Economic growth in Sub-Saharan Africa is set to decelerate from 4.1percent in 2021 to 3.3 percent this year, a downward revision of 0.3 percentage points, according to the latest World Bank report.
The report released on Tuesday, October 4, attributed the dump to slowdown in global growth, including disruption of value chains, Russia-Ukraine crisis exacerbating already high inflation and weighing on economic activity by depressing both business investments and household consumption.
Dubbed ‘the World Bank’s latest Africa Pulse’, the report is a biennial analysis of the near-term regional macroeconomic outlook.
According to the findings, as of July 2022, 29 of 33 countries in the Sub-Saharan region had inflation rates over 5 percent while 17 countries had double-digit inflation.
"These trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic,” said Andrew Dabalen, World Bank Chief Economist for Africa.
"What is most worrisome is the impact of high food prices on people struggling to feed their families, threatening long-term human development. This calls for urgent action from policymakers to restore macro-economic stability and support the poorest households while reorienting their food and agriculture spending to achieve future resilience.”
Elevated food prices are causing hardships with severe consequences in one of the world’s most food-insecure regions.
Other findings
Debt is projected to stay elevated at 58.6 percent of GDP in 2022 in Sub-Saharan Africa, according to the statistics.
African governments spent 16.5 percent of their revenues servicing external debt in 2021, up from less than 5 percent in 2010.
Eight out of 38 IDA-eligible countries in the region are in debt distress, and 14 are at high risk of joining them.
Ordinarily, IDA aims to reduce poverty by providing zero to low-interest loans (credits) and grants for programs that boost economic growth, reduce inequalities and improve people’s living conditions.
Meanwhile, the report also highlighted that high commercial borrowing costs make it difficult for countries to borrow on national and international markets, while tightening global financial conditions are weakening currencies and increasing African countries’ external borrowing costs.
This challenging environment makes it essential to improve the efficiency of existing resources and to optimise taxes.
"In the agriculture and food sector, for example, governments have the opportunity to protect human capital and climate-proof food production by re-orienting their public spending away from poorly targeted subsidies toward nutrition-sensitive social protection programs, irrigation works, and research and development known to have high returns,” according to the report.
For instance, one dollar invested in agricultural research yields, on average, benefits equivalent to $10 (roughly Rwf10,000), while gains from investments in irrigation are also potentially high in the region.
Such reprioritisation maintains the level of spending in a critical sector, while raising productivity, building resilience to climate change, and achieving food security for all.
The report recommends that creating a better environment for agribusiness and facilitating intra-regional food trade could also increase long-term food security in a region that is highly dependent on food imports.