2024 economic crisis in Africa: What can the World Bank and IMF do?

In 2024, Africa’s economy will face unprecedented problems, with debt, political instability, and economic downturns endangering millions of people’s livelihoods.

As the World Bank and the International Monetary Fund (IMF) gather in Washington, DC for their regular spring meetings, numerous African countries are looking for rescue measures to prevent more disaster.

The facts

Ghana is facing unsustainable public debt, requiring the government to implement a comprehensive debt restructuring plan. The West Africa nation is seeking around $3 billion in support from the IMF’s Extended Credit Facility programme, as fiscal measures and reforms aimed at ensuring that economic stability plans continue.

South Sudan’s struggle stems from economic downturn and conflicts in the region. President Salva Kiir faces a daunting task in reversing the economic crisis that has pushed over eight million people into poverty.

The country’s principal cash source is exhausted due to declining oil production, which has been compounded by military conflicts in neighbouring Sudan.

Africa’s largest economy, Nigeria, is in the midst of an economic crisis characterised by a failed currency reform, the elimination of fuel subsidies, and currency devaluation.

Zambia is also dealing with debt restructuring after becoming Africa’s first pandemic-related sovereign default.

The arguments

Economic concerns in several African countries point to structural issues that necessitate concerted international initiatives for sustainable development and poverty alleviation.

For Ghana’s debt distress situation, a comprehensive restructuring plan is underway. The World Bank cautions that Ghana’s economic growth has slowed dramatically, falling to an estimated 2.9% in 2023 and expected to remain poor in 2024.

Restoring growth to its potential pace of 5% depends on restoring macroeconomic stability.

South Sudan is also attempting to harvest resources from its faltering oil sector, hampered by a lack of foreign financing and political reluctance in executing peace agreements.

Years of flooding and the consequences from global events such as Russia’s invasion of Ukraine have exacerbated the country’s economic and humanitarian issues, putting it in desperate straits.

In Nigeria, spiralling inflation and a currency crisis have resulted in an economic crisis, with IMF assessments noting the elimination of gasoline subsidies worth $10 billion in June 2023, four times the amount spent on health care. These subsidies, which primarily benefited affluent portions of the population, also encouraged smuggling and rent-seeking behaviour, worsening Nigeria’s economic woes.

Zambia’s debt restructuring demonstrates African countries’ vulnerability to foreign shocks, emphasising the significance of long-term debt management.

Meanwhile, Sudan’s continuous conflict has killed thousands of lives and caused economic chaos, resulting in a worsening famine crisis throughout the area.

Food costs have skyrocketed, with Sudan seeing a 73% increase over 2023, increasing food crises in South Sudan and Chad, where interrupted trade and significant population displacements are straining resources.

As Africa faces economic issues, other countries such as Egypt, Somalia, and South Africa are feeling the strain.

Now the question remains if the World Bank and IMF operations save these countries from further disaster?