By Okeoghene Akubuike
The World Bank says African Governments urgently need to restore Macroeconomic stability and protect the poor in a context of slow growth and high inflation.
This is contained in a statement obtained from the World Bank website on Tuesday in Abuja by the News Agency of Nigeria (NAN).
The statement said global headwinds were slowing Africa’s economic growth as countries continued to contend with rising inflation, hindering progress on poverty reduction.
It said the risk of stagflation was coming at a time when high interest rates and debt were forcing African governments to make difficult choices as they tried to protect people’s jobs, purchasing power and development gains.
According to the World Bank’s latest Africa’s Pulse, a biannual analysis of the near-term regional macroeconomic outlook, economic growth in Sub-Saharan Africa (SSA) is set to decelerate from 4.1 per cent in 2021 to 3.3 per cent in 2022.
“This is a downward revision of 0.3 percentage points since April’s Pulse forecast, mainly as a result of a slowdown in global growth, including flagging demand from China for commodities produced in Africa.”
It said the war in Ukraine was exacerbating already high inflation and weighing on economic activity by depressing both business investments and household consumption.
“As of July 2022, 29 out of 33 countries in SSA with available information had inflation rates over five per cent,
while 17 countries had double-digit inflation.”
The statement quoted Andrew Dabalen, World Bank Chief Economist for Africa as saying, “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 statement said elevated food prices were causing hardship with severe consequences in one of the world’s most food-insecure regions.
It said hunger had sharply increased in SSA in recent years driven by economic shocks, violence and conflicts, and extreme weather.
“More than one in five people in Africa suffer from hunger and an estimated 140 million people faced acute food insecurity in 2022, up from 120 million people in 2021, according to the Global Report on Food Crises 2022 Mid-Year Update.
“The interconnected crises come at a time when the fiscal space required to mount effective government responses is all but gone. ”
The statement said in many countries, public savings have be,en depleted by earlier programmes to counter the economic fallout of the COVID-19 pandemic.
It said, however, resource-rich countries in some cases had benefited from high commodity prices and managed to improve their balance sheet.
According to the statement, debt is projected to stay elevated at 58.6 per cent of GDP in 2022 in SSA.
It said African governments spent 16.5 per cent of their revenues servicing external debt in 2021, up from less than five per cent 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.
“This challenging environment makes it essential to improve the efficiency of existing resources and to optimise taxes.”
The statement said in the agriculture and food sector for example, governments had the opportunity to protect human capital and climate-proof food production.
” This will be done by re-orienting their public spending away from poorly targeted subsidies toward nutrition-sensitive social protection programmes, irrigation works, and research and development known to have high returns.
“For example, one dollar invested in agricultural research yields, on average, benefits equivalent to 10 dollars , while gains from investments in irrigation are also potentially high in SSA.
“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.”
It said creating a better environment for agribusiness and facilitating intra-regional food trade could also increase long-term food security in a region that was highly dependent on food imports. (NAN)