“Geoeconomic Fragmentation: Sub-Saharan Africa Caught between the Fault Lines” Report

May 4, 2023

The IMF has recently released a report titled “Geoeconomic Fragmentation: Sub-Saharan Africa Caught between the Fault Lines”.

Key Findings of the Report

Sub-Saharan African economies may face a long-term decline of as much as 4% of their gross domestic product in a decade if the world is fragmented into isolated trade blocs centered around China or the United States and the European Union (EU).
The region stands to lose the most in a severely fragmented world compared to other regions.
While economic and trade ties with China, India and other partners have provided benefits, Sub-Saharan Africa has been negatively impacted by the recent increase in geopolitical tensions. The escalation of these tensions would see countries in the region hit by higher import prices or even lose access to key export markets, potentially impacting half of the region’s international trade value.
The financing options for Sub-Saharan African countries have deteriorated significantly over the past year due to the acceleration in the tightening of global monetary policy. This has led to higher interest rates worldwide, causing borrowing costs for Sub-Saharan African countries to increase both domestically and internationally. T
The Sub-Saharan African countries could face a loss of around $10 billion in foreign direct investment and official development assistance inflows each year, which amounts to about 0.5% of the region’s gross domestic product.

Recommendations

To build resilience, the IMF suggests that Sub-Saharan African countries strengthen the ongoing regional trade integration under the African Continental Free Trade Area, expand financial inclusion, identify and nurture sectors that may benefit from trade diversion, and promote economic integration and cooperation through multilateral institutions.

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