by David Musyoka
NAIROBI, Oct. 30 (Xinhua) -- Economic growth in Sub-Saharan Africa is expected to hit 2.6 percent this year from 1.4 percent in 2016, mainly due to a recovery in oil production in Nigeria and the easing of drought conditions in eastern and southern Africa, the International Monetary Fund (IMF) said on Monday.
In its latest Regional Economic Outlook for Sub-Saharan Africa, the IMF said while growth is expected to accelerate further to 3.4 percent in 2018, momentum remains weak and growth will likely remain below past trends in 2019.
According to the report, one third of the economies, mostly in eastern and western Africa, continue to grow at a brisk pace of 5 percent or more.
"But per capita incomes are expected to decline in 12 countries, home to 40 percent of the region's population or 400 million people," said Abebe Aemro Selassie, director of the IMF's African Department.
The report said addressing remaining fiscal challenges is a key policy priority, which should go hand in hand with the implementation of polices to facilitate economic diversification.
Selassie stressed that the quest for recovery rests on strong and urgent policy actions to address vulnerabilities and tackle constraints to growth.
He said many countries face a period of fiscal consolidation, noting that while this is already reflected in most Sub-Saharan African countries' medium-term strategies, experience shows that planned fiscal adjustments tend to be postponed; implementation needs to begin without delay if debt levels are not to increase sharply.
The lender proposed adoption of policies to promote diversification that can help support growth.
"While there is no single path for reforms, countries such as Botswana, Rwanda, and Uganda that have successfully diversified their economies have built on their existing strengths and tackled specific constraints," the report said.
The IMF said public debt has been rising in the region particularly in those economies adjusting to the substantial commodity price shock and in many fast-growing economies.
"With debt now above 50 percent of GDP in half of the economies in the region, debt servicing costs have risen. Growing exposure to the sovereign and the accumulation of domestic arrears have magnified pressures in the financial sector," said the IMF.
According to the lender, despite some narrowing in current account deficits, international reserves are now below adequacy levels in many countries, especially those with fixed exchange rate regimes.
Driving this increase in debt is a combination of large fiscal deficits, a slowdown in growth, and in some countries, exchange rate depreciations.
"Increasingly, deficits are being financed by domestic banks and ultimately constraining the availability of credit to the private sector. In many countries, banks' liquidity and solvency indicators have deteriorated, and non-performing loans have increased," said the IMF.
The report said fiscal reforms can be designed to limit the adverse effect on growth and the most vulnerable, noting that experience with past fiscal consolidations in the region shows that this is best achieved through revenue mobilization as well as better prioritization of public spending.
