As the coronavirus pandemic slowly starts spreading within Africa, the International Monetary Fund (IMF) has said that this will have the same human costs as elsewhere in the world and the economic costs could be just as devastating.
Speaking on developing and emerging economies, especially in Sub-Saharan Africa, Kristalina Georgieva, Managing Director, IMF, said:
“The same way the virus hits vulnerable people with medical pre-conditions hardest, the economic crisis hits vulnerable economies the hardest.”
So far, about $90 billion has fled the developing world, way more than during the global financial crisis of 2008. With a lot of countries highly depended on commodity exports, and with prices collapsing, they are hit yet again.
“Never in the 75 years history of the institution have so many countries – 85 so far – found themselves in need of IMF emergency financing. And this financing is being made available in record short time.”
In a blog post, the IMF said:
“We know that 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. So, difficult decisions to close borders (to people, but not essential goods) are even more important. All the more so if we are to minimize added strain on already fragile health systems.”
While emerging African countries were spared the brunt of the 2008 global financial crisis, this time, Africa will not be spared from the global economic crisis. Emerging countries were less integrated with global financial markets and that meant being cut off from financing was harmful for only a handful of countries.
Neither of those conditions apply today. Many countries in sub-Saharan Africa have limited room in their budgets to increase spending. They also rely more on global capital markets.
The IMF lists three ways the current pandemic will have a substantial economic impact on sub-Saharan Africa:
The very measures that are crucial to slowing the spread of the virus will have a direct cost on local economies. The disruption to people’s daily lives means less paid work, less income, less spending, and fewer jobs
Global hardships will spill over to the region. The slowdown in major economies will see global demand fall. Disruptions to production and world supply chains will weigh more on trade. Expect limited access to finance and investments
The sharp decline in commodity prices will hit oil exporters hard, compounding the first two effects. The price of oil has tumbled to levels not seen in decades, and with oil prices already down by more than 50 percent since the start of the year, the impact will be substantial
As a result, IMF has made $50 billion available with a number of African countries having already received monetary out of this fund.
How far and deep the economic crisis will be remains to be seen. For now, the monetary help provided by the IMF will likely see emerging African economies stay afloat amid the economic fallout as they manage the pandemic.