The International Monetary Fund (IMF) has advocated the need for Africa to prioritise sustaining economic growth over efforts to tame rising inflation.
This is as African economies still struggle to recover from the slowdown caused by the global pandemic as well as the risk of destabilisation from Russia’s invasion of Ukraine.
Speaking during a virtual press briefing, Abebe Aemro Selassie, director, IMF Africa Department noted that the pathway to addressing issues of inflation and economic growth varies from country to country as they are considered domestic and political decisions that have to be made by policymakers.
“Take the first priority, in particular, balancing inflation versus growth. One could argue that the policy focus for African countries should be to prioritise sustaining growth, over inflation taming.
“And this is because we know Africa is comprised of low and middle income emerging economies, so I think, firstly, that trade-off, that high inflation will facilitate growth is not one that has been empirically observed in our region. Inflation hurts the poor the most; inflation erodes the value of monies in people’s pockets.
“Again, you know, the whole economic policymaking arena really is about trade-offs, so it is about considering the pros and cons of going in one direction versus the other. And, you know, ultimately it’s for the policymakers to decide what’s most appropriate for their specific economy,” he said.
Speaking on the looming food crisis in the region, Selassie harped on the need for countries, especially Nigeria to focus on policy intervention crisis.
According to him, the issue of food insecurity can be addressed either by promoting agricultural production or making sure that people have incomes from other means to be able to secure food.
“Governments, especially in Nigeria have to make sure that everybody is fed. So given that, you know we have already significant food security issues.
“In some cases, this may require subsidies for a period of time, at least for the period when food prices are elevated. I think that leaning forward and doing what other governments can, will ensure that food insecurity doesn’t get exacerbated, will be very important,” he said.
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Selassie, speaking further noted that while issues around fuel subsidy remain deeply domestic and political, there is a need for governments to weigh in and make sure that they do not lead to macroeconomic instability.
According to him, the issue around fuel subsidies, which tend to be prevalent in the African region is that they tend to be highly regressive.
“By regressive, I mean that the benefits of the subsidies tend to accrue to richer households a lot more than to poorer households. So when governments subsidized taxes on fuel for an extended period of time, what tends to happen is that the lion’s share of the benefit will accrue to richer households.
“Several social pressures have risen on account of the pandemic which is why again, we are trying to highlight what a difficult moment this is for Africa and the need for our policymakers to take brave actions. Also, the international community needs to come in and support our countries,” he added.
