IMF Says Sub-Saharan Africa Already Feeling Effects of the ‘Big Funding Squeeze’ – The International Monetary Fund has stated that the Sub-Saharan Africa (SSA) region is experiencing a significant funding shortfall due to reduced inflows from partners and shrinking aid budgets. As a result, countries in the region may have to reduce their spending on vital areas such as health, education, and infrastructure.
This, in turn, could hinder the region’s ability to reach its full potential, according to a statement issued by the international lender. The director of the African department at the lender, Abebe Aemro Selassie, has noted that the decreasing share of funding for the SSA region is already having an impact on its people. “People in sub-Saharan Africa are feeling the effects of a funding crisis. Since Russia’s invasion of Ukraine, the cost of living is more expensive, borrowing costs have increased and access to cheaper funding is dwindling.”
“Coupled with a long-term decline in aid and a more recent fall in investment from partners, this means that there is less money to be spent on vital services like health, education, and infrastructure,”:Selassie argues. Selassie also warned that unless measures are taken to mitigate these risks, the region’s goal of becoming the “driving force of the global economy in years to come” will be hampered. In its press release on April 14th, the IMF stated that it has already contributed over $50 billion to countries in Sub-Saharan Africa between 2020 and 2022.
Additionally, the organization disclosed that it has active lending agreements with 21 countries, and is currently considering more requests for such programs. Besides waiting for a financial bailout, the IMF said countries from the SSA region should also consider having in place “a well-functioning debt-resolution framework.”
Countries should also consider allowing their respective exchange rates to depreciate. “A final priority is ensuring that important efforts to tackle climate change do not crowd out basic needs, like health and education. Climate finance provided by the international community must come on top of current aid flows,” the IMF added.