Rachel Savage, Mark Jones and Jorgelina do Rosario
JOHANNESBURG/LONDON (Reuters) – Africa’s central banks are walking a tightrope as they try to tame inflation that is largely out of their control and causing “horrendous” food insecurity, the International Monetary Fund’s Africa chief warned.
The IMF’s biannual Regional Economic Outlook released on Friday warned that 123 million people, or 12% of sub-Saharan Africa’s population, face acute food insecurity, where lack of access to adequate nutrition puts their lives or livelihoods at risk. existence in immediate danger. the end of the year.
That compares with an estimated 82 million people affected before the COVID-19 pandemic, but the impact of the virus, the fallout from the war in Ukraine, and worsening unrest and drought in parts of the continent have pushed the numbers higher.
“What really worries us is that this comes on top of all the disruptions caused by the pandemic,” the IMF’s Abe Selassie told Reuters this week.
“I was in Chad (in May) and the conditions you saw there in terms of food security are really very, very terrible.”
Ethiopia, Somalia and parts of Kenya are also on track for a fifth failed rainy season, with famine looming in Somalia.
Annual food price inflation in sub-Saharan Africa has been more than 10% since the second half of 2021, and the IMF’s new economic outlook this week revised up its regional inflation forecast by 2 percentage points to 8.7% for this year.
It also cut its forecast for GDP growth by 0.2 percentage point to 3.6%, down significantly from 4.7% growth in 2021, and said Nigeria, Ghana, Ethiopia, Malawi and Zimbabwe may need raise interest rates faster or more strongly. .
“It’s a delicate balancing act that central banks face,” Selassie said. “Inflation is an insidious, insidious tax on the poorest.”
Rapidly rising global interest rates mean that sub-Saharan Africa’s most indebted countries have effectively lost access to international capital markets.
That prompted countries including Ghana to request IMF help, and Selassie said work was still underway to determine whether the West African country now needed debt relief.
Ethiopia, Zambia and Chad, meanwhile, have long sought to restructure their debts under the G20 Common Framework, an initiative created in 2020 in response to the COVID-19 pandemic.
Progress was very slow. Ethiopia’s restructuring has been delayed by the ongoing civil war, although IMF Managing Director Kristalina Georgieva said this week that she hoped the Zambia and Chad processes would be completed by the end of the year.
Chad’s bilateral creditors said late on Thursday that the country does not need debt relief now, given the surge in the price of crude oil, one of the country’s main sources of income. Oil trading and mining company Glencore, Chad’s biggest commercial creditor, declined to comment.
“The delay by Chad’s creditors in approving much-needed debt relief has been very problematic indeed,” Selassie told a press conference on Friday.
“We want to be sure that the resources we provide will go to support Chad and not to solve the unsustainable debt situation,” he said, referring to the three-year, $570 million program approved in December. “The benefits of these higher oil prices should accrue to both the people of Chad and its creditors.”
“Is everything working as timely, as quickly as we hoped? No, Selassie said of the Common Structures in an interview ahead of the statement by Chad’s creditors. “But I also want to emphasize that there has been quite a bit of cooperation with G20 members, China and others.”
He said the restructuring of Zambia and Chad now depends on private firms and foundations that have given loans to the country.
“Anything beyond the reasonable requests of Zambians would be unfair to the people of Zambia,” Selassie added.
He warned that more African countries may need to restructure their debt.
“If global conditions persist,” he said, “there will be some countries that will need debt restructuring.”
Meanwhile, an assessment of Ghana’s debt sustainability is ongoing, Selassie told a news conference after the West African country asked the fund for help amid soaring inflation and a falling currency.
The IMF is waiting for the government to announce how it will deal with its debts, while the financing program will also depend on how quickly Ghana implements planned economic reforms, Selassie said.
(Reporting by Rachel Savage, Mark Jones and Jorgelina do Rosario, additional reporting by Bhargava Acharya, editing by Deepa Babington and Louise Havens)