Mind the gap: delivering sustainable growth for Sub-Saharan Africa
‘Revenue mobilisation is key for securing the resources needed to achieve SDGs’. This was the message Abebe Selassie, Director of the African Department at the IMF, delivered to African leaders at the 7th African Fiscal Forum in Nairobi last month.
If the SDGs are to become a reality in Africa over the next decade, the financing gap across the continent will need to be addressed. For the IMF, robust macro-economic growth is the place to start. IMF Africa’s Regional Economic Outlook projects higher growth rates on the horizon as oil-exporting countries like Angola and Nigeria recover from the 2014 commodity price shock and more diversified economies maintain their strong growth. GDP growth for the whole region is now expected to rise from 3.1% in 2018 to 3.8% in 2019 with continued acceleration thereafter.
But, as Mr. Selassie and the IMF have pointed out, unhealthy balance sheets could put this recovery at risk. Government borrowing has been on the rise across the region, partly to finance large-scale infrastructure and public works projects. Worryingly, four countries (Cabo Verde, Eritrea, Mozambique and Republic of Congo) now have a debt to GDP ratio of over 100% and the regional average has nearly doubled over the last 10 years. While infrastructure development is essential and large public projects can kick-start job-creation, financing will now need to move to a more sustainable basis.
What will happen to Africa’s growth if the continent falls into another debt crisis? What are the financing solutions for the economies of tomorrow? Will job-driven sustainable growth unlock the demographic dividend or will rising debt and under-investment spell disaster for Africa’s youth?
There are no simple answers to these questions, but one thing is clear: stakeholders across the public and private sectors have their role to play and cooperation will be needed. To hear more from Abebe Selassie and other thought-leaders on the big questions facing African business development click here to book your place at The Annual Debate 2019.