IMF, IDEG launch Sub-Saharan Africa Economic Outlook

Accra, May 14, GNA - The International Monetary Fund (IMF) and the Institute for Democratic Governance (IDEG), on Tuesday launched the May 2013 edition of the regional economic outlook for Sub-Saharan Africa (SSA) in Accra.

The report covered economic policies in SSA, including the SSA building momentum in a multi-speed world, strengthening fiscal policy space, issuing international sovereign bonds, and reforming energy subsidies for SSA countries.

Explaining the topic, building momentum in a multi-speed world for SSA countries, Madam Antoinette Sayeh, Director, African Department, IMF, said with five per cent growth in 2012, economic activity in SSA remained strong.

She said growth was particularly strong in oil-exporting and low-income countries and added that middle-income countries including Ghana with closer ties to the Euro-area saw a significant deceleration, while the smaller fragile states lagging behind the regional average.

Madam Sayeh said inflation declined in most SSA countries reflecting stable global commodity prices, improved local climate conditions, and tight monetary policy.

Mr Sean Nolan, Deputy Director, African Department, IMF said fiscal balances weakened in most SSA countries during the global financial crisis, with increases in deficits offset by consolidation efforts as growth rebounded in 2010-2012.

Mr Nolan said while majority of SSA countries are not currently constrained by high debt levels, many could find it difficult to raise sufficient domestic financing to meet larger deficits commitment in the event of an economic downturn.

He said, nevertheless, most SSA countries had the capacity to create fiscal space overtime through expenditure rationalisation and revenue mobilisation reforms, while safeguarding social and developmental objectives.

On the issuing of international sovereign bonds, Mr Nolan said as at the end of March, 11 SSA countries had issued international sovereign bonds for reasons that included infrastructure, benchmarking, and debt restructuring.

He said bond issuance in the region had affected the composition of public debt, rather than debt levels, and have often led to increasing currency risks.

He said the bonds are priced relatively favourably, reflecting good prospects for SSA economies.

He said many SSA countries might tap international markets in the near future on the back of the favourable global conditions.

Mr Nolan, however, advised SSA countries that international sovereign bonds might not be the best option for financing infrastructure investment.

On reforming energy subsidies, Mr Nolan said the fiscal cost of subsiding energy in SSA was estimated at about three per cent of gross domestic product, equivalent to total public spending on health care.

He said energy subsidies in SSA are poorly targeted, with the bulk of the benefits accruing to the better-off.

Besides, the pervasive energy subsidies have discouraged investment and maintenance in the energy sector leading to costly and inadequate energy supply that is increasingly a bottleneck for economic growth, Mr Nolan added.

  GNA