Countries from the Sub-Saharan Africa (SSA) region face a “big funding squeeze” which is forcing some of them to cut spending on health, education, and infrastructure. According to Abebe Aemro Selassie, people from the region are already “feeling the effects of the funding crisis.” The IMF says countries from the SSA region should also consider having in place “a well-functioning debt-resolution framework.”
Region Faced With Increased Borrowing Costs and Reduced ‘Access to Cheaper Funding’
According to the International Monetary Fund, the Sub-Saharan Africa (SSA) region faces a “big funding squeeze” which is being spurred by “shrinking aid budgets and reduced inflows from partners.” Without this funding, countries from the region will be forced to cut spending on health, education, and infrastructure, thus “holding the region back from developing its true potential,” a statement released by the global lender has said.
Remarking on the region’s declining share of funding, Abebe Aemro Selassie, the lender’s director of the African department, claimed that people from SSA regions are already starting to feel the effects of this crisis.
“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.
IMF: SSA Region Countries Should Consider Allowing Their Currencies to Depreciate
Meanwhile, in its April 14 press release, the IMF said has already played its part after it provided more than $50 billion to countries within SSA between the years 2020 and 2022. The lender also revealed that it had “lending arrangements with 21 countries” while more requests for such programs are said to be under consideration.
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.
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