The World Bank says Nigeria and other African Governments urgently need to restore Macroeconomic stability and protect the poor in a context of slow growth and high inflation.
The World Bank also claimed African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010.
This was disclosed in a press release issued by the world bank titled ”African Governments Urgently Need to Restore Macro-Economic Stability and Protect the Poor in a Context of Slow Growth, High Inflation”
Biannual analysis of the near-term regional macroeconomic outlook shows that economic growth in Sub-Saharan Africa (SSA) is set to decelerate from 4.1% in 2021 to 3.3% in 2022, a downward revision of 0.3% since April’s Pulse forecast according to the World Bank’s latest Africa’s Pulse. This is mainly due to the slowdown in global growth, including flagging demand from China for commodities produced in Africa.
Due to decreased corporate investments and consumer consumption, the war in Ukraine is impacting economic activity and aggravating already high inflation. 29 of the 33 SSA nations having information as of July 2022 had inflation rates exceeding 5%, while 17 nations experienced double-digit inflation.
What the World bank is saying
The bank said, “Global headwinds are slowing Africa’s economic growth as countries continue to contend with rising inflation, hindering progress on poverty reduction. The risk of stagflation comes at a time when high-interest rates and debt are forcing African governments to make difficult choices as they try to protect people’s jobs, purchasing power, and development gains.”
- Andrew Dabalen, World Bank Chief Economist for Africa stated that “these trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic. 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.”
- The bank claimed that one of the world’s most food-insecure regions is suffering greatly as a result of elevated food prices. Due to recent economic shocks, instability, war, and extreme weather, hunger has drastically grown throughout SSA.
According to the Global Report on Food Crises 2022 Mid-Year Update, more than one in five Africans experience hunger, and in 2022, 140 million more people than in 2021 were predicted to experience severe food insecurity.
- “The interconnected crises come at a time when the fiscal space required to mount effective government responses is all but gone. In many countries, public savings have been depleted by earlier programs to counter the economic fallout of the COVID-19 pandemic, though resource-rich countries in some cases have benefited from high commodity prices and managed to improve their balance sheet.”
The world bank spoke about the growing debt to GDP ratio, particularly in the high inflationary environment.
- The bank said, “Debt is projected to stay elevated at 58.6% of GDP in 2022 in SSA. African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% 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. At the same time, 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.”
According to the bank, it is crucial to increase the effectiveness of current resources and to maximize taxes in light of the current difficult situation.
For instance, by refocusing their public spending away from poorly targeted subsidies and toward nutrition-sensitive social protection programs, irrigation projects, and research and development with a track record of producing high returns, governments can safeguard human capital and ensure climate-proof food production.
