Staying at home is not an option for the informal sector –Dir. IMF’s African Department

Authorities in sub-Saharan Africa (SSA) face a distinct challenge in getting support to those who need it most, according to Abebe Aemro Selassie, Director of the International Monetary Fund (IMF) African Department. Selassie who was speaking on the recently released Regional update for SSA countries said that around ninety percent of non-agricultural employment is in the informal sector, where participants are usually not covered by the social safety net.

“Moreover, a large proportion of this activity centers on the provision of services, which have been particularly hard hit by the crisis. Further, informal workers typically have few savings and limited access to finance. “So staying at home is often not an option” he cautioned whilst adding that it is complicating the authorities’ efforts to maintain an effective lockdown. In response, many authorities have done what they can to temporarily expand their safety nets; using home-grown, often innovative approaches to ensure that transfers reach as much of their population as possible.

But again, resources he said are limited, and these efforts cannot hope to offset the full impact of this crisis.

Expanding on the fiscal side he said, country responses have often been more constrained. Even before the crisis, debt levels were elevated for many countries in the region. “In this context, and in light of collapsing tax revenues, the ability of governments to increase spending has been limited. To date, countries in the region have announced COVID-related fiscal packages averaging 3 percent of GDP” he said. “This effort has been indispensable. But it has often come at the expense of other priorities, such as public investment, and is markedly less than the response seen in other emerging markets or advanced economies.”

“In sum, many authorities in Sub-Saharan Africa face a particularly stark set of near-term policy choices; concerning not only the scale of support they can afford, but also the pace at which they can reopen their economies.” Against this backdrop, Mr. Selassie pointed to a number of policy priorities going forward.

“First and foremost, the immediate priority remains the preservation of health and lives. But as the region starts to recover, authorities should gradually shift from broad fiscal support to more affordable, targeted policies; concentrating in particular on the poorest households and those sectors hit hardest by the crisis.

“Looking even further forward, and once the crisis has waned, countries should refocus their attention on transforming their economies, creating jobs, and boosting living standards—clawing back some of the ground lost during the current crisis. As before the crisis, part of this effort he said will require putting fiscal positions back on a path consistent with debt sustainability; which will in turn require a renewed determination to implement revenue-mobilization, debt-management, and public financial management reforms.

In addition, sustainable, job-rich, and inclusive growth will require private-sector investment, along with a business environment in which new ideas and projects can flourish, and where new opportunities (such as from the digital revolution) can be developed fully.

By Zainab Iyamide Joaque