IMF: Sub-Saharan Africa Experiencing the Effects of Financial Squeeze – Economics Bitcoin News


The Sub-Saharan African (SSA) region has been hit with a financial squeeze due to declining aid budgets and reduced financing from other sources. This has already started to cause an effect on the population with rising costs of living, increased borrowing costs, and reduced access to cheaper funding.

Region’s Share of Funding Declining, Director of African Dept. at IMF Says

The International Monetary Fund (IMF) has warned that the Sub-Saharan African (SSA) region is facing a “big funding squeeze” due to “shrinking aid budgets and reduced inflows from partners.” According to the global lender, this will force countries from the region to cut spending on health, education, and infrastructure, thus “holding the region back from developing its true potential.”

The lender’s director of the African department, Abebe Aemro Selassie, noted that people from SSA regions are already starting to feel the effects of this crisis. He said:

“People in sub-Saharan Africa are feeling the effects of a funding crisis. Since Russia’s invasion of Ukraine, [the] cost of living is more expensive, borrowing costs have increased and access to cheaper funding is dwindling. Coupled with a long-term decline in aid and a more recent fall in investment from partners, this means that there is less money to be spent on vital services like health, education, and infrastructure.”

Selassie also warned that unless measures are taken to mitigate these risks, the region’s goal of becoming the “driving force of the global economy in years to come” will be hindered.

IMF: Countries From the Region Need to Implement Debt Resolution Framework and Allow Their Currencies to Depreciate

In its April 14 statement, the IMF revealed that it had already provided more than $50 billion to countries within SSA between the years 2020 and 2022. The lender also stated that it had “lending arrangements with 21 countries” while more requests for such programs are said to be under consideration.

The IMF also suggested that countries from the SSA region should consider having in place “a well-functioning debt-resolution framework” and allowing their respective exchange rates to depreciate. It added:

“[A final priority] is ensuring that important efforts to tackle climate change do not crowd out basic needs, like health and education. Climate finance provided by the international community must come on top of current aid flows.”

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Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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