What began as a year filled with projections of economic recovery from the Covid-19 pandemic, quickly turned into a year riddled with financial drawbacks.
Different countries in the sub-Saharan region are faced with unprecedented challenges, unique to each environment. For some context, while the current global climate change is causing droughts in some African regions, it is causing flooding in others.
It goes beyond just climate change as serval African countries are gasped with one monetary issue or the other.
The International Monetary Fund recently released a report detailing some of Sub-Sahara’s most urgent challenges.
Below are five problems the IMF highlighted.
Inflation: Some factors influencing the growth of inflation in the region are sharp spikes in global commodity prices, swings in the exchange rate, global supply chain disruptions, and natural disasters, all categorized as. external developments. While inflation in some countries is down and most, up, the median of inflation rates in the region increased by 9% in August.
Food scarcity: Food and energy account for half of the household consumption in sub-Saharan Africa, and both these utilities have become more immoderate. The IMF has projected that 12%of the region’s population will face acute food insecurity by the end of 2022. The report also noted that higher prices of food and tradable goods account for the bulk of the inflation rate in Sub-Saharan Africa.
Interest rate: A counterbalance strategy to combating a mounting inflation rate is to increase the interest rate. This works on the principle that increasing an interest rate would increase borrowing costs, reduce spending, and decrease the demand for goods and services, which will cause inflation to fall. However, the IMF warns that continually increasing interest rates will cause the choking off of credit for investment, the depression of economic activities, and the reduction of incomes.
Energy crises: The energy crises affecting Africa has foreign origins. The ongoing war between Russia and Ukraine is the obvious culprit. The sudden halt in Russia’s supply of liquified gas to Europe has created a demand for alternative sources, Africa’s fossil fuel being one said source. As a result, higher demand for African oil has spurred a price increase both locally and globally, not to mention hoarding. This, coupled with other factors like oil theft and vandalism, subsidy challenges, higher exchange rates, and conflicts, has made energy prices in Sub-Saharan Africa soar.
Public debt: A huge subject discussed in this year’s United Nations General Assembly, Africa’s public debt has been an irritating thorn in the side of the continent’s economy. External debts stifle economic growth in different Sub-Saharan regions, as some countries have very little returns to pour into their debt service, while simultaneously developing their economy. As recently as this morning, it was reported that Zambia has defaulted on its debt, and in an ironic twist, the World Bank decided to award the country $270 million. Read Story here.