Managing Public Finance in Times of Crisis in Africa

The Covid-19 has exacerbated African countries’ challenges in financing the 2030 sustainable development goals (SDGs), the 2015 Paris Climate Agreement, Africa’s Agenda 2063, as well as national development goals across the continent. It has impacted Africa’s macro-economic outlook, fiscal positions, debt vulnerabilities, lives and livelihoods, and financial flows in fundamental ways, reversing decades of progress on the continent. Africa’s GDP contracted by 2.1 percent in 2020. About 30 million Africans were pushed into extreme poverty in 2020, with about 39 million people expected to fall into extreme poverty in 2022. The pandemic has also exacerbated pre-existing public finance challenges in Africa. Fiscal revenues have declined by about 10-15 percent, while government expenditure edged up due to health-related spending, resulting in doubling of fiscal deficits to a historical high of 7.2 percent of Gross Domestic Product (GDP). As African countries already have very limited fiscal space, including large borrowing to fight the COVID-19 pandemic, the situation was further worsened by the plummeting prices of commodities, which most African countries depend on for fiscal revenues and foreign exchange earnings. Public debt has ballooned to $546 billion - about one-quarter of Africa’s GDP and higher than Africa’s annual government revenues, adding about 10 percentage points to Africa’s debt burden. Read More