Front Matter

Front Matter

International Monetary Fund. African Dept.
Published Date:
May 2018
  • ShareShare
Show Summary Details

World Economic and Financial Surveys

Regional Economic Outlook

Sub-Saharan Africa

Domestic Revenue Mobilization and Private Investment

APR 18


©2018 International Monetary Fund

Cataloging-in-Publication Data

Regional economic outlook. Sub-Saharan Africa. — Washington, D.C.: International Monetary Fund, 2003–

  • v. ; cm. — (World economic and financial surveys, 0258-7440)

Began in 2003.

Some issues have thematic titles.

1. Economic forecasting — Africa, Sub-Saharan — Periodicals. 2. Africa, Sub-Saharan — Economic conditions — 1960 — Periodicals. 3. Economic development — Africa, Sub-Saharan — Periodicals. I. Title: Sub-Saharan Africa. II. International Monetary Fund. III. Series: World economic and financial surveys.

HC800.R4 2017

ISBN: 978-1-48433-986-2 (paper)

ISBN: 978-1-48434-889-5 (Web PDF)

The Regional Economic Outlook: Sub-Saharan Africa is published twice a year, in the spring and fall, to review developments in sub-Saharan Africa. Both projections and policy considerations are those of the IMF staff and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Publication orders may be placed online, by fax, or through the mail:

International Monetary Fund, Publication Services

P.O. Box 92780, Washington, DC 20090 (U.S.A.)

Tel.: (202) 623-7430 Fax: (202) 623-7201

E-mail :




African Continental Free Trade Area


Arab Maghreb Union


Bank of Central African States


West African Development Bank


cyclically adjusted primary balance


correspondent banking relationships


Economic and Monetary Community of Central Africa


Community of Sahel-Saharan States


corporate income tax


Central African Banking Commission


Common Market for Eastern and Southern Africa


debt, investment, growth, and natural resources


East African Community


Economic Community of Central African States


emerging market and developing economies


all emerging market economies


financially constrained


foreign direct investment


Forum on China-Africa Cooperation


gross domestic product


generalized method of moments


intergovernmental authority on development


International Country Risk Guide


information and communication technology


International Centre for Trade and Sustainable Development


Investor and Exporter Foreign Exchange


Indian Ocean Commission


local projections method


Middle East and North Africa


non–financially constrained


official development aid


personal income tax


public-private partnerships


PPP Fiscal Risk Assessment Model


Poverty Reduction and Growth Trust


regional economic communities


Regional Economic Outlook (IMF)


return on assets


Southern African Customs Union


Southern African Development Community


South African National Roads Agency Limited


South Africa Reserve Bank


Sustainable Development Goals


special economic zones


Sub-Saharan Africa


Tripartite Free Trade Area


value-added tax


West African Economic and Monetary Union


World Economic Outlook (IMF)


The April 2018 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Papa N’Diaye under the direction of David Robinson.

The team included Francisco Arizala, Romain Bouis, Paolo Cavallino, Chuling Chen, Reda Cherif, Xiangming Fang, Jesus Gonzalez-Garcia, Cleary Haines, John Hooley, Gabriel Leost, Miguel Pereira Mendes, Nkunde Mwase, Mustafa Yenice, Toomas Orav, Hector Perez-Saiz, Ashan Rodriguez, Manuel Rosales, Alex Segura-Ubiergo, Jaroslaw Wieczorek, and Ludger Wocken.

Specific contributions were made by Karim Barhoumi, Matthieu Bellon, Dalia Hakura, Nana Hammah, Thordur Jonasson, James Knight, Trevor Lessard, Margaux MacDonald, Edouard Martin, Giovanni Melina, Alice Mugnier, Garth Nicholls, Mathilde Perinet, Marcos Poplawski-Ribeiro, Ivohasina F. Razafimahefa, Sampawende J. Tapsoba, and Shirin Nikaein Towfighian.

Charlotte Vazquez was responsible for document production, with production assistance from Natasha Minges and Sarahalou Pilouzoue. The editing and production were overseen by Linda Long 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).

Editor’s Note

April 30, 2018

Table SA24. External Debt, Official Debt, Debtor Based table on page 116 has been replaced; the new version includes revised figures for Senegal.

Executive Summary

Slow Recovery Amid Growing Challenges

Sub-Saharan Africa is set to enjoy a modest growth uptick, but vulnerabilities have risen and action is needed to raise medium-term growth potential. Average growth in the region is projected to rise from 2.8 percent in 2017 to 3.4 percent in 2018, with growth accelerating in about two-thirds of the countries in the region aided by stronger global growth, higher commodity prices, and improved market access. External imbalances have narrowed, but progress with fiscal consolidation has been mixed and vulnerabilities are rising: about 40 percent of low-income countries in the region are now in debt distress or assessed as being at high risk of debt distress. On current policies, average growth in the region is expected to plateau below 4 percent—barely 1 percent in per capita terms—over the medium term.

Across countries, economic outcomes are far from uniform. Oil exporters are still dealing with the legacy of the largest real oil price decline since 1970, with growth well below past trends and rising debt levels; several other economies, both resource intensive and nonresource intensive and some fragile states, continue to grow at 6 percent or more, while a number of countries are suffering from internal conflicts, with record numbers of refugees and internally displaced people. The two largest economies in the region, Nigeria and South Africa, remain below trend growth, weighing heavily on prospects for the region.

Looking forward, the impetus from the favorable external environment is likely to fade. The current growth spurt in advanced economies is expected to taper off, and the borrowing terms for the region’s frontier markets will likely become less favorable, in step with the normalization of US monetary policy, which could coincide with higher refinancing needs for many countries across the region.

Turning the current recovery into sustained strong growth to improve living standards and meet social demands would require policies to both reduce vulnerabilities and raise medium-term growth prospects. Prudent fiscal policy is needed to rein in public debt, while monetary policy must be geared toward ensuring low inflation. And countries should also continue to advance structural reforms to reduce market distortions, shaping an environment that fosters private investment, and strengthen revenue mobilization to give governments the means to invest in physical and human capital, and protect social spending, even during fiscal consolidation. Reform priorities and sequencing vary with individual country characteristics and strength of fundamentals.

  • Oil-exporting countries should continue to adjust their fiscal position and advance economic diversification, taking advantage of the respite provided by the uptick in commodity prices, while taking credible measures to boost non-oil revenues and enhance the efficiency of public spending. Countries that opted for exchange rate flexibility need to eliminate foreign exchange restrictions and multiple currency practices and allow their exchange rate to adjust to reflect economic fundamentals.

  • Oil-importing countries, which have experienced rapid growth on the back of large public investment outlays but at the cost of rising debt, must aim to transfer the growth momentum from the public to the private sector and reduce fiscal imbalances to lower vulnerabilities that could threaten the achievement of sustainable growth over the medium term.

The risks to the outlook for the region depend on the decisiveness of policy actions. The uptick in oil prices, impending elections, and political transitions in many countries may reduce appetite for difficult reforms and could lead to further policy slippages. In addition, protracted internal conflicts continue to cloud the outlook in several countries. At the same time, the regional outlook could significantly strengthen on the back of an improved business environment and strengthened confidence. This will occur, if the uncertainties in countries undergoing political transition dissipate and countries that are still in need of adjustment make decisive progress toward macroeconomic stabilization.

Domestic Revenue Mobilization in Sub-Saharan Africa: What are the Possibilities?

Domestic revenue mobilization is one of the most pressing policy challenges facing sub-Saharan African countries. Nearly all countries are seeking to raise revenues to make progress toward their Sustainable Development Goals while preserving fiscal sustainability. Despite substantial progress in revenue mobilization over the past two decades, sub-Saharan Africa is still the region with the lowest revenue-to-GDP ratio. Examining structural factors that account for this underperformance, it is estimated that the region could, on average, mobilize between 3 and 5 percent of GDP in additional tax revenues—significantly more than what the region has received each year from international aid. Key steps would be to strengthen value-added tax systems; streamline exemptions; and expand coverage of income taxes. Case studies of successful revenue mobilization episodes in the region highlight the importance of medium-term revenue strategies to strengthen the basic building blocks of effective tax administration; emphasizing efforts to broaden the tax base; and modernizing institutional processes. Developing new sources of taxation, such as property taxes, and harnessing new technologies that could facilitate access to more reliable information are also key. Moreover, since revenue mobilization is a process that needs to be sustained for years to have a durable impact, countries need to build a constituency for reform, based on a credible commitment to improved governance and transparency.

Private Investment to Rejuvenate Growth

Increasing private investment is critical for the region to achieve sustainable strong growth and improve social outcomes over the medium term. While public investment in the region is at a similar level to other regions of the world, private investment in sub-Saharan Africa lags well below all other regions. Empirical work suggests that the strength of current and prospective economic activity plays a dominant role in driving private firms’ decisions to invest. Beyond that, strengthening the regulatory and insolvency frameworks, increased trade liberalization, and deeper financial markets could also help lift private investment. As such reforms take time, countries have pursued other avenues in an attempt to jump-start private investment, notably public-private partnerships (PPPs), special economic zones (SEZs), and mechanisms to attract foreign direct investment (FDI). PPPs have been widely used in the region, but these partnerships need to be considered carefully in view of the risks involved. Notably, proper management of PPPs requires the adoption of institutional and legal frameworks to assess and limit risks as such projects often entail sizable contingent liabilities. SEZs, while in some cases successful in attracting investors to the region, benefit their host economies more where they establish strong links with host country firms and become better integrated in the national and regional development strategies. Recent international initiatives (for example, the G20 Compact with Africa and the Belt and Road Initiative) potentially provide another opportunity to support private investment in sub-Saharan Africa, including by fostering the institutional reforms to encourage FDI and PPPs.

    Other Resources Citing This Publication