IMF bemoans 2% fiscal support to households in SSA

Many of the Sub‑Saharan African (SSA) countries have not been able to provide as much fiscal support as advanced economies or emerging markets, International Monetary Fund (IMF) said on Wednesday.

On average, in 2020, advanced economies provided 15 percent of fiscal support to companies and households. In emerging markets, the number was about half of that, 7 to 8 percent. But in Sub‑Saharan Africa, it is only between 1 and 2 percent of fiscal support.

The Washington-based Fund said the recovery would be slower in Sub‑Saharan Africa compared to emerging markets or advanced economies.

This, according to has Fund, means that there is an asynchronous recovery that could put financial stability at risk.

“Of course, we have started a number of new programmes, and we are very actively engaged with governments in the region in order to make sure that we help in any way we can,” Tobias Adrian, financial counsellor and director, IMF said.

He spoke at a press briefing on Global Financial Stability (GFS) on Wednesday at the ongoing Spring meeting of the IMF and the World Bank in Washington D.C.

So Sub‑Saharan Africa has been hit by this pandemic just like every other country. Every country in IMF’s membership has been hit by the pandemic.

However, the numbers coming out of Sub-Sahara Africa in terms of the pandemic have been somewhat lower than in other countries, so that is good news. “There has been some resurgence in infections recently, and we do hope that the medical situation will get under control,” Adrian said.

One of the two major challenges he noted was that the economic headwinds from the global economy have hit Sub‑Saharan Africa hard, and countries have been depressed, even though the medical conditions might have been less severe than elsewhere, so the economic headwinds are strong.

Evan Papageorgiou, deputy division chief, IMF said the monetary policy stance in Sub‑Saharan Africa, as well as the rest of the world’s emerging markets overall, as well, has been accommodative for the reasons the Tobias mentioned, and it is expected to remain so for the foreseeable future in order to accommodate more policy support.

“Uganda, where you mentioned the policy rate has been lowered to 7 percent, still has positive real policy rates, so there is still quite a lot of accommodation in the system, and that is expected to continue,” he said.

In terms of the capital markets, obviously much like the rest of the world, Sub‑Saharan African spreads had widened a lot during the top of the pandemic. They have recovered somewhat, but they still remain above pre‑pandemic levels.

“We are heartened by the fact that recently we have seen some hard currency bond issuance as well coming out of the region after a long pause. We expect this to continue. We hope this will continue,” Papageorgiou.