Africa-Press – Eswatini. Sub-Saharan African governments, including Eswatini, face a tricky balancing act in reducing macroeconomic vulnerabilities, while addressing development needs and ensuring that reforms are socially and politically acceptable.
According to the International Monetary Fund’s (IMF) regional economic outlook, countries with high imbalances may have to implement significant and frontloaded adjustments given the tight financing constraints. Nevertheless, many countries with more moderate imbalances may be able to pursue smaller and more gradual policy adjustments. But even countries with relatively low imbalances (about one-fifth of the total) need to rebuild fiscal and external buffers as conditions allow. The IMF said protecting the most vulnerable from adjustment costs
Communication
Carefully designed communication and consultation strategies, appropriate reform design and improvements in governance to rebuild public trust will also help policymakers’ tasks.
While challenging, implementing reform strategies to unlock more durable and inclusive growth, including promoting economic diversification and economic opportunities for women, will reduce vulnerabilities and social frustration. The global lender noted that Sub-Saharan Africa navigates a complex economic landscape marked by progress and persistent macroeconomic vulnerabilities.
The IMF said countries in the region are trying to implement complex and much-needed reforms to restore macroeconomic stability in the aftermath of repeated adverse shocks and the ensuing need for support. Overall, internal and external imbalances have started to narrow, mainly reflecting policy adjustments, but the picture is varied; about one-half of countries still exhibit high imbalances. IMF highlighted that monetary tightening has curbed inflation, which is within target in about half of the region. As a result, inflation is declining in most countries in the area. Inflation is already below or within the target band in about one-half of countries. Fiscal consolidation efforts are helping to rebuild buffers and ensure debt sustainability.Significant fiscal consolidation has stabilised the average debt-to-GDP ratio, albeit high. External positions have strengthened, with sovereign spreads narrowing and more countries returning to Eurobond markets.
Challenges
However, challenges persist, inflation remains in double digits in nearly one-third of countries. Debt service capacity needs to be higher, and rising debt service burdens are eroding the resources available for development spending. Foreign exchange reserve buffers are often insufficient, and concerns about overvaluation and competitiveness persist. In their efforts to reduce these imbalances, policymakers face three main hurdles. First, regional growth, at a projected 3.6 per cent in 2024, is generally subdued and uneven, although it is expected to recover modestly next year. Resource-intensive countries continue to grow at about half the rate of the rest of the region, with oil exporters struggling the most. Factors dampening growth include conflict, insecurity, drought, and electricity shortages.
Domestic and external financing conditions also remain tight, with many countries needing access to or afford financing. Third, complex underlying pressures linked to high poverty, lack of inclusion and job opportunities, and weak governance, compounded by the rapid cost of living and the short-term effects of macroeconomic adjustment, are causing significant hardships in many countries. The resulting social frustration and political pressures make it increasingly challenging to implement reforms.
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