Disclaimer: The views expressed herein are those of the author(s) and should not be attributed to the IMF, its Executive Board, or its management. The Impact of the Global Financial Crisis on Sub-Saharan Africa Regional Economic Outlook April 24, 2009 Norbert Funke, Victor Lledo, Gustavo Ramirez, and Irene Yackovlev,

Agenda How are recent developments in the world economy affecting sub-Saharan Africa? Outlook and Risks for sub-Saharan Africa Confronting Challenges: domestic policies and donor support

Lower demand for African exports

Key commodity prices have fallen to or even below 2007 levels… Sources: IMF, Commodity Prices; and UN Comtrade. 1 Composite of cocoa, coffee, sugar, tea, and wood, weighted by sub-Saharan African exports. Commodity Prices

Financing flows have declined Source: IMF, World Economic Outlook.

A decline in world growth drags down growth in sub-Saharan Africa

The outlook has deteriorated markedly Current and Previous Forecast for 2009 Source: IMF, African Department database

Growth is projected to decline in 2009 and recover mildly in 2010 Source: IMF, African Department database. GDP Growth,

Inflation will decline in most countries Inflation Sources: IMF, World Economic Outlook; and IMF, African Department database.

Risks to the outlook are mostly on the downside Sources: IMF, World Economic Outlook; and IMF, African Department database. 1 Including Zimbabwe. Growth Prospects

Confronting challenges Use available fiscal space Where possible, ease monetary policy and let the exchange rate adjust to the external environment Closely monitor financial vulnerabilities and be prepared to act promptly Keep medium-term goals in sight

Use available fiscal space Output gap Financing constraints Debt sustainability Other constraints Risk of Debt Distress (Number of countries, 44 total) Source: IMF staff estimates

Fiscal deficits are expected to widen Source: IMF, African Department database. Central government overall fiscal balances,

Where possible, ease monetary policy Some countries began to ease in 2008 Change in Monetary Policy (Percent of SSA countries)

Let the exchange rate adjust to the external environment Real Effective Exchange Rates in Oil Exporters and by Exchange Rate Regime Change in International Reserves Since September 2008

The external position is expected to weaken External Current Account Balances Source: IMF, African Department database.

Keep medium-term goals in sight Countries need to avoid imposing new restrictions on trade flows as they work to mitigate the impact of the global crisis. It is important now to move ahead with planned structural reforms in: Public financial management Social safety nets Cost of doing business

How can the international community help? All these measures require the support of the international community. A lack of resources could set Africa back by several years in terms of reducing poverty and providing infrastructure. This is the time where international commitments to double annual aid promised by the G-8 Heads of State at the Gleneagles summit in 2005 need to be honored and even increased.

The Role of the IMF To help African countries meet the challenges of the current crisis, the IMF is: Revising its lending instruments to make them more flexible Working to double concessional lending to low income countries Continuing to provide policy advice and extensive technical assistance for strengthening economic policymaking in Africa

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