IMF Report April 2024 – Africa South of the Sahara: Growth, Challenges, and Opportunities

After a period of turbulence, Africa is poised for gradual improvement, with economic growth projected to rise from 3.4 percent in 2023 to 3.8 percent in 2024. Nearly two-thirds of countries in the region anticipate higher growth, signalling positive momentum. Economic recovery is expected to continue beyond 2024, with growth projections reaching 4.0 percent in 2025. Additionally, inflation has decreased significantly, public debt ratios have stabilised, and several countries have re-entered international markets by issuing Eurobonds, marking an end to a two-year hiatus.

Despite these positive developments, challenges persist. Governments in the region face funding shortages, high borrowing costs, and impending debt repayments, contributing to a funding squeeze. Risks to the outlook remain tilted to the downside, with vulnerabilities to global external shocks, political instability, and climate events. To address these challenges, three policy priorities are essential: improving public finances, maintaining price stability through monetary policy, and implementing structural reforms to diversify funding sources and economies. Additional support from the international community will be crucial for African countries South of the Sahara to achieve a more inclusive, sustainable, and prosperous future.

Many African countries have initiated fiscal tightening plans, emphasising the importance of revenue-enhancing measures over cuts to investment and priority spending. Building public trust around fiscal consolidation plans is crucial, requiring effective strategies such as compensatory measures and adequate sequencing to ensure successful implementation.

The region’s abundance of critical minerals presents a significant opportunity for transformation, particularly in the context of global shifts towards clean energy. Developing processing industries alongside mineral extraction can amplify economic gains and foster broader development. Cross-border collaboration and integration are vital for leveraging the region’s mineral diversity and attracting investment. Structural reforms at the country level to support domestic processing industries are essential for maximising returns from critical mineral resources.

With the region’s population set to double by 2050, investing in education is paramount for future growth and employment. Achieving universal enrollment by 2030 may require doubling education expenditures as a share of GDP. Governments must prioritise education budgets and ensure efficient spending, while the international community should continue to prioritise education in their efforts to support Africa’s development.

In conclusion, while African nations South of the Sahara faces challenges, there are significant opportunities for growth and transformation. Strategic policy measures and international cooperation will be essential for realising the region’s potential and fostering a prosperous future for its people.

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Source: IMF