Huge potential to boost growth in sub-Saharan Africa – IMF

There is huge potential for boosting growth in sub-Saharan Africa as the current global environment provides the opportune time to push economic reforms.

This according to the International Monetary Fund’s (IMF) Regional Economic Outlook for sub-Saharan Africa which recorded modest economic growth in the region, from 2.8% in 2017 to 3.4% this year.

This growth was largely driven by improved policies in some countries along with a more supportive external environment propelled by stronger global growth and higher commodity prices.

However, the two largest economies in the region (Nigeria and South Africa) remained below trend growth, weighing heavily on prospects for the region.

“Policymakers should seize the opportunity provided by favourable external conditions to turn the current recovery into durable, robust growth by taking policy steps to reduce debt and raise medium-term growth potential,” said an IMF spokesperson.

The report noted that prudent fiscal policy, with an emphasis on increasing domestic revenue, was critical to preventing excessive public debt accumulation and making room for key infrastructure and social spending.

“If current policies persist, average growth in the region could plateau below 4% over the medium term, falling far short of levels envisaged five years ago and below what is needed for countries to achieve their sustainable development goals,” the report read.

It also pointed out that while most countries in the region had considerable potential to collect higher revenue, sub-Saharan Africa had the lowest revenue-to-GDP ratio in comparison to other emerging and developing economies.

The report estimates that the region could collect 3-5% of GDP in additional tax revenues – significantly more than what it receives annually through international aid.

The IMF said that by improving value-added and income tax systems, streamlining exemptions and broadening the tax base, revenue mobilisation could be further strengthened.

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