Accessing International Sovereign Bond Markets
- 3.3. Nigeria: Issuing a Sovereign Bond
- 3.4. Côte d’Ivoire: Bond Issuance for Debt Restructuring
- 4.1. Energy Reforms Payoff in Kenya and Uganda
- 4.2. Mitigating Measures to Protect the Poor
- 1.1. Sub-Saharan Africa: Real GDP Growth
- 1.2. Sub-Saharan Africa: Other Macroeconomic Indicators
- 3.1. Sub-Saharan Africa: Sovereign Bond Issuances
- 3.2. Sub-Saharan Africa: Sovereign Credit Ratings, March 2013
- 3.3. Sub-Saharan Africa: Maximum Amortization in 2013–17 Exceeding 500 million U.S. dollars
- 3.4. Comparison of Financing Sources
- 1.1. Sub-Saharan Africa: Food and Nonfood Inflation
- 1.2. Sub-Saharan Africa: Overall Fiscal Balance, 2007–14
- 1.3. Sub-Saharan Africa: General Government Debt, 2007–14
- 1.4. Sub-Saharan Africa: External Current Account Balance, 2004–14
- 1.5. Sub-Saharan Africa: Exports and Imports by Regional Groups
- 1.6. Sub-Saharan Africa: Stock Market Indices
- 1.7. Sub-Saharan Africa: Reserve Coverage and Current Account Balance
- 1.8. Selected Regions: Real GDP Growth, 2008–14
- 1.9. Selected Regions: Inflation, 2008–14
- 1.10. Sub-Saharan Africa: Growth Prospects, 2013 and 2014
- 1.11. Sub-Saharan Africa: Downside Scenarios
- 2.1. Sub-Saharan Africa: Density of Public Sector Debt, 2000–12
- 2.2. Sub-Saharan Africa: Total Public Debt Accumulation Decomposition, 2000–12
- 2.3. Sub-Saharan Africa: Change in Public Sector Debt, 2007–12
- 2.4. Sub-Saharan Africa: Public Sector Debt in 2012 and Sustainability Thresholds
- 2.5. Sub-Saharan Africa: Density of Public Sector Debt, 2012–17
- 2.6. Sub-Saharan Africa: Public Sector Debt in 2012, 2017, and Sustainability Thresholds
- 2.7. Sub-Saharan Africa: Composition of Government Deficit Financing, 2007–12
- 2.8. Sub-Saharan Africa: Composition of Government Deficit Financing, 2008–12
- 2.9. Sub-Saharan Africa: External Budget Support, 2007–12
- 2.10. Sub-Saharan Africa: Composition of Credit, end-2012 or the Most Recent Year Available
- 2.11. Sub-Saharan Africa: Changes in Government Deposits, 2000–12
- 2.12. Sub-Saharan Africa: Government Deposits in Banking System and Foreign Reserves, end-2012 or the Most Recent Year Available
- 3.1. Sub-Saharan Africa: Recent Sovereign Bond Issuances
- 3.2. Sub-Saharan Africa: Sovereign Debt Restructurings with Private Creditors, 1980–2010
- 3.3. Sub-Saharan Africa: Primary Fiscal Balance, Expenditure, and Public Debt-Cases Other than Debt Restructuring
- 3.4. Sub-Saharan Africa: Primary Fiscal Balance, Expenditure, and Public Debt-Cases Involving Debt Restructuring
- 3.5. Sub-Saharan Africa: Share of Public Debt Denominated in Foreign Currency
- 3.6. Sub-Saharan Africa: Public Investment after Bond Issuance
- 3.7. Sub-Saharan Africa: Sovereign Bond Issuance Terms
- 3.8. Sub-Saharan Africa: Market Performance for Selected Countries
- 3.9. Sub-Saharan Africa: Sovereign Bond Ratings, 2012
- 3.10. Sub-Saharan Africa: Total Public External Debt by Creditor, 2011
- 4.1. Selected Regions: Electricity Production, 1975–2009
Bank for International Settlements
Bank of Uganda
Brazil, Russia, India, and China
Central Bank of Kenya
Economic and Monetary Community of Central Africa
Currency zone of CEMAC and WAEMU
consumer price index
Country Policy & Institutional Assessment
Debt Management Office
debt sustainability analyses
debt sustainability framework
foreign direct investment
gross domestic product
growth decline vulnerability index
Heavily Indebted Poor Countries
International Finance Corporation
local currency bond market
liquified petroleum gas
Millennium Development Goals
Multilateral Debt Relief Initiative
Middle East and North Africa
monetary policy framework
net present value
Poverty Reduction Growth Trust
Poverty & Social Impact Analysis
Southern African Customs Union
Chicago Board of Options Exchange Volatility Index
West African Economic & Monetary Union
This May 2013 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Alfredo Cuevas under the direction of Seán Nolan.
The team included Trevor Alleyne, Jorge Iván Canales-Kriljenko, Emily Forrest, Cheikh Anta Gueye, Anne-Marie Gulde-Wolf, Cleary Haines, Mumtaz Hussain, Promise Kamanga, Mauro Mecagni, Montfort Mlachila, Yibin Mu, Seok Gil Park, Jon Shields, Juan Treviño, Mauricio Villafuerte, Sebastian Weber, and Masafumi Yabara.
Specific contributions were made by Isabell Adenauer, Tamon Asonuma, Sebastian Corrales, Sandra Donnally, Hamid Davoodi, Rodrigo Garcia-Verdu, Andrew Jonelis, Borislava Mircheva, Bakar Ould Abdallah, Alun Thomas, and John Wakeman-Linn; and with editorial assistance from Jenny Kletzin DiBiase. Natasha Minges was responsible for document production, with assistance from Anne O’Donoghue, and publishing assistance from Charlotte Vazquez. The editing and production was overseen by Joe Procopio with assistance from Martha Bonilla of the Communications Department.
The following conventions are used in this publication:
- In tables, a blank cell indicates “not applicable,” ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
- An en-dash (–) between years or months (for example, 2009–10 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).
- “Billion” means a thousand million; “trillion” means a thousand billion.
- “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).
Chapter 1: Building Momentum in A Multi-Speed World
With 5 percent growth in 2012, economic activity in sub-Saharan Africa remained strong, slowing only marginally from the 2010–11 rate. Growth was particularly strong among oil exporters and low-income countries. Middle-income countries with closer ties to the euro area saw a significant deceleration, while the smaller fragile states still lagged behind the regional average. Civil unrest remained a drag on growth in a few countries. Inflation declined in most of the region, reflecting more stable global commodity prices, improved local climate conditions, and tight monetary policy.
Growth in sub-Saharan Africa is expected to accelerate moderately in 2013–14, with inflation continuing its downward trend. Growth projections for the region reflect, in part, the gradually improving outlook for the global economy. Locally, investment in export-oriented sectors is an important driver of growth going forward. Growth in 2013 will be further supported by the end of negative one-off factors in some countries, such as the floods in Nigeria in 2012 and drought in other regions, and the gradual normalization of activity in post-conflict countries. Likely moderating influences on inflation include subdued nonoil commodity prices and favorable local crops; more than half the countries in the region may post inflation rates of 5 percent or less by end-2014.
The robust growth path projected for sub-Saharan Africa is subject to downside risks that could originate from inside or outside the region. Threats to the outlook from outside the region include (i) the possibility of several more years of economic stagnation in the euro area and (ii) a sharp drop in investment in major emerging market economies. In the first case, the impact on sub-Saharan Africa would be modest but persistent, and it would be felt especially in countries that are more integrated with the global economy. The second case would slow growth more noticeably, but not enough to derail it, and the region would rebound quickly. Downside risks from within the region include adverse climate developments and internal conflict. Such events, though potentially severe in their impact domestically and on close neighbors, usually do not have significant regional effects.
Given these risks, countries with thin policy buffers that continue to grow rapidly should give priority to rebuilding buffers to handle adverse external shocks, while safeguarding long-term growth and developmental needs. With inflation projections relatively benign and growth generally robust (only the bloc of middle-income countries is grappling with the problem of sluggish economic activity), the region’s policymakers should take this opportunity to rebuild policy buffers, especially where vulnerabilities and exposures are high and policy space restricted. As global risks moderate further, priorities can shift to generating fiscal space to support public investment and poverty-reduction spending.
Chapter 2: Strengthening Fiscal Policy Space
A frequently heard concern is that governments in sub-Saharan Africa may be more constrained today than before the crisis when it comes to their ability to respond to adverse shocks with fiscal policy tools. Fiscal balances weakened in most sub-Saharan African countries during the global crisis, with increases in deficits being partly offset by consolidation efforts as growth rebounded. To address these concerns, this chapter examines various aspects of a government’s financial position, including the riskiness and sustainability of public sector debt, and the ability to finance higher deficits.
While the majority of countries in sub-Saharan Africa are not currently constrained by high debt levels, many could find it difficult to raise sufficient financing for larger deficits in the event of a downturn. Elevated public debt levels are a constraint on fiscal policy space in several cases, but most countries now have relatively moderate levels of public debt, with IMF-World Bank debt sustainability assessments pointing to significant concerns in only a few instances. The ability to finance larger deficits domestically is constrained in much of the region by the size of domestic financial markets. Nevertheless, most sub-Saharan African countries have the capacity to create fiscal space over time through expenditure rationalization and revenue mobilization reforms, while safeguarding social and developmental objectives. In countries with the thinnest policy buffers, such capacity should be used to strengthen the governments’ fiscal ability to support the economy in the event of a downturn.
Chapter 3: Issuing International Sovereign Bonds: Opportunities and Challenges for Sub-Saharan Africa
Sub-Saharan Africa’s access to capital markets has grown significantly, facilitated by easy global financial conditions. By the end of March 2013, a diverse array of 11 countries in the region had issued international sovereign bonds, for reasons that include infrastructure building, benchmarking, and debt restructuring. The international bond issuances in the region have mainly affected the composition of public debt, rather than debt levels, and have often led to increasing currency risks. These bonds are currently priced relatively favorably, reflecting good prospects for these economies and strong market demand. Market intelligence suggests other countries in sub-Saharan Africa may tap international markets in the near future, taking advantage of the favorable global conditions.
This chapter examines potential advantages and risks of issuing international sovereign bonds within broader fiscal policy considerations. Countries in the region should maintain prudent fiscal policies that safeguard long-term sustainability, and develop appropriate medium-term debt management strategies which weigh bond issuances against a range of financing options. To get the best possible access terms, the design of international bonds should be consistent with that framework and should follow best practices in accessing financial markets. This approach could help lock in low interest rates while smoothing the maturity profile of the entire public debt portfolio. In this context, international sovereign bonds may not be the best option for financing infrastructure investment, as other funding options may provide more tailored and cost-effective financing.
Chapter 4: Reforming Energy Subsidies
For many countries in sub-Saharan Africa, explicit and implicit energy and fuel subsidies continue to crowd out more efficient spending on much-needed social and infrastructure projects. Total energy subsidies, estimated at about 3 percent of GDP, are often poorly targeted, with the bulk of the benefits accruing to the more affluent consumers. 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 constraining economic growth.
Despite these difficulties in the energy sector, the experiences of various sub-Saharan African countries point to the key elements for designing a successful reform strategy: careful preparation, early consultation with stakeholders, and a well-planned public communications campaign have proven crucial. Public acceptance is a key component, and past experiences show that such acceptance is much more likely for reforms that have a gradual phasing-in period, well-targeted mitigating measures for the poor, and reform of state-owned enterprises in the energy sector. Finally, this chapter includes a number of actions and reforms that can help ensure the durability of energy reforms, including the depoliticizing of the energy pricing process.