Countries in the sub-Saharan Africa (SSA) region are facing a “major funding squeeze” that is forcing some of them to cut spending on health, education and infrastructure. According to Abebe Aemro Selassie, people in the region are already “feeling the effects of the financial crisis.” The IMF says that countries in the SSA region should also consider having “a well-functioning debt resolution framework.”
Region faces higher borrowing costs and less ‘access to cheaper financing’
According to the International Monetary Fund, the Sub-Saharan Africa (SSA) region is facing a “major funding squeeze” that is being driven by “shrinking aid budgets and shrinking partner revenues.” Without this financing, countries in the region will be forced to cut spending on health, education and infrastructure, which will “stop the region from developing its true potential,” says a statement issued by the global lender.
Commenting on the dwindling portion of the region’s funding, Abebe Aemro Selassie, director of the lender’s Africa department, said that people in the SSA regions are already beginning to feel the effects of this crisis.
“The people of sub-Saharan Africa are feeling the effects of a funding crisis. Since the Russian invasion of Ukraine, the cost of living is higher, borrowing costs have risen, and access to cheaper financing is declining. Coupled with a long-term decline in aid and a more recent drop in partner investment, this means there is less money to spend on vital services like health, education and infrastructure,” Selassie argues.
Selassie also warned that unless steps are taken to mitigate these risks, the region’s goal of becoming the “driving force of the world economy for years to come” will be hampered.
IMF: SSA countries should consider allowing their currencies to depreciate
Meanwhile, on his April 14 Press releaseThe IMF said, it has already played its role after providing more than $50 billion to countries within SSA between the years 2020 and 2022. The lender also revealed that it had “loan agreements with 21 countries”, while it is said that more applications for such programs are under consideration.
In addition to hoping for a bailout, the IMF said countries in the SSA region should also consider having “a well-functioning debt resolution framework.” Countries should also consider allowing their respective exchange rates to depreciate.
“(A final priority) is to ensure that significant efforts to address climate change do not displace basic needs, such as health and education. Climate finance provided by the international community must be added to current aid flows,” the IMF added.
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