By Jeph Ajobaju, Chief Copy Editor
Increased fiscal spending will ease the impact of coronavirus on African economies, the International Monetary Fund (IMF) has recommended, warning that the spread of the disease into the continent will hit its growth hard.
Government support should also include cash transfers to individuals and households under strain, said the IMF – just as it is planned in the $2 trillion stimulus package in the United States to give $1,200 to each household, especially the poor.
Chief oil exporters in Africa, like Nigeria and Angola, are all in for a hard time, as global demand drops and the price per barrel has halved since January, the IMF warned in a blog posting.
That notwithstanding the effort by the United Nations to mobilise $2 million to help fight the virus in Nigeria alone.
Tourism dependent economies, like Kenya and The Gambia, will also be heavily impacted with travel lockdowns across countries and continents to stave off the pandemic.
Likewise commodities dependent nations, like Cote d’Ivoire and Zimbabwe, because demand for exports will fall worldwide as long as coronavirus persists.
There are direct disruptions to livelihoods, tighter financial conditions, reduced trade and investment and a steep drop in commodity prices, the IMF said on March 25.
In a blog posting on the IMF’s website, top officials in its Africa Department said they have received requests for emergency financing from over 20 nations in the region and expect at least 10 more soon.
“Across the region, growth will be hit hard. Precisely how hard is still difficult to say. But it is clear that our growth forecast in April’s regional outlook will be significantly lower,” wrote Abebe Selassie, Director of IMF Africa Department; and Karen Ongley, Mission Chief for Sierra Leone.
On March 24, the IMF announced that Ghana had requested a rapid-disbursing emergency loan to fight coronavirus.
That came a day after IMF Managing Director Kristalina Georgieva disclosed that some 80 countries had requested loans from emergency facilities, under which some $50 billion is available, with at least 20 more requests expected, Reuters reports.
During the global financial crisis in 2018, African countries were spared the brunt of the economic impact, because many were less integrated with global financial markets and supply chains, Selassie and Ongley wrote.
Debt levels were lower, too, and countries had more room to increase spending to boost growth.
In the coronavirus pandemic, a number of countries have closed borders and limited public gatherings, which will cut many off from paid work.
“For society’s most vulnerable in the region, ‘social distancing’ is not realistic. The notion of working from home is only possible for the few,” they wrote.
Impact on oil, travel, tourism
The disruptions to livelihoods mean less income, less spending, and fewer jobs. Closed borders mean that travel and tourism will dry up, along with trade and shipping.
The partial shutdown of major economies means that global demand will fall, further disrupting supply chains and trade. And tighter global financial conditions will limit access to finance and delay investments and development projects, they wrote.
With oil prices down 50 per cent since the start of 2020, the impact on oil exporters in Africa will be substantial.
“We estimate that each 10 per cent decline in oil prices will, on average, lower growth in oil exporters by 0.6 per cent and increase overall fiscal deficits by 0.8 per cent of GDP,” Selassie and Ongley wrote.
Nonetheless, they recommended increased fiscal spending – first on public health, but also to provide broad economic support, including cash transfers to individuals and households under strain.
“Where feasible, governments should consider targeted and temporary support for hard-hit sectors such as tourism. For instance, temporary tax relief through targeted reductions or delays in paying taxes could help address cashflow shortfalls for affected businesses.”