Public Disclosure Authorized

APRIL 2024 | VOLUME 29

AN ANALYSIS OF ISSUES SHAPING AFRICA’S ECONOMIC FUTURE

Public Disclosure Authorized
Public Disclosure Authorized

TACKLING INEQUALITY TO REVITALIZE GROWTH

AND REDUCE POVERTY IN AFRICA
Public Disclosure Authorized

THIS REPORT WAS PRODUCED BY THE OFFICE OF

THE CHIEF ECONOMIST FOR THE AFRICA REGION
ACKNOWLEDGMENTS
This report was produced by the Office of the Chief Economist for the Africa Region under the
overall guidance of Victoria Kwakwa and Ousmane Diagana. The team for this edition of Africa’s
Pulse was led by Andrew L. Dabalen and Cesar Calderon. The core team included Megumi
Kubota, Vijdan Korman, Nicholas Woolley, Sena Kimm Gnangnon, and Ayan Qu (section 1), and
Nistha Sinha and Gabriela Inchauste (section 2).
Valuable contributions to the report were provided by Mariela Caycho Arce, Dawit Mekonnen,
Dominik Peschel, and Mellany Geraldine Pintado Vasquez (section 1), and Aziz Atamanov, Tom
Bundervoet, Elwyn Davies, Elizabeth Foster, Alastair Haynes, Ruth Hill, Christopher Hoy, Jeremy
Lebow, Ambar Narayan, Hugo Ñopo, Olive Nsababera, Ana Maria Oviedo, Regina Pleninger,
Mariano Sosa, Liliana Sousa, Daniel Valderrama, and Haoyu Wu (section 2).
This report was peer reviewed by Dominik Peschel (section 1) and Rinku Murgai (section 2).
Specific comments were received from Umutesi Angelique, Helene Ba, Mamadou Tanou Balde,
Matheus Bueno, Flore de Préneuf, Rosa Brito Delgado, Maria Elkhdari, Jakob Engel, Elizabeth
Mary Foster, Chadi Bou Habib, Nazmus Sadat Khan, Stuti Khemani, Simeon Koffi, Wilfred A.
Kouame, Dorsati Madani, Naomi Muthoni Mathenge, Patrick John McCartney, Emmanuel A.
Mungunasi, Stanley Kasanga Mutinda, Miguel Angel Saldarriaga Noel, Hayaan Nur, Daniel
Pajank, Jorge Tudela Pye, Sajjad Ali Shah, Joseph Simumba, Fulbert Tchana Tchana, Claudia
Noumedem Temgoua, Sherin Varkey, and Precious Zikhali.
Communications, media relations, and stakeholder engagement were led by Flore de Préneuf
with the External and Corporate Relations team, including Caitlin Berczik, Patricia Riehn Berg,
Kimberly Bumgarner, Christelle Chapoy, Laure de Petiville, Marie Duffour, Georgette Dwomoh-
Appiah, Tomas Gonzalez, Eisa Gouredou, Artem Kolesnikov, Pabsy Mariano, Liviane Urquiza, and
Daniella van Leggelo Padilla. Beatrice Berman, Abrah Desiree Brahima, Kenneth Omondi, and
Rose-Claire Pakabomba provided production and logistical support.
The report was edited by Sandra Gain. The online and print publication was produced by Bill
Pragluski, and the cover design was by Rajesh Sharma.
 APRIL 2024 | VOLUME 29

AN ANALYSIS OF ISSUES SHAPING AFRICA’S ECONOMIC FUTURE

TACKLING INEQUALITY TO REVITALIZE GROWTH

AND REDUCE POVERTY IN AFRICA
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Table of Contents
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Growth is set to bounce back in Sub-Saharan Africa, but the recovery is still fragile. . . . . . .1

Tackling structural inequality to revitalize growth and accelerate poverty reduction . . . . . .3

Policy responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Section 1. Recent Developments and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1.1 Growth Outlook in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1.2 The Global Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1.3 Macroeconomic Performance of Sub-Saharan Africa. . . . . . . . . . . . . . . . . . . . . . 20

1.4 Risks to the Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 2. Tackling inequality for inclusive growth and poverty reduction . . . . . . . . . . . . . . . . 39

2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

2.2 Growth in Sub-Saharan Africa: Low, volatile, and unstable . . . . . . . . . . . . . . . . . . 41

2.3 Poverty and Inequality in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Section 3. Policy Implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Appendix: Country Classifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

A F R I C A’ S P U L S E > i
 Box
2.1 Country Experiences: Bangladesh and Viet Nam . . . . . . . . . . . . . . . . . . . . . . . . . . 61

List of Figures
1.1 Growth per Capita in Sub-Saharan Africa, 2015–2026f. . . . . . . . . . . . . . . . . . . . . . . 7
1.2 Real GDP per Capita in Sub-Saharan Africa under Different Scenarios . . . . . . . . . . . . . . 7
1.3 Purchasing Managers’ Index in Sub-Saharan African Countries. . . . . . . . . . . . . . . . . . 8
1.4 Contribution to GDP Growth: Expenditure Approach . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5 Contribution to GDP Growth: Sectoral Output Approach. . . . . . . . . . . . . . . . . . . . . 9
1.6 Contribution to Regional GDP Growth by the Largest Economies in the Region. . . . . . . 10
1.7 Growth Forecasts for the AFE Subregion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.8 Growth Forecasts for the AFW Subregion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.9 Growth across Sub-Saharan African Countries, 2023–25. . . . . . . . . . . . . . . . . . . . . . 12
1.10 External Debt Service in Sub-Saharan Africa, by Creditor. . . . . . . . . . . . . . . . . . . . . 13
1.11 External Financing Inflows to Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.12 Net Debt Inflows to Sub-Saharan Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.13 Global Purchasing Managers’ Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.14 Economic Growth in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.15 Global Inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.16 10-Year Treasury Bond Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.17 World Bank Commodity Price Indexes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.18 Average Monthly Prices of Cocoa, Coffee, and Tea. . . . . . . . . . . . . . . . . . . . . . . . . 19
1.19 Inflation in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.20 Distribution of SSA Countries, by Inflation Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.21 Headline and Food Inflation across Sub-Saharan African Countries, February 2024 . . . . . 21
1.22 Currencies in Sub-Saharan Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.23 Central Bank Policy Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.24 Fiscal Balances in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.25 Distribution of SSA Countries, by Fiscal Balances . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.26 Fiscal Balances in Sub-Saharan Africa, 2023–24 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.27 Sources of Changes in the Fiscal Balances of Sub-Saharan African Countries. . . . . . . . . 27
1.28 External PPG Debt Composition in Sub-Saharan African Countries, by Creditor . . . . . . . 30
1.29 External Risk of Debt Distress in Sub-Saharan African Countries. . . . . . . . . . . . . . . . . 30
1.30 Debt Dynamics in LIC-DSF Sub-Saharan African Countries . . . . . . . . . . . . . . . . . . . . 31
1.31 Public Debt Dynamics in Sub-Saharan African Countries . . . . . . . . . . . . . . . . . . . . . 31
1.32 Debt Service Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.33 Gross Financing Needs: Evolution and Decomposition . . . . . . . . . . . . . . . . . . . . . . 33
1.34 Bond Spreads in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.35 PPG External Debt Service in 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ii > A F R I C A’ S P U L S E
 2.1 Real GDP per Capita in SSA, 1960–2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.2 Relative Income per Capita in SSA, 1960–2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.3 SSA Relative Income per Capita, 1960–2022: Comparison with Income Groups. . . . . . . 42
2.4 SSA Relative Income per Capita, 1960–2022: Comparison with East and South Asia. . . . . 43
2.5 Different Growth Topologies across Sub-Saharan Africa. . . . . . . . . . . . . . . . . . . . . . 46
2.6 Main Features of Expansions in Sub-Saharan Africa, 1960–2021. . . . . . . . . . . . . . . . . 47
2.7 Main Features of Recessions in Sub-Saharan Africa, 1960–2021 . . . . . . . . . . . . . . . . . 48
2.8 Growth Accounting in Sub-Saharan African Countries. . . . . . . . . . . . . . . . . . . . . . . 49
2.9 Growth Accounting for 2000–14: The Role of Natural Capital. . . . . . . . . . . . . . . . . . . 50
2.10 Growth Leads to Greater Poverty Reduction in Countries with Low Levels of Inequality . . 52
2.11 Extreme Poverty in the Africa Region Relative to the Rest of the World, 2000–19 . . . . . . 53
2.12 Multidimensional Poverty Rates, by GDP per Capita . . . . . . . . . . . . . . . . . . . . . . . . 54
2.13 Extreme Poverty in Sub-Saharan Africa Since 2019 . . . . . . . . . . . . . . . . . . . . . . . . . 55
2.14 Poverty Trends, by Fragility and Resource Wealth Status. . . . . . . . . . . . . . . . . . . . . . 56
2.15 Poverty in Urban and Rural Areas in the Africa Region. . . . . . . . . . . . . . . . . . . . . . . 56
2.16 Decomposition of Poverty Reduction through Income Growth versus Income
Redistribution, 2000–19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2.17 Elasticity of Poverty Reduction to Growth, by Region . . . . . . . . . . . . . . . . . . . . . . . 57
2.18 Inequality in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
2.19 Inequality of Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
2.20 Average Contributions of Circumstances to Inequality of Opportunities. . . . . . . . . . . . 62
2.21 Share of Income from Agriculture, Household Enterprises, and Wage Jobs,
by Consumption Deciles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
2.22 Firm Size and Employment Distributions in Sub-Saharan African Countries
and the United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
2.23 Main Customers for Own-Account Workers and Household Enterprises. . . . . . . . . . . . 65
2.24 Product Market Regulations in Sub-Saharan Africa. . . . . . . . . . . . . . . . . . . . . . . . . 65
2.25 Fiscal Redistribution in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
2.26 Impacts of Taxes and Transfers and Subsidies on Poverty . . . . . . . . . . . . . . . . . . . . . 67

Map
1.1 Reserve Coverage Ratio, 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

List of Tables
1.1 Revenue and Expenditure Measures Introduced in Selected African Countries, 2022–23. . 28
2.1 Long-Term Growth in Sub-Saharan Africa, 1960–2022: Basic Statistics . . . . . . . . . . . . . 44
A.1 Western and Central Africa Country Classification . . . . . . . . . . . . . . . . . . . . . . . . . 73
A.2 Eastern and Southern Africa Country Classification. . . . . . . . . . . . . . . . . . . . . . . . . 73

A F R I C A’ S P U L S E > iii
iv > A F R I C A’ S P U L S E
Executive Summary
GROWTH IS SET TO BOUNCE BACK IN SUB-SAHARAN AFRICA,
BUT THE RECOVERY IS STILL FRAGILE
u After bottoming out at 2.6 percent in 2023, economic growth in Sub-Saharan Africa is
expected to reach 3.4 percent in 2024 and 3.8 percent in 2025. The recovery is primarily driven
by greater private consumption growth as declining inflation boosts the purchasing power of
household incomes. Investment growth will be subdued as interest rates are likely to remain
high while fiscal consolidation constrains government consumption growth. The contribution
of the global economy to Africa’s growth will remain modest. Expectations of monetary policy
rate cuts in large global economies may stimulate investment growth in 2025.

Lower inflation is supporting the economic rebound in the region

u Inflation is cooling in most Sub-Saharan African economies but remains high. The median
inflation in the region is projected to fall from 7.1 percent in 2023 to 5.1 percent in 2024 and 5
percent in 2025–26. The normalization of global supply chains, steady decline of commodity
prices, and impacts of monetary tightening and fiscal consolidation are contributing to a
lower rate of inflation in the region.
u Although inflation is receding in most countries in 2024, it remains high compared to pre-
pandemic levels: inflation is projected to decrease in about 80 percent of African countries
compared with 2023, but it is still higher than pre-pandemic levels in 32 of 37 countries.
Moreover, 14 countries in the region still exhibit persistently high levels of inflation (two or
more digits) this year—with a median inflation rate that has dropped modestly from 25.9
percent in 2023 to 24.8 percent in 2024.
u This mixed picture requires different monetary policy responses. A pause in monetary policy
tightening might be warranted in countries with declining inflation that are close to or
within the target range, while a combination of monetary tightening and fiscal consolidation
will be essential for those countries with elevated inflation. Fiscal prudence is particularly
recommended to avoid a resurgence of inflation in the many Sub-Saharan African countries
that are holding elections this year.

The contribution of global drivers of growth remains subdued and uncertain

u The global engine of growth is slowly reactivating. In the second half of 2023, global activity
remained resilient as stronger private and government spending sustained aggregate
demand despite tight financial conditions. Greater labor force participation, the normalization
of supply chains, and falling energy and commodity prices contributed to global
economic activity amid uncertainties arising from geopolitical tensions and geoeconomic
fragmentation. Still, headwinds to growth in advanced economies lie ahead this year. Global
policy rates remain elevated, leading to tight credit markets—which could dampen private
investment. Moreover, continued growth of household consumption may be restricted by a
gradual depletion of the stock of excess savings that accrued during the COVID-19 pandemic.
In China, subdued consumer sentiment, the risk of entrenched deflation, and persistent strains
in the property sector limit the prospects for a return to the growth levels of the early 2010s.

A F R I C A’ S P U L S E > 1
 Fiscal balances are improving but at a moderate pace
u Fiscal balances continue to improve, thanks to the fiscal consolidation measures underway
in several Sub-Saharan African countries (for instance, Ghana, Kenya, and Nigeria). Debt
restructuring negotiations provide an additional incentive for prudent fiscal management in
Ghana and Zambia. The median fiscal deficit in the region is projected to decline modestly
from 3.8 percent of gross domestic product (GDP) in 2023 to 3.5 percent of GDP in 2024.
Although the fiscal balance is expected to improve in most countries in the region (31 of
46), their deficits still remain large: the median fiscal deficit of these 31 countries is projected
to narrow from 4.8 percent of GDP in 2023 to 3.8 percent of GDP in 2024. Furthermore, the
number of countries with large deficits (exceeding 3 percent of GDP) has dropped modestly,
from a peak of 34 in 2022 to 27 in 2024. The vulnerability of African governments’ fiscal
positions to global shocks remains a challenge. Transformative policy actions to build fiscal
buffers are essential to prevent and/or cope with future shocks.

Growing debt service obligations are creating liquidity problems and

crowding out development spending
u Public debt in Sub-Saharan Africa is expected to decline from 61 percent of GDP in 2023 to
57 percent of GDP in 2024. However, the risk of debt distress remains high. More than half of
the African governments grapple with external liquidity problems, face unsustainable debt
burdens, or are actively seeking to restructure or reprofile their debts. Public debt service
obligations have surged as governments in the region are exposed to market financing and
non–Paris Club government loans. External borrowing is more expensive than it was prior
to the pandemic despite sovereign spreads gradually declining from their peak in May 2023.
For instance, the coupon of the new Eurobond issued by Kenya this February is 9.75 percent,
compared to the 6.875 percent of the Eurobond maturing in 2024.

Growth headwinds are compounded by escalating conflict and violence

u Increased conflict and violence in the region will continue to weigh on economic activity.
Although confined to small economies so far, military coups and the risk of coup contagion
significantly impact international investor sentiment and the perception of risk toward the
entire region. Tensions in West Africa have escalated with the decisions of Burkina Faso, Mali,
and Niger to leave the Economic Community of West African States and Senegal’s decision to
delay elections. In Sudan, the resolution of the conflict between the Sudanese Armed Forces
and the Rapid Support Forces through mediation may prove difficult. In Ethiopia, security
remains uncertain as bouts of violence continue in the Amhara and Oromia regions.
u Persistent conflict and organized violence may disrupt production and access to food staples
in several countries (Burkina Faso, Mali, Niger, and Somalia, among others). Food security
problems are amplified by climatic shocks—as frequent droughts and floods are lashing
Eastern and Southern Africa (Ethiopia, Kenya, Mozambique, Somalia, and Zambia). Disruptions
of rainfall patterns, along with the black pod disease, are threatening cocoa production and the
livelihoods of farmers in Côte d’Ivoire and Ghana. Moreover, factors like soil degradation, pests,
and market fluctuations exacerbate the difficulties faced by agricultural communities. With an
estimated 105 million people in the region potentially experiencing severe food insecurity as of
March 2024, urgent and comprehensive agricultural interventions and support are imperative.

2 > A F R I C A’ S P U L S E
Renewed urgency around revitalizing growth is critical
u The pace of economic expansion in the region remains slow and insufficient to have a
significant effect on poverty reduction. Growth per capita in Sub-Saharan Africa is set to
accelerate from a modest 0.1 percent in 2023 to 0.9 percent in 2024 and 1.3 percent in 2025.
However, the projected boost in economic activity remains well below the long-term growth
rate. Indeed, the region has remained stuck in a low-growth trap over the past decade: if the
region’s growth rate maintained the pace of 2000–14 over 2015–26, real output per capita
would be about one-third higher than its level at current growth rates.

TACKLING STRUCTURAL INEQUALITY TO REVITALIZE

GROWTH AND ACCELERATE POVERTY REDUCTION
u Most countries in the region have been unable to sustain growth over the long term. Over the
past six decades, the evolution of real GDP per capita can be characterized by long-term swings.
Moreover, growth is volatile and unstable compared to that in advanced economies and other
developing countries—particularly non-African upper-middle-income countries. This variability
is especially troublesome when measured against the region’s low average growth rate. Overall,
countries in the region are unable to sustain longer expansions. In fact, Sub-Saharan Africa has
shorter and weaker expansions relative to the rest of the world. Existing evidence suggests that
the more egalitarian societies tend to sustain growth for a longer period of time.
u Economic growth reduces poverty in Sub-Saharan Africa less than in other regions, as measured
by the growth elasticity of poverty. Per capita GDP growth of 1 percent is associated with
poverty reduction of only 1 percent in the region, compared to 2.5 percent in the rest of the
world. The low growth elasticity of poverty prevails even after controlling for initial differences in
poverty, income levels, and inequality. Meanwhile, the limited poverty reduction in Sub-Saharan
Africa since 2000 has been driven primarily by growth as opposed to distributional changes in
income, making the limited impact of growth on poverty reduction especially concerning.
u High inequality in the region is largely structural and not simply the result of differences in
individual talents or effort. Structural differences lead to accumulating disparities at three
distinct stages. First, these disparities arise when people build their productive capacities,
including in access to schooling and other basic services (the pre-market stage). Second, when
people engage in productive activities, poorly functioning markets, distortions, and frictions
can systematically limit certain groups’ access to productive income-generating opportunities
(the in-market stage). This limits market competition, increases the misallocation of resources,
and undermines structural transformation and firm growth. Third, disparities can be
exacerbated or redressed through taxes, social transfers, and subsidies (the post-market stage).
Importantly, these stages are interconnected, with spillovers occurring from one stage to the
other. For example, inequality in access to quality education will be compounded by labor
market distortions or lack of competition, which could then be exacerbated by regressive taxes.
u Access to basic services remains highly unequal despite significant improvements in coverage
over recent decades. Critically, inequality in access to services is heavily influenced by the
circumstances into which a child is born, suggesting that structural inequalities are prevalent
early in the pre-market stage. On average, a child’s location accounts for around half of the
structural inequality at the pre-market stage, especially in resource rich countries. Such pre-
market structural inequalities are strong drivers of limited intergenerational mobility.

A F R I C A’ S P U L S E > 3
 u Market imperfections and institutional distortions have the power to limit productivity and
earnings. Firms and farms face pervasive credit constraints, with only about one in 10 firms
with fewer than 19 workers relying on bank financing. Instead, most own-account workers
and household enterprises rely on their own resources, resources from family and friends,
or informal sources to start up their businesses. Similarly, access to product markets is
constrained, which prevents firms and farms from scaling up their production. In particular,
the lack of connectivity and market integration means that markets are segmented, allowing
firms or farms with market power to capture benefits, contributing to income inequality. For
instance, trade costs, including costs of transportation, are four to five times higher in Ethiopia
and Nigeria than in the United States. Finally, frictions in the labor market prevent workers
from accessing productive opportunities.
u Although taxes, transfers, and subsidies reduce inequality, they may not reduce poverty. The
combined effect of taxes, transfers, and subsidies leads to a greater reduction in inequality in
Sub-Saharan Africa than in non-African countries with comparable levels of income. However,
the level of inequality after this fiscal effort is still higher than the pre-fiscal level of inequality
in other regions. The poor often pay more in taxes than they receive in benefits, even if
taxes are higher for the rich. Taxation policy tends to increase poverty rates in most African
countries for which fiscal incidence analysis is available. Poorly targeted subsidies and limited
social assistance do not compensate poor African households for the indirect taxes they pay,
even after accounting for the fact that low-income households largely purchase goods in
informal markets.

POLICY RESPONSES
Domestic resource mobilization and support from the international
community can play a role in alleviating the region’s funding squeeze
u The ability of African countries to finance their development and reprofile their debt is
constrained by limited access to costlier external funding. Amid high levels of external
debt repayments, as a result of high debt levels and elevated borrowing costs, some
countries in the region may face temporary external liquidity pressures in 2024 and 2025.
Increased domestic resource mobilization is critical to win back the country’s policy space,
channeling resources toward pro-growth public spending and addressing debt rollover risks.
Strengthening tax administration, broadening the tax base, and improving the efficiency of
public spending are essential. The international community can also play a role by providing
more concessional financing to facilitate the implementation of structural reforms and
supporting external debt management.

4 > A F R I C A’ S P U L S E
Tackling structural inequalities to foster growth and poverty reduction
u Structural inequalities in Sub-Saharan Africa require multisectoral actions—particularly
policies to create a level playing field and enhance the productive capacity of the
disadvantaged. Investments in human capital (foundational learning and nutrition) and
strengthened local capacity for service delivery to underserved populations and regions can
build people’s capacity to seize market opportunities. Removing size-dependent distortions,
improving justice service delivery, and boosting market access can support fairer and
more thriving marketplaces. Implementing regional trade agreements, such as the African
Continental Free Trade Area, and investing in more efficient and affordable transportation
corridors present a unique opportunity to expand markets.
u Domestic revenue mobilization efforts can also be designed to protect the poor—through
taxation of high-net-worth individuals via income and property taxes. Taxation of land and
property can provide effective mechanisms to support local governments in the region.
Digital technologies can help to broaden the coverage of property taxes. This would require
digital record keeping that maximizes interoperability, facilitates updating of records,
and allows regulatory oversight; transparency through public access to registry data; and
integrated workflows to support record updating and tax enforcement. Eliminating value-
added tax exemptions and reforming utilities (that is, addressing energy subsidies and
reviewing water tariffs), which largely benefit high-income households, could also yield
revenue—although they might be accompanied by mitigating measures to minimize the
impact on the poor.
u Overall, the special focus of this issue of Africa’s Pulse suggests that fiscal policy alone is
insufficient to revitalize growth and accelerate poverty reduction. Policies to build assets and
use them efficiently are critical for fostering inclusive growth.

A F R I C A’ S P U L S E > 5
6 > A F R I C A’ S P U L S E
Section 1. Recent Developments and Outlook
1.1 GROWTH OUTLOOK IN SUB-SAHARAN AFRICA
Economic growth in Sub-Saharan Africa is expected to rebound to 3.4 percent in 2024 and
3.8 percent in 2025, after bottoming out at 2.6 percent in 2023. The rebound from 2023 can
be attributed to receding inflationary pressures in the region, growth resilience in the United
States and other large economies, recovery in global trade, as well as increased risk appetite and
expected gradual easing of global financial conditions—particularly in the second half of this year.

In per capita terms, growth in the region is set to accelerate to 0.9 percent in 2024 and 1.3 percent
in 2025—from a modest 0.1 percent in 2023. However, the projected growth in the region is still
slower than what was registered in 2000-14 (2.4 percent per year). Regional forecasts suggest that
Sub-Saharan Africa’s real output per capita will fail to grow over 2015–26 (figure 1.1). This would
mark a decade of futility in economic performance. If the region’s growth rate maintained the pace
of 2000–14 over 2015–26, real output per capita should be about one-third higher than its level at
current growth rates (figure 1.2).

This issue of Africa’s Pulse suggests that the post-COVID-19 growth recovery in Sub-Saharan
Africa remains fragile, and there is renewed urgency to revitalize economic growth. While some
progress has been made, Africa still needs to overcome significant challenges regarding low
and unstable growth, high levels of extreme poverty and inequality, and difficulty translating
growth into poverty reduction. Policymakers must find ways to foster inclusive growth that is
both longer and stronger while avoiding economic downturns. Structural inequalities are at
the root of the weak transmission of growth, making it difficult to reduce poverty and achieve
sustained growth in the region. Addressing the drivers of structural inequalities requires policy
frameworks that account for interlinkages, complementarities, and trade-offs across three
phases of the income generation process—building people’s productive capacities, addressing

FIGURE 1.1: Growth per Capita in Sub-Saharan Africa, FIGURE 1.2: Real GDP per Capita in Sub-Saharan Africa
2015–2026f under Different Scenarios

3 1.35
2000-14 = 2.4%
2 1.30
1.25
1
1.20
Index 2014=1.0

0
1.15
Percent

-1 1.10
-2 1.05
-3 1.00

-4 0.95
0.90
-5
2014
2015
2016
2017
2018
2019
2020
2021
2022

2024f
2025f
2026f
2023e
2015
2016
2017
2018
2019
2020
2021
2022
2023e
2024f
2025f
2026f

Actual growth path Africa rising growth trend (2000-14)

Source: World Bank staff projections.

Note: The actual growth path is the actual, estimated, and forecast growth rates over 2015–26. e = estimate; f = forecast; GDP = gross domestic product.

A F R I C A’ S P U L S E > 7
 market and institutional distortions that limit people’s ability to use and benefit from those
productive capacities, and ensuring fiscal progressivity. Section 3 of this issue provides a series
of policy recommendations for tackling these structural inequalities, drawing on a forthcoming
regional report.1

Economic growth in Sub-Saharan Africa bottomed out in 2023…

Growth in Sub-Saharan Africa slowed to 2.6 percent in 2023, down from 3.6 percent in 2022.
More than half of the countries in the region experienced a decline in their gross domestic
product (GDP) growth rate in 2023. The deceleration of growth was partly attributed to slower
growth of consumption and investment. Elevated inflation rates, primarily driven by higher
food and energy prices as well as weaker currencies, reduced the purchasing power of Sub-
Saharan African households and, therefore, led to a growth slowdown of private consumption
in the past year. Tighter (global and domestic) financial conditions, as a result of contractionary
monetary policies aiming to dampen inflation, increased the cost of financing and reduced the
availability of credit—thus holding back gross fixed investments. Country-specific challenges in
the larger economies in the region also contributed to the slowdown, including energy outages
and inadequate transportation logistics in South Africa, as well as lower prices and below quota
production of oil in Nigeria and Angola.

… and it is set to rebound in 2024 and 2025, but the recovery remains fragile
High-frequency indicators show that aggregate activity has expanded in the largest countries in
the region during the early months of 2024 (figure 1.3). In South Africa, the seasonally adjusted
Absa Purchasing Managers’
FIGURE 1.3: Purchasing Managers’ Index in Sub-Saharan African Countries Index (PMI) increased from
Nigeria South Africa Kenya Ghana Uganda Mozambique Zambia 43.6 in January to 51.7 in
2023 Jan February—thus recording
Feb the strongest expansion in
Mar
factory activity since early
Apr
May 2023. Taking the PMIs of
Jun the first two months of
Jul the year together signals a
Aug subdued start to 2024, with
Sep
expectations of an uptick
Oct
Nov
in growth over the rest of
Dec the year as some of the
2024 Jan constraints to economic
Feb activity ease. In Nigeria, the
Contraction Expansion PMI fell from 54.5 in January
to 51.1 in February—
Sources: Haver Analytics; Bloomberg.
Note: The figure plots the evolution of the S&P Global Purchasing Managers’ Index across countries
indicating some buoyancy
in the region. Red (green) colors denote contraction (expansion). Darker (lighter) shades of the color
denote that the contraction or expansion is larger (modest).
in the private sector.2
Inflationary pressures

1 Sinha, Inchauste, and Narayan (forthcoming).

2 The February 2024 PMI is still higher than the average in 2023.

8 > A F R I C A’ S P U L S E
pushed input and output
FIGURE 1.4: Contribution to GDP Growth: Expenditure Approach
costs in the private sector.
5
In turn, output and new
orders slowed significantly. 4

Growth in Sub-Saharan 3
Africa is expected to

Percent
2
accelerate to 3.4 percent 2.0

in 2024 and further to an 1 1.8 1.5 1.7 1.8

0.8
average rate of 3.9 percent 0
in 2025–26. Surprising
upside growth among -1
2021 2022 2023e 2024f 2025f 2026f
large, advanced economies
Government consumption Private consumption
at the start of the year— Gross fixed investment Net exports
particularly the United
States—and a recovery FIGURE 1.5: Contribution to GDP Growth: Sectoral Output Approach
in global trade and the 5
gradual easing of financial
conditions expected late 4
this year partly explain
3
the recovery in economic
Percent

2.7 2.2 2.3

activity in Sub-Saharan 2 2.7 2.0
Africa. Inflation cooling and 1.9
policy commitment toward 1
restoring macroeconomic
0
stability will help to 2021 2022 2023e 2024f 2025f 2026f
improve investor sentiment. Agriculture Industry Services Net taxes

From the expenditure Source: World Bank staff projections (World Bank Macro-Fiscal Model).
Note: Change in inventories and statistical discrepancy are not displayed in figure 1.4. e = estimate;
side, the recovery of f = forecast; GDP = gross domestic product.

private consumption
explains the bulk of the rebound in economic activity this year. As inflation recedes and the
purchasing power of household incomes climbs back, private consumption growth is expected
to accelerate by as many percentage points as overall activity. The contribution of investment
remains subdued in 2024 as interest rates remain high. Expectations of a cut in monetary policy
rates by the second half of the year in large, advanced economies and by late this year or early
next year in African economies might explain an uptick in the contribution of investment to
growth in 2025. Government consumption is expected to make a modest contribution to
economic activity this year as fiscal authorities continue their commitment to restoring the
sustainability of public finances (figure 1.4). From the sectoral output perspective, industry
and services account for nearly three-quarters of the rebound of economic activity in 2024.
As growth further firms in 2025–26, the service sector will account for more than half of the
expansion along the forecast horizon, followed by modest contributions from agriculture and
industry (figure 1.5).

A F R I C A’ S P U L S E > 9
 The pace of the recovery is expected to differ across subregions in 2024
Sub-Saharan Africa’s rebound in 2024 is driven by large countries in the region recording
growth rates that are lower than their performance over the first two decades of this century.
In 2024, growth is expected to accelerate in nearly 70 percent of Sub-Saharan African countries
(32 countries). However, growth rates are below their average growth in 2000–19 in about
half of them (17 countries). The expansion of economic activity in the 10 largest countries in
the region explains about 80 percent of the regional growth in 2024. Growth in Côte d’Ivoire,
Ethiopia, Kenya, and Nigeria, which comprise about 40 percent of the region’s GDP, is projected
to account for half of the
FIGURE 1.6: Contribution to Regional GDP Growth by the Largest Economies regional growth this year
in the Region (percent) (figure 1.6). Among the
3.5 0.88 10 largest economies in
Growth in 2024 = 3.4%
the region, only three are
3.0
growing at rates that are
2.5
0.39 higher than their long-term
0.25
average—namely, Côte
2.0 0.23 d’Ivoire, the Democratic
0.21 Republic of Congo, and
1.5 0.19 Kenya.
0.17
0.15
1.0 0.12 In the Eastern and Southern
0.10
0.71 Africa (AFE) subregion,
0.5 growth of economic
activity is expected to
0.0
accelerate from a trough
Other SSA countries

Ghana

Uganda

Angola

Congo, Dem. Rep.

Tanzania

South Africa

Côte d'Ivoire

Kenya

Ethiopia

Nigeria

of 2.2 percent in 2023 to

3.2 percent in 2024 and
firm further to 3.6 percent
Source: World Bank staff projections (World Bank Macro-Fiscal Model). in 2025–26. The growth
Note: Growth in the region is the weighted average across countries. GDP = gross domestic product;
SSA = Sub-Saharan Africa. performance of the AFE
subregion is dragged down
by lower-than-average growth in Angola and South Africa. Excluding these two countries,
economic activity in the AFE subregion is expected to increase by 4.3 percent in 2024 and 5
percent in 2025–26 (figure 1.7). Within the subregion, the East African Community is projected
to grow at the fastest pace (5.3 and 5.8 percent in 2024 and 2025–26, respectively), thanks to
robust growth in the Democratic Republic of Congo, Kenya, Rwanda, and Uganda.

Economic activity in South Africa is set to rebound from 0.6 percent in 2023 to 1.2 percent
in 2024 and slightly accelerate to 1.4 percent in 2025–26. The gradual easing of structural
constraints—in particular, electricity load shedding and logistics problems in freight rail and
ports—and easing of cost-of-living pressures on households are contributing to this rebound.
In Angola, growth is projected to accelerate from 0.8 percent in 2023 to 2.8 percent in 2024.
Economic activity will be driven primarily by the non-oil sector, while oil production is set to
decline by 2.5 percent in 2024 due to lack of investments and maturing fields. Inflationary
pressures will remain in 2024, although they are expected to cool by the end of the year. Finally,

10 > A F R I C A’ S P U L S E
Kenya is expected to grow
FIGURE 1.7: Growth Forecasts for the AFE Subregion
by 5 percent in 2024 and
5.2 percent in 2025–26. 8

In the medium term,

growth will be supported 6
by increased investment
predicated on restored

Percent
access to international 4
capital markets that will
spur investor confidence
2
and capital inflows, as
well as more credit to the
private sector through 0
2022 2023e 2024f 2025f
reduced domestic
government borrowing. AFE excl. South Africa
AFE excl. Angola and South Africa
Other growth drivers Non-resource-rich countries
include the recovery in Mineral and metal exporters excl. South Africa
agriculture and tourism
as well as deeper regional FIGURE 1.8: Growth Forecasts for the AFW Subregion
integration. 7

Economic activity in the 6

Western and Central Africa 5
(AFW) subregion is set to
4
Percent

increase from 3.2 percent in

2023 to 3.7 percent in 2024 3
and further accelerate to 2
4.2 percent in 2025–26. The
1
subregion’s performance
will be held back by the 0
2022 2023e 2024f 2025f
lower-than-average growth
in Nigeria. Excluding AFW excl. Nigeria Mineral and metal exporters
this country, the AFW Non-resource-rich countries Oil resource-rich countries
WAEMU CEMAC
subregion is projected to
grow by 4.4 percent in 2024 Source: World Bank staff projections (World Bank Macro-Fiscal Model).
Note: AFE = Eastern and Southern Africa; AFW = Western and Central Africa; CEMAC = Economic
and 5 percent in 2025–26. and Monetary Community of Central Africa; e = estimate; f = forecast; WAEMU = West African
Economic and Monetary Union.
Within the subregion,
economic activity in the
West African Economic and Monetary Union (WAEMU) is projected to increase by 5.9 percent in
2024 and 6.2 percent in 2025 due to the solid performances of Benin, Côte d’Ivoire, Niger, and
Senegal (figure 1.8).

Growth in Nigeria is projected at 3.3 percent in 2024 and 3.6 percent in 2025–26 as
macroeconomic and fiscal reforms gradually start to yield results. A more stable macroeconomic
environment, as the reforms’ initial shock dissipates, will lead to sustained but still slow growth

A F R I C A’ S P U L S E > 11
 of the non-oil economy. The oil sector is expected to stabilize with recovery in production and
slightly lower prices. Structural reforms will be needed to foster higher growth. Average inflation
will remain elevated at 24.8 percent in 2024, although it is expected to ease gradually to 15.1
percent by 2026 on the back of monetary policy tightening and exchange rate stabilization.
In Côte d’Ivoire, economic activity is set to grow at 6.6 percent in 2024 and to stay firm at 6.5
percent in 2025–26. A more accommodative monetary policy by the Central Bank of West
African States will support private consumption. In line with the development of the offshore
Baleine oilfield, rising oil production and exports are expected to boost economic activity.
Finally, investments in agriculture, manufacturing, and telecommunications are expected to
increase as a result of reforms in the business environment.

More diversified economies in the region are projected to grow faster

There is wide heterogeneity in growth performance across the region: 32 of 47 countries in
Sub-Saharan Africa are expected to experience a growth acceleration in 2024—with eight of
these 32 countries posting a rate of growth greater than 5 percent this year (figure 1.9). The
countries with the fastest rebound in 2024 include Niger (5.7 percentage points), Senegal (3.4
percentage points), São Tomé and Príncipe (2.9 percentage points), Angola (1.9 percentage
points), and the Republic of Congo (1.6 percentage points). At the other end, 15 countries are
expected to record a growth slowdown in 2024, with the sharpest decelerations in Guinea (2.2
percentage points), Zimbabwe (2.2. percentage points), Mauritius (2.2 percentage points), and
the Democratic Republic of Congo (1.8 percentage points).

FIGURE 1.9: Growth across Sub-Saharan African Countries, 2023–25

10

0
Percent

-5

-10

-15
Sudan
South Africa
Malawi
Central African Republic
Lesotho
São Tomé and Príncipe
Ghana
Mali
Eritrea
Zimbabwe
Seychelles
Comoros
Eswatini
Burkina Faso
Burundi
Cameroon
Madagascar
Guinea-Bissau
Mauritius
Cabo Verde
Mozambique
Kenya
Togo
Gambia, The
Tanzania
Benin
Uganda
Côte d'Ivoire
Ethiopia
Senegal
Rwanda
Namibia
Sierra Leone
Botswana
Mauritania
Zambia
Guinea
Liberia
Congo, Dem. Rep.
Niger
Equatorial Guinea
South Sudan
Angola
Chad
Gabon
Nigeria
Congo, Rep.

Minerals and metals Oil rich

Non-resource-rich countries rich countries countries

2023e 2024f 2025f

Source: World Bank staff projections (World Bank Macro-Fiscal Model).
Note: e = estimate; f = forecast.

12 > A F R I C A’ S P U L S E
Furthermore, the growth divergence between non-resource abundant and resource abundant
countries will continue increasing along the forecast horizon. For both groups of countries,
growth will rebound in 2024 and continue to accelerate in 2025–26. Declining international
commodity prices from their 2022 peaks are expected to weigh on exports for resource
abundant countries. Still, this group of countries will grow from 2.2 percent in 2023 to 2.8
percent in 2024 as hydrocarbon projects resume or come online in Niger and Senegal and
mining production kicks off in the Democratic Republic of Congo, Mali, and Sierra Leone.
Growth in non-resource abundant countries is supported by gross fixed investment and private
consumption, and these countries are expected to grow from 2.4 percent in 2023 to 3.4 percent
in 2024, and further increase to 4 percent in 2025–26.

Limited access to external funds is crimping Sub-Saharan African countries’

ability to finance their development
Many low-income and lower-middle-income countries in Sub-Saharan Africa have accumulated
debt burdens—as reflected by their high levels of public debt and increased debt service. During
the past decade, public debt increased rapidly, and the composition of public and publicly
guaranteed (PPG) external debt shifted from bilateral creditors to private creditors and non–Paris
Club governments.3 Consequently, the larger share of debt owed to private creditors and non–
Paris Club governments has not only complicated debt restructuring negotiations, but also raised
the debt service burden. High policy rates in advanced economies have recently further increased
interest payments on debts. For instance, figure 1.10 illustrates the shift in the composition of
debt service from official to private creditors. Interest payments owed by governments to private

FIGURE 1.10: External Debt Service in Sub-Saharan Africa, by Creditor

100

90

80

70

60
US$, billions

50

40

30

20

10

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023e
Principal, PNG Principal, PPG official creditors Principal, PPG private creditors Interest, PNG
Interest, PPG official creditors Interest, PPG private creditors Total debt service

Source: International Debt Statistics, World Bank.

Note: e = estimate; GDP = gross domestic product; PNG = private nonguaranteed; PPG = public and publicly guaranteed.

3 See figure 1.28 in this issue and Africa’s Pulse, No. 19 (World Bank 2019).

A F R I C A’ S P U L S E > 13
 creditors account for almost 65 to 70 percent of total PPG external debt interest payments. The
share of governments’ principal repayments to private creditors also increased, from about 60
percent in 2010 to a peak of 80 percent in 2015, and then declined to 62 percent in 2022. The
sharp rise in public debt service—and, particularly, servicing the costlier debt burden owed to
private creditors—may raise the risk of external liquidity shortages in the region.

Shortages of liquidity have become an urgent issue in Sub-Saharan African countries with
high levels of external debt repayments. Easing liquidity pressures will also reduce default
risk—although some of these countries have already been facing a solvency problem.4
Figure 1.11 depicts the
FIGURE 1.11: External Financing Inflows to Sub-Saharan Africa
significant reduction in
external financing inflows
4.0
to region. For instance,
3.5 financing flows such as
foreign direct investment
3.0
inflows, international
Percent of regional GDP

2.5 bond issuances, and loan

disbursements from China
2.0
have decreased since
1.5 2015–16, while official
development assistance
1.0
has remained relatively
0.5 steady over time. External
liquidity shortages in
0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 the region can also be
FDI inflows International bond issuances proxied by the evolution
Loan disbursements from China Official development assistance of net debt inflows to
Source: International Debt Statistics, World Bank. Sub-Saharan Africa (figure
Note: FDI inflows to the region exclude those into South Africa. FDI = foreign direct
investment; GDP = gross domestic product.
1.12). Negative short-
term debt inflows were
experienced in 2015,
2016, and 2020, and similarly for long-term private debt inflows in 2019. Long-term private
net debt inflows have dramatically declined since 2018, thus signaling that amortization (loan
principal payments) for long-term private debts increased at a higher pace than disbursements.
Consequently, some countries (Benin, Côte d’Ivoire, and Kenya) have returned to the
international capital market to buy back and refinance Eurobonds and commercial loans falling
due.5 For instance, Côte d’Ivoire placed US$2.6 billion in Eurobonds in January 2024, which
represents the first issuance for any Sub-Saharan African country since April 2022. The issuance
consisted of US$1.1 billion in nine-year bonds at 7.875 percent, and US$1.5 billion in 13-year
bonds at 8.5 percent. In February, Benin raised US$750 million in 14-year bonds at 8.375 percent,
and Kenya made a US$1.5 billion issuance at a higher yield and coupon rate (10.375 and 9.75
percent, respectively).

4 Chad, Ethiopia, Ghana, and Zambia have already requested debt restructuring under the Common Framework.
5 Benin’s decision to access external markets was also driven by the tightening of financial conditions in the West African Economic and Monetary Union regional financial market and
other factors, including foreign reserves management.

14 > A F R I C A’ S P U L S E
External debt restructuring
FIGURE 1.12: Net Debt Inflows to Sub-Saharan Africa
is still in progress under
80
the Common Framework
in Ethiopia, Ghana, and 70

Zambia. The presence 60

of multiple creditors— 50
particularly private creditors

US$, billions
40
and non–Paris Club
30
governments—makes debt
restructuring negotiations 20

complex. For instance, Chad 10

and Ghana have relatively 0
lower exposure to loans
-10
from China. The share of 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
PPG external debt owed Long term, private Long term, PPG Short term
to China accounted for 7 Source: International Debt Statistics, World Bank.
percent in Ghana and 11 Note: PPG = public and publicly guaranteed.

percent in Chad in 2022.

The lower exposure to multiple creditors has enabled these countries to reach or be close
to reaching agreements.6 In January 2024, the Official Creditor Committee (OCC) reached an
agreement in principle with the Government of Ghana on the terms of the treatment of official
bilateral debt.7 Debt restructuring negotiations allowed the International Monetary Fund to
conclude financing programs and the World Bank to provide large positive net flows at highly
concessional or grant terms. In contrast, Zambia and Ethiopia have greater exposure to China.
The share of PPG external debt owed to China amounts to 36 percent in Zambia and 25 percent
in Ethiopia. These high shares pose challenges for debt restructuring. For instance, the OCC
requested Zambia to provide comparability of treatment among bondholders and other private
creditors. Ethiopia’s agreement is delayed due to the policy mix of reforms.

6 Only Chad has so far reached an agreement with its main creditors (bilateral and the largest private one) in November 2022.
7 In 2023, Ghana also concluded a domestic debt exchange that achieved 95 percent participation and critically helped reduce refinancing needs.

A F R I C A’ S P U L S E > 15
 1.2 THE GLOBAL ENVIRONMENT
Modest growth in major economies and improving conditions
in emerging markets
Global economic growth is expected to slow to 2.4 percent in 2024—the third consecutive year
of deceleration—reflecting the lagged and ongoing effects of tight monetary policies to rein in
decades-high inflation, restrictive credit conditions, and anemic global trade and investment.
Near-term prospects are diverging, with subdued growth in major economies alongside
improving conditions in some emerging markets and developing economies (EMDEs).

Growth in advanced economies is forecast to slow from 1.5 percent in 2023 to 1.2 percent in 2024,
as domestic demand decelerates—particularly private consumption, due to a gradual depletion
of the stock of excess savings. Investment growth should remain subdued as sustained high real
interest rates and restrictive credit conditions dampen business investment. Most of the projected
slowdown in growth in advanced economies in 2024 is due to a deceleration in the United States.
This deceleration follows
stronger-than-expected
FIGURE 1.13: Global Purchasing Managers’ Index
US growth in 2023 that
56
supported global economic
54
activity (figure 1.13).
Index, 50+ = expansion

In EMDEs excluding China,

52
growth is projected to
increase from 3.2 percent
50
in 2023 to 3.5 percent in
2024. This pickup reflects
48
steady improvements in
46
projected trade growth
and expectations for solid
Jul-23
Jul-22

Oct-23

Jan-24
Oct-22

Jan-23

Apr-23

Jun-23

Sep-23

Dec-23

Feb-24
Jan-22
Feb-22

Apr-22

Jun-22

Sep-22

Dec-22

Feb-23

Aug-23

Nov-23
Mar-22

Aug-22

Nov-22

Mar-23

May-23
May-22

domestic demand growth

Composite Manufacturing Services
in several large economies
FIGURE 1.14: Economic Growth in China
as inflation continues to
recede and interest rates
15
decline. China’s growth
is forecast to slow from
12
5.2 percent in 2023 to
9 4.5 percent in 2024—the
Percent

slowest expansion in over

6 three decades outside the
pandemic-affected years
3 of 2020 and 2022 (figure
1.14). Subdued sentiment
0 is expected to weigh
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023e

on consumption in an
Source: Haver Analytics. environment where deflation
Note: Figure 1.14 shows year-on-year growth of real gross domestic product.
is becoming entrenched.

16 > A F R I C A’ S P U L S E
Persistent strains in the property sector will hold back investment. Soft construction starts in late
2023 signal further weakness in property activity as developers grapple with stressed balance sheets
and lackluster demand. Although central government support should help to boost infrastructure
spending, local governments have limited fiscal space for policy support.

Global trade growth is projected to pick up to 2.3 percent in 2024, from an estimated 0.2 percent
in 2023, partly reflecting a recovery of demand for goods and, more broadly, advanced economy
trade. This reflects a partial normalization of trade patterns following exceptional weakness last
year. Goods trade is envisaged to start expanding again, while the contribution of services to total
trade growth is expected to decrease. Although these shifts indicate movement closer to the trade
composition patterns observed before the pandemic, the responsiveness of global trade to global
output is expected to remain lower in the near term than it was before the pandemic, reflecting
subdued investment growth.

Inflation remains above target in most advanced economies and many inflation-targeting
emerging markets and developing economies (EMDEs). Global inflation is expected to retreat
further in 2024 but stay above its 2015–19 levels (figure 1.15). Although monetary tightening
in advanced economies
is concluding, real policy FIGURE 1.15: Global Inflation
interest rates are expected 12
to remain elevated for some
10
time as inflation returns to
target rates only gradually. 8
This will keep the stance
6
of advanced economy
Percent

monetary policies restrictive 4

in the near term. Long-term 2

yields on advanced economy
government bonds were 0
Jan-15
Jul-15
Oct-15
Jan-16
Jul-16
Oct-16
Jan-17
Jul-17
Oct-17
Jan-18
Jul-18
Oct-18
Jan-19
Jul-19
Oct-19
Jan-20
Jul-20
Oct-20
Jan-21
Jul-21
Oct-21
Jan-22
Jul-22
Oct-22
Jan-23
Jul-23
Oct-23
Jan-24
volatile in 2023, reflecting -2
shifting expectations about Global Advanced economies EMDEs
the path of future interest
FIGURE 1.16: 10-Year Treasury Bond Yields
rates and sizable movements
5
in term premia. Although
yields have retreated from 4
their late October 2023 3
peaks, they remain high at
Percent

2
levels last seen before the
1
global financial crisis (figure
1.16). Monetary tightening’s 0
drag on growth is expected -1
15-May-19

17-May-23
24-Aug-22
10-Mar-21
25-Sep-19

27-Sep-23
01-Dec-21
05-Feb-20

07-Feb-24
13-Apr-22
17-Jun-20
02-Jan-19

04-Jan-23
28-Oct-20

21-Jul-21

to peak in 2024 in most major

economies, assuming an
orderly evolution of broader Germany United States
financial conditions.8 Sources: Haver Analytics; World Bank.
Note: Figure 1.15 shows the median for up to 135 economies in total (up to 35 AEs and 100 EMDEs).
Figure 1.16 shows the mid yield in percent per year. The last observation is March 19, 2024.
8 So far, headwinds to growth from elevated EMDEs = emerging markets and developing economies.
interest rates have been offset, to some degree,

A F R I C A’ S P U L S E > 17
 Commodity prices are declining significantly from 2022 peaks
but remain at relatively high levels
International commodity prices have continued to decline from their peaks in April/June
2022—as global supply chains have normalized. This has been particularly the case for energy,
fertilizers, and food. The largest fall has been for fertilizers, with prices dropping almost 60
percent from their peaks in April 2022 to February 2024 (figure 1.17). Food prices have fallen
by about 5 percent since October—and nearly 24 percent from the highs in May 2022. Energy
prices dropped by 12 percent between October 2023 and February 2024. A deceleration in
China, amid higher supplies from non–Organization of the Petroleum Exporting Countries Plus
(OPEC+) countries (Brazil, Canada, Guyana, and the United States), exerted downward pressure
on oil prices. Trade disruptions in the Red Sea and the broader geopolitical uncertainty related
to the war in the Middle
East, the ongoing voluntary
FIGURE 1.17: World Bank Commodity Price Indexes
cuts by OPEC+ members
360
led by Saudi Arabia and
320 the Russian Federation,
280 weather-related production
disruptions in the United
Index, 2019=100

240
States, and the Chinese
200
economic stimulus led to
160
an oil price uptick of 2.7
120 percent in the first two
80 months of 2024.
40 Agricultural prices have
Jul-19

Jul-20

Jul-21

Jul-22

Jul-23
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
Oct-19

Oct-20

Oct-21

Oct-22

Oct-23
Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

been broadly stable,

Energy Fertilizers Agriculture Metals and minerals although their behaviors
have differed across
Sources: Bloomberg; World Bank; International Coffee Organization; International
Cocoa Organization; International Tea Committee. agricultural products. Price
Note: Data is as of February 2024.
increases for cocoa (53
percent between October
2023 and February 2024) as well as Robusta and Arabica coffee (29 and 14 percent, respectively)
drove prices higher for beverages (figure 1.18). Adverse weather and black pod disease in major
cocoa-growing regions in West Africa contributed to reduced cocoa supply and higher prices.
Robusta coffee prices reached their highest level since 1995, supported by a poor Indonesian
harvest and delays in Viet Nam’s harvest. Food prices continue their declining trend of 2023—
as wheat, maize, and soybean prices declined to their lowest levels in two years as new
crops arrived from the Southern Hemisphere. Rice remains the exception as El Niño–related
production shortfalls and India’s ongoing restrictions increased prices.

by households and firms spending from their savings buffers, resilient risk appetite, and extended maturities on stocks of low-cost debt, as well as by expansionary fiscal policy in some
cases, most notably the United States.

18 > A F R I C A’ S P U L S E
Metal and mineral prices
FIGURE 1.18: Average Monthly Prices of Cocoa, Coffee, and Tea
have remained fairly stable,
7
with a modest gain of 2
percent between October 6
2023 and February 2024
(figure 1.17). Price increases 5

US$ per kilogram

for iron ore and copper
4
(5 percent) were partly
offset by an 11 percent 3
decline in the price of
2
nickel. Iron ore prices rose
due to multi-year low 1
inventory levels in China as
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
mills have been cautious
about restocking amid the Coffee Arabica Coffee Robusta Tea Mombasa Cocoa
struggling property sector.9 Sources: Bloomberg; World Bank; International Coffee Organization; International
Cocoa Organization; International Tea Committee.
The surge in nickel supplies
from Indonesia resulted in
declining prices. Indonesian nickel production grew more than two and half times in three years
as the country successfully attracted foreign investors to local nickel smelting after the permanent
ban it put on nickel ore exports in 2020. Precious metal prices increased by 5 percent between
October and February (particularly gold prices), reflecting geopolitical tensions and elevated
global interest rates that motivate the use of precious metals as safe havens.

9 China accounts for 70 percent of the global demand for iron ore, and the property sector accounts for 40 percent of the country’s demand for the metal.

A F R I C A’ S P U L S E > 19
 1.3 MACROECONOMIC PERFORMANCE OF
SUB-SAHARAN AFRICA
Inflation is cooling in Sub-Saharan Africa but remains elevated
The median rate of inflation in the region is expected to drop from 7.1 percent in 2023 to 5.1
percent in 2024 and 5 percent in 2025–26. The lower inflation in Sub-Saharan Africa could be
attributed to the normalization of global supply chains, the steady decline in commodity prices,
and the effects of monetary tightening and fiscal consolidation across countries in the region.
Disinflation efforts are expected to continue although at differing paces across countries.
There is risk of a slight acceleration of inflation among countries holding elections this year.
However, the deceleration of inflation is broad-based: the pace of inflation reduction among
non-resource abundant
countries is similar to that
FIGURE 1.19: Inflation in Sub-Saharan Africa
of the region as a whole.
12
Inflation among metal
10 exporting countries is
expected to drop from
8
9.3 percent in 2023 to 7.7
Percent

6 percent in 2024, while that

of oil exporting countries
4
will decrease slightly from
2 4.3 percent in 2023 to 4
percent in 2024 (figure
0 1.19).
2019 2020 2021 2022 2023e 2024f 2025f 2026f

SSA Non-resource-rich countries Inflation is cooling in

Metals and minerals resource countries Oil-resource-rich countries
most Sub-Saharan African
Source: World Bank staff projections. countries but remains high.
Note: Inflation is measured by the percentage change in the Consumer Price Index using the World
Bank Macro-Fiscal Model database. e = estimate; f = forecast; SSA = Sub-Saharan Africa. About 90 percent of the
countries in the region (42
of 47) are projected to have
lower inflation in 2024 (relative to the previous year); however, the rate of inflation is expected
to be lower than the pre-pandemic period for only seven countries. Additionally, a group of
countries in the region still exhibit persistently high rates of inflation (above target) and, in some
cases, these rates have not yet peaked—although this group is gradually becoming smaller. The
number of countries with a two-digit (or more) average annual rate of inflation is set to decline
to 13 this year (down from a peak of 19 countries in 2022). For those 13 countries, the median
inflation rate has dropped modestly from 27 percent in 2023 to 22.5 percent in 2024. Still, a
larger share of countries is converging toward lower rates of inflation. For instance, the number
of countries with annual inflation lower than 5 percent is projected to increase from a trough of
nine in 2022 to 23 countries in 2024 (figure 1.20).

20 > A F R I C A’ S P U L S E
Food inflation and the
FIGURE 1.20: Distribution of SSA Countries, by Inflation Rates
weakening of domestic (number of countries)
currencies are still major 35
drivers of inflation across 30
30
countries in the region. By 28
26
February 2024, about one- 25 24 23
third of the Sub-Saharan 20
African countries with 15
15
monthly available food
price information (14 of 40 10 9

countries) had double-digit 5

year-on-year rates of food 0
inflation, with the fastest 2019 2020 2021 2022 2023e 2024f 2025f
0 to 5 % 5 to 10 % More than 10%
increases experienced
Source: World Bank staff projections.
in Ethiopia, Malawi, Note: The figure depicts the country distribution across different ranges of inflation: between 0 and
Nigeria, Sierra Leone, and 5 percent, between 5 and 10 percent, and more than 10 percent. e = estimate; f = forecast; SSA =
Sub-Saharan Africa.

Zimbabwe (figure 1.21).

International food prices have experienced a protracted decline from their peak in March
2022—although they are nearly 25 percent above their 2015–19 pre-pandemic average. By
February 2024, the Food and Agriculture Organization’s food price index dropped by about 11

FIGURE 1.21: Headline and Food Inflation across Sub-Saharan African Countries, February 2024
60

50

40
Percent, year-on-year

30

20

10

-10
Benin
Seychelles
Mali
Burkina Faso
Uganda
Tanzania
Senegal
Rwanda
Guinea-Bissau
Equatorial Guinea
Togo
Gabon
Mauritania
Côte d'Ivoire
Congo, Rep.
Cabo Verde
South Sudan
Botswana
Namibia
Mozambique
Eswatini
South Africa
Cameroon
Kenya
Madagascar
Mauritius
Niger
Lesotho
Zambia
Guinea
Angola
Burundi
Gambia, The
Ghana
Ethiopia
Nigeria
Malawi
Sierra Leone
Zimbabwe

Headline inflation Food inflation

Source: Haver Analytics, Bloomberg.
Note: This figure depicts the year-on-year headline inflation (bars) and food inflation (diamonds) in January 2024. Zimbabwe’s year-on-year food
inflation accelerated to 84.4 percent in February 2024.

A F R I C A’ S P U L S E > 21
 percent year-on-year—thus registering its 15th consecutive month of year-on-year decline.
Lower international food prices were mainly driven by declines in the prices of cereals (22
percent year-on-year in February 2024) and dairy products (13 percent). Domestic food inflation
has also been on the retreat across countries, although at a slower pace than international food
prices. For instance, the number of countries with two-digit food inflation (or more) declined
from 30 in February 2023 to 14 in February 2024. For those 14 countries, the (median) food
inflation remained stubbornly high—although it declined from 27.8 percent in 2023 to 21.7
percent in 2024.

Adverse weather events disrupting food supplies (for instance, floods in East Africa, droughts in
Southern Africa, as well as hot and dry weather in West Africa), the high cost of food imports in
local currencies (as a result of exchange rate depreciation), and elevated logistics costs abroad
(higher shipping costs) and at home (high cost of transportation and elevated price of fertilizers)
still explain the food inflation dynamics in this group of countries. Elevated food prices tend to
have a more than proportional effect on the budgets of lower-income households.

Most currencies in Sub-Saharan Africa were weakened in 2023 as a result of tighter (global and
domestic) financial conditions and a strong dollar. In 2023, the Nigerian naira, Angolan kwanza,
Malawian kwacha, and South Sudanese pound were the worst performing currencies in the
region: these currencies posted end-of-year depreciations that ranged from 37.3 percent (South
Sudan) to 49.5 percent (Nigeria) in the past year (figure 1.22). The weakening of the naira has
followed the progressive liberalization of the official exchange rate since June 2023. In Angola,
the decision of the central bank to stop defending the currency amid low oil prices, low oil

FIGURE 1.22: Currencies in Sub-Saharan Africa

20

10
Year-to-date variation, percent

-10

-20

-30

-40

-50
São Tomé and Príncipe
Congo, Dem. Rep.

Mozambique
South Sudan

Gambia, The

South Africa

Madagascar

Cabo Verde
Seychelles
Botswana

Mauritius
Tanzania
Rwanda

Namibia

Eswatini
Burundi

Lesotho

Ethiopia
Malawi

Zambia

Uganda
Somalia
Nigeria
Angola

Guinea
Ghana
Kenya

Sudan

CFA franc

2023 (YTD %) 2024 (YTD %)

Source: Haver Analytics, Bloomberg.

Note: The YTD variation in the exchange rate for 2024 is computed as the cumulative percentage change in the exchange rate (in US$ per local
currency) from December 31, 2023, to March 15, 2024. YTD = year-to-date.

22 > A F R I C A’ S P U L S E
production, and rising debt
MAP 1.1: Reserve Coverage Ratio, 2023 (months of imports)
repayments contributed to
the currency depreciation.10
Finally, the depreciation
of currencies in many
African countries resulted
from acute shortages of
foreign exchange. Nearly
40 percent of the countries
in the region had less than
three months of imports in
international reserves by the
end of 2023 (map 1.1).11 More than 6 months
4.6 – 6 months
This year, the Nigerian 3.1 – 4.5 months
naira has continued 1.5 – 3 months
weakening, with a year-to- Fewer than 1.5 months
date depreciation of about No data
41 percent in the official
market as of mid-March.
The weakening of the naira IBRD 47865 |
MARCH 2024

resulted from a backlog

of accumulated foreign Sources: IMF Regional Economic Outlook, Sub-Saharan Africa. IMF Regional Economic
Outlook, Sub-Saharan Africa.

exchange demand on the IBRD 47865 | MARCH 2024

official market due partly to

limited dollar flows as foreign investments into the country and its crude oil export receipts have
declined. In contrast, the Kenyan shilling is the best performing currency in the subcontinent—
as it recorded an appreciation of 16 percent so far this year. After strengthening by 14 percent
by mid-February, the Zambian kwacha has lost some ground and recorded a year-to-date
appreciation of 2.4 percent as of mid-March (figure 1.22).12 In both cases, the monetary authority
hiked interest rates to defend their currencies. The Bank of Zambia additionally raised commercial
banks’ reserve ratios. In Kenya, securing funds to repay its Eurobond falling due in June 2024
restored confidence and increased the demand for local currency.

Monetary policy responses may start to differ across African countries

In 2022, more than 80 percent of the countries in the region experienced an acceleration of
their rate of inflation—with the (median) rate of inflation in Sub-Saharan Africa rising to 9.3
percent (nearly 5 percentage points higher than in the previous year). Hence, there was a
synchronization of monetary policy actions to control inflation from 2022 to mid-2023. Most
African central banks increased interest rates at a fast and aggressive pace as inflation surged
rapidly—although there were some differences across countries in terms of the pace and
magnitude of the interest rate hike.

10 The decline in oil revenues, which resulted from low international prices compounded by low production, limited the supply of foreign currency.
11 Furthermore, the import coverage ratio in nearly two-thirds of countries in the region decreased from 2019 to 2023.
12 However, these currencies have not recovered from their losses in 2023 yet.

A F R I C A’ S P U L S E > 23
 Cross-country differences in the speed of disinflation have become more pronounced this
year as 23 (of 47) countries in the region are expected to experience a deceleration of inflation
toward rates below 5 percent, while inflation is projected to fall to rates between 5 and 10
percent in 10 countries. In contrast, the rate of inflation will remain stubbornly high (two-digits
or more) among 14 countries in the region. Hence, the monetary policy stance will differ across
countries in the region depending on the trajectory of their inflation rates (converging or
diverging from target) and whether inflation expectations are well-anchored.

On the one hand, a pause in the monetary policy adjustment cycle is an option for countries
with rates of inflation that are declining but still have not converged to their central bank’s
target. The central bank may want to keep interest rates higher for a longer period until inflation
is securely on the path to reaching its target. An earlier-than-expected policy rate cut may fuel
an inflationary comeback once the aggregate demand recovers. For instance, as of February
2024, South Africa has kept its monetary policy rate at 8.25 percent since May 2023. Other
countries that have kept their policy rates constant for more than seven consecutive months
include countries that are pegged to the South African rand (Lesotho and Namibia), the Bank of
Central African States, and Mauritius, among others (figure 1.23).

On the other hand, for

FIGURE 1.23: Central Bank Policy Rates countries with stubbornly
Country Current rate (%) Months on hold Last change (net) high levels of inflation, the
Angola 19 0 1 monetary policy stance
Botswana 2.4 3 -0.25 should remain restrictive—
Eswatini 7.5 7 -0.25
particularly in countries
Gambia, The 17 6 2
Ghana 29 1 -1 like Ethiopia, Malawi,
Kenya 13 1 0.5 Nigeria, Sierra Leone, and
Lesotho 7.75 9 0.25 Zimbabwe, among others.
Malawi 26 1 2
In February, the Reserve
Mauritius 4.5 14 0.5
Mozambique 16.5 1 -0.75 Bank of Malawi raised its
Namibia 7.75 8 0.5 policy rate by 200 basis
Nigeria 22.75 0 4 points to 26 percent as
Rwanda 7.5 6 0.5 inflation continued to
South Africa 8.25 9 0.5
Tanzania 5.5 2 -
accelerate. The year-on-
Uganda 10 0 0.5 year inflation rate in Malawi
Zambia 12.5 1 1.5 reached 35 percent in
WAEMU 3.5 2 0.25 January 2024, up from 25.9
CEMAC 5 11 0.5
percent in the same month
Sources: Central banks; cbrates.com; Office of the Chief Economist of the Africa region, World Bank.
Note: Information as of March 15, 2024. The value for WAEMU refers to the minimum bid rate set by
of the previous year.13 The
BCEAO. The value for CEMAC refers to the tender interest rate set by BEAC. BCEAO = Central Bank
of West African States; BEAC = Bank of Central African States; CEMAC = Economic and Monetary Central Bank of Nigeria
Community of Central Africa; WAEMU = West African Economic and Monetary Union.
announced a larger-than-
expected increase in its
policy rate of 400 basis points to 22.75 percent as inflation surged to 29.9 percent in January, and
the currency lost about 70 percent of its value (as of mid-March 2024) since the start of 2023.

13 In February, year-on-year inflation decelerated to 33.5 percent in Malawi.

24 > A F R I C A’ S P U L S E
In conclusion, securing and maintaining the independence and credibility of central banks across
the region are critical in the fight against inflation. The credibility gained by central banks, as
reflected in their improved monetary, exchange rate, and financial policy frameworks, is being
put to the test. Anchoring inflation expectations against future (local or global) shocks will require
the implementation of a credible policy framework. This implies tighter coordination of monetary
policy actions with the fiscal authorities to bring down inflation. Monetary adjustment is less
likely to be effective if fiscal policies remain expansionary or the presence of foreign exchange
distortions widens the parallel premium. Policies that might increase inflation in the short term (for
instance, fuel subsidy reforms) need to be accompanied by mitigating measures that support the
most affected (lower-income households) and reduce the likelihood of social unrest and conflict.

Fiscal balances are improving but at a sluggish pace

Fiscal balances continue to improve across countries in the region, although sluggishly, due to
measures that are raising revenues and/or reining in spending—including tax administration
and compliance measures, tax reforms, streamlining of tax expenditures, subsidy reforms, and
repurposing of public expenditures toward growth-enhancing programs. Amid the current
external financing squeeze faced by African countries, some governments in the region are
taking steps to put the accounts on a more sustainable path.

The (median) fiscal deficit in Sub-Saharan Africa is projected to decline from 3.8 percent of GDP
in 2023 to 3.5 percent of GDP in 2024. It is set to drop further to 2.9 percent of GDP in 2025–26.
Fiscal deficits among non-resource abundant countries are expected to decrease by nearly 1
percentage point of GDP to 3.8 percent of GDP in 2024. Among resource abundant countries,
the evolution of fiscal balances appears to have diverged since 2022. For instance, the fiscal
deficit in oil abundant
countries is projected to FIGURE 1.24: Fiscal Balances in Sub-Saharan Africa
shift from a surplus of 1.3 2
percent of GDP in 2023 1
to a deficit of 1.4 percent 0
of GDP in 2024—as
Percent of GDP, median

-1
international oil prices
may edge down in 2024 as -2

global growth weakens and -3

oil production increases. 14
-4
In contrast, the fiscal -5
deficit in metal exporting
-6
countries is expected 2019 2020 2021 2022 2023e 2024f 2025f 2026f
to drop slightly from 3
Sub-Saharan Africa Non-resource-rich countries
percent of GDP in 2023 to Metals and minerals resource countries Oil-resource-rich countries
2.9 percent of GDP in 2024 Source: World Bank staff projections.
(figure 1.24). Note: e = estimate; f = forecast; GDP = gross domestic product; SSA = Sub-Saharan Africa.

14 Oil prices are expected to decline from an average of US$83 per barrel in 2023 to US$81 per barrel in 2024 as global activity slows and China’s economy continues to decelerate. This
scenario assumes that the conflict in the Middle East does not escalate.

A F R I C A’ S P U L S E > 25
 Most countries in the
FIGURE 1.25: Distribution of SSA Countries, by Fiscal Balances
region (31 of 46) are
35 expected to register
improvement in their fiscal
30
balances this year. Sixteen
25 of the countries with
Number of countries

20 improved fiscal accounts in

2024 will have a narrower
15
deficit (below 3 percent
10 of GDP) or shift into a
5 surplus. For this group of
countries, the (median)
0
2019 2020 2021 2022 2023e 2024f 2025f 2026f deficit is projected to
Deficit > 3% Deficit 0-3% Surplus narrow from 4.8 percent
Source: World Bank staff projections. of GDP in 2023 to 3.8
Note: The legend indicates the country distribution of fiscal balances: deficits greater than 3 percent
of GDP, deficits between 0 and 3 percent of GDP, and fiscal surpluses. e = estimate; f = forecast;
percent of GDP in 2024.
SSA = Sub-Saharan Africa. The remaining countries
(15 of 46) will experience a
wider deficit or a narrower surplus this year. For these countries, the (median) deficit is expected
to widen from 1.6 percent of GDP in 2023 to 2.8 percent of GDP in 2024. Overall, the reduction
of fiscal imbalances is still sluggish as the number of countries with large deficits (exceeding
3 percentage points of GDP) has dropped modestly from a peak of 34 in 2022 to 27 in 2024
(figure 1.25).

Fiscal performance across African countries is expected to be heterogeneous this year. Among
the group of countries with increasing imbalances, some countries are expected to widen
their already high deficits (Malawi and Mauritius) and others to move from surplus to deficit
(Lesotho). Oil resource abundant countries have also seen increases in their fiscal deficits
(including Angola and Gabon) and others have started to run deficits this year (Chad) or reduce
their surplus (Equatorial Guinea). The countries with the largest improvements in their fiscal
balances this year (a decline of 2.5 percentage points of GDP or higher in 2024) are expected to
narrow the large deficits registered in 2023 (Burundi, Guinea-Bissau, São Tomé and Príncipe, and
Sierra Leone) (figure 1.26).

Among the countries with improved fiscal balances, government revenues increased in about
75 percent of them (22 of 31), while government spending decreased in more about 72 percent
(21 of 31 countries). For only 14 countries in this group, the improvement in the fiscal balance
was driven by both greater revenues and lower spending. Their (median) government revenues
are expected to increase by 0.6 percent of GDP and their (median) government expenditure is
projected to narrow by 0.5 percent of GDP this year. Finally, rising revenues contributed more
than declining expenditures to the large narrowing of fiscal deficits for countries like Guinea-
Bissau, Senegal, Sierra Leone, and Uganda (figure 1.27).

26 > A F R I C A’ S P U L S E
FIGURE 1.26: Fiscal Balances in Sub-Saharan Africa, 2023–24

10

0
Percent of GDP

-5

-10

-15
Malawi
Mauritius
Ghana
Namibia
Botswana
Congo, Dem, Rep.
Angola
Guinea
Seychelles
Zimbabwe
Gabon
Cabo Verde
Chad
Lesotho
Equatorial Guinea
Rwanda
Sierra Leone
Burundi
Guinea-Bissau
Togo
Senegal
Burkina Faso
South Africa
Liberia
Uganda
Nigeria
Kenya
Côte d'Ivoire
Madagascar
Eritrea
Mali
Benin
Comoros
Niger
Sudan
Tanzania
Central African Republic
Mozambique
São Tomé and Príncipe
Gambia, The
Ethiopia
Mauritania
Eswatini
Cameroon
South Sudan
Congo, Rep.
2023e 2024f

FIGURE 1.27: Sources of Changes in the Fiscal Balances of Sub-Saharan African Countries

6
5
4
3
Percent of GDP

2
1
0
-1
-2
Cameroon
Swaziland
South Sudan
South Africa
Tanzania
Sudan
Congo, Rep.
Central African Republic
Togo
Mauritania
Gambia
Ethiopia
Mali
Benin
Eritrea
Nigeria
Burkina Faso
Mozambique
Madagascar
Comoros
Kenya
Cote d'Ivoire
Niger
Uganda
Rwanda
Senegal
Liberia
Guinea-Bissau
Burundi
Sierra Leone
São Tomé and Príncipe

Government revenues Government expenditure Fiscal balance

Source: World Bank staff estimates.

Note: The figure depicts changes in the fiscal balance, government revenues, and government expenditure for countries improving their fiscal balance from
2023 to 2024. Positive (negative) values for the green columns indicate increases (decreases) in government revenues including grants. Positive (negative)
values for the yellow columns indicate decreases (increases) in government expenditures. e= estimate; f = forecast; GDP = gross domestic product.

A F R I C A’ S P U L S E > 27
 Sub-Saharan African governments are implementing measures
to put public finances on a sustainable path
Governments in the region implemented a series of resource mobilization measures, including
raising tax rates, albeit modestly, broadening the tax base, and improving tax compliance
and administration (table 1.1). Many countries introduced new tax policy measures, including
new taxes on hotels and financial services (Burundi), increased taxes on telecom (Mauritania)
and tourism services (Cabo Verde), increased taxes on imported luxury goods (Cameroon),
strengthening of the progressive scale in personal income tax regimes (Côte d’Ivoire and
Rwanda), introduction of an excise tax on telecom services (Ethiopia and Madagascar), a set of
new taxes on used goods and services (The Gambia), introduction of a turnover tax for informal
businesses (Malawi), and an increase in the value-added tax rate to 15 percent (Zimbabwe). A
few countries simplified or reduced corporate income taxes (the Democratic Republic of Congo,
Kenya, and Rwanda). For example, in Kenya, the government phased out preferential corporate
tax rates applicable to special economic zones and export processing zones and, at the same
time, there is a proposal yet to be implemented to reduce the corporate income tax from 30 to
25 percent. Rwanda took similar actions. Other indirect tax measures were also implemented: an
increase in stamp and registration fees, excise adjustments, the introduction of a social welfare
levy on imports (Ethiopia), and the introduction of a minimum turnover tax (Sierra Leone).

TABLE 1.1: Revenue and Expenditure Measures Introduced in Selected African Countries, 2022–23

Revenue and expenditure measures Countries in Sub-Saharan Africa

introduced in 2022–23

Benin, Burkina Faso, Burundi, Central African Republic, Cabo Verde, Cameroon, Chad,
Enhancing tax administration Comoros, Democratic Republic of Congo, Republic of Congo, Guinea, Kenya, Mauritania,
Mozambique, Niger, Senegal, Sierra Leone, Tanzania, Zambia, Zimbabwe

Tax policy measures

Introducing new taxes, raising existing Benin, Burkina Faso, Burundi, Central African Republic, Cabo Verde, Cameroon, Côte d’Ivoire,
tax rates, or broadening the tax base Democratic Republic of Congo, Ethiopia, The Gambia, Kenya, Lesotho, Liberia, Malawi,
Mauritania, Mozambique, Rwanda, São Tomé and Príncipe, Senegal, Sierra Leone, Tanzania,
Zimbabwe

Streamlining tax exemptions to raise Benin, Cabo Verde, Cameroon, Comoros, Ethiopia, Ghana, Liberia, Malawi, Madagascar,
revenue Mozambique, Republic of Congo, Senegal, Sierra Leone, Tanzania, Zimbabwe

Expenditure measures

Fuel subsidy reforms

Angola, Central African Republic, Cameroon, Côte d’Ivoire, Guinea, Nigeria, Senegal, Zambia
(to improve fiscal position)

Food subsidy Guinea

Source: World Bank.

28 > A F R I C A’ S P U L S E
Similarly, many countries streamlined tax exemptions to broaden the tax base. Several countries
eliminated or reduced value-added tax exemptions (Mozambique and Senegal), goods and
services tax exemptions (Sierra Leone), import duty exemptions (Cameroon, Malawi, and Sierra
Leone), and sector-specific tax exemptions (Comoros). Tanzania decided to limit tax exemptions
to under one percent of GDP. Liberia introduced duty waivers on high-yield and climate-
resilient seeds and quality-verified solar products to benefit farmers and rural dwellers. Tax
administration measures included the introduction of digital solutions, including data-matching
platforms to detect tax fraud (Cabo Verde and Malawi), an electronic single window at border
posts, compulsory use of the electronic platform for filing taxes for large and medium-size
taxpayers (Burundi), measures to limit tax arrears (Mozambique), strengthened technical skills
and capacity of tax officials (the Republic of Congo), and abolishment of the two-tier taxation
system in the telecom sector (Zambia). Finally, several countries in the region implemented
(full or partial) removal of fuel subsidies (Angola, Guinea, Kenya, and Nigeria). A roadmap for
eliminating energy subsidies by 2025 was announced in Senegal. Measures to remove costly
fuel subsidies might be complemented with other actions that mitigate their impact on the
most vulnerable.

Government debt appears to be stabilizing although at high levels

and risks remain
Total external PPG debt more than doubled in Sub-Saharan Africa between 2012 and 2022: it
reached US$462 billion in 2022, compared with US$189 billion in 2012. As a percent of GDP,
the median external PPG debt went from 17 percent in 2012 to 28 percent in 2022.15 The AFW
subregion recorded higher external PPG debt than the AFE subregion, and PPG debt in AFW
increased faster after the pandemic. Between 2012 and 2022, the median external PPG debt-to-
GDP ratio in AFW increased by roughly 13 percentage points to 30 percent of GDP, while in AFE
it increased by 9 percentage points and reached 25 percent of GDP.

Increases in external debt were accompanied by a shift toward nontraditional borrowing,

including Eurobonds and bilateral lending from non–Paris Club creditors, especially China.
At the end of 2022, bilateral creditors (excluding China) only accounted for 9 percent of total
external PPG debt, compared with 20 percent in 2010. The share of Chinese bilateral lending
increased from 7 to 11 percent during the same period. Bond issuances in international markets
have also increased sharply, particularly among middle-income countries (MICs). From 2010 to
2022, the share of international bonds in external PPG debt rose from 0 to 3 percent in low-
income countries (LICs) and from 28 to 35 percent in MICs. Overall, the share of multilateral debt
in PPG external debt in 2022 increased slightly in LICs compared to 2010, reflecting the step-up
of multilateral emergency financing during 2020–22 (figure 1.28).

15 The analysis includes 46 countries in the region, excluding Somalia and Sudan. Sudan reached the Heavily Indebted Poor Countries (HIPC) Initiative decision point in 2021 and is
expected to receive debt relief over the coming years. Somalia, also part of the HIPC, reached a completion point by the end of 2023.

A F R I C A’ S P U L S E > 29
 FIGURE 1.28: External PPG Debt Composition in Sub-Saharan African Countries, by Creditor (percent)

a. Low-income countries b. Middle-income countries

1.00 1.00

0.75 0.75

0.50 0.50

0.25 0.25

0.00 0.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Multilateral Bilateral-PC Bilateral-China
Bilateral-other creditors Other private Bonds

Sources: International Debt Statistics, World Bank, December 2023; World Bank staff calculations.
Note: PC = Paris Club; PPG = public and publicly guaranteed.

The risk of external debt

FIGURE 1.29: External Risk of Debt Distress in Sub-Saharan African
Countries (percent)
distress in Sub-Saharan
Africa have increased
100
significantly as a result of
higher borrowing on less
Share of active LIC-DSF countries

80
concessional terms. It has
60 increased sharply, with
the share of Low-Income
40 Country Debt Sustainability
Framework (LIC–DSF)
20 countries in the region at
high risk of or already in
0 debt distress increasing
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

from 27 percent in 2015

In debt distress High Moderate Low to 53 percent in 2023. No
Sources: World Bank–International Monetary Fund LIC–DSF database as of end-December 2023;
country in Sub-Saharan
World Bank staff calculations.
Note: LIC–DSF = Low-Income Country Debt Sustainability Framework.
Africa has been classified as
low risk since 2021 (figure
1.29). Over the past year,
the risk of debt distress improved in a few countries: Mauritania and Somalia were upgraded to
“moderate” from “high” and “in debt distress,” respectively. Somalia reached the completion point
under the Heavily Indebted Poor Countries Initiative in December 2023. In contrast, Ghana was
downgraded to “in debt distress” in May 2023 in the context of the ongoing debt restructuring.

30 > A F R I C A’ S P U L S E
Reliance on domestic debt
FIGURE 1.30: Debt Dynamics in LIC-DSF Sub-Saharan African Countries
has increased over the
past decade as domestic
700 -25
revenue mobilization
600
has remained subdued -20
and the development of 500

Percent of GDP
US$, billions
domestic debt markets 400 -15
has allowed countries to 300 -10
finance larger deficits. Amid 200
low tax collection in the -5
100
region, Sub-Saharan African
governments resorted to 0 0

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023
domestic debt to finance
PPG external debt, nominal Domestic public debt, nominal
larger development
Domestic debt-to-GDP (median,rhs)
needs.16 The median
domestic debt-to-GDP ratio Sources: World Bank–International Monetary Fund LIC–DSF database as of end-December 2023;
World Bank staff calculations.
in Sub-Saharan African LIC- Note: GDP = gross domestic product; LIC–DSF = Low-Income Country Debt Sustainability Framework;
PPG = public and publicly guaranteed.
DSF countries increased
from 8.5 percent in 2012 to
20.7 percent in 2023 (figure 1.30).17 Domestic debt to GDP expanded at a faster pace after the
onset of the pandemic, given the need for funding and limited access to international markets.
Domestic debt to GDP further increased to 21 percent of GDP in LICs and 17 percent of GDP in
lower-middle-income countries in 2023.

Higher domestic and

external debt led to a FIGURE 1.31: Public Debt Dynamics in Sub-Saharan African Countries

tripling of overall public 1.4 80

debt in Sub-Saharan 70
1.2
Africa. The median public
60
debt-to-GDP ratio in Sub- 1.0
50 Percent of GDP
US$, trillions

Saharan Africa increased 0.8

40
from 29 percent in 2012 to 0.6
53 percent in 2019 (prior 30
0.4
to the COVID-19 shock) 20
and further increased to 0.2 10
61 percent in 2023 (figure 0.0 0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

1.31).18 Within the region,

the median debt-to-GDP Public debt, nominal (AFE) Public debt, nominal (AFW)
ratio for LICs reached 60 Public debt-to-GDP (median, rhs)
percent, while it reached 61 Sources: World Economic Outlook, October 2023; World Bank staff calculations.
percent for MICs in 2023. Note: The figure includes data for 46 countries in the region. AFE = Eastern and Southern Africa;
AFW = Western and Central Africa; GDP = gross domestic product.
Since 2012, the public

16 On average, 60 percent of Sub-Saharan African countries had a ratio of tax revenues to GDP below 15 percent during 2010–21.
17 In countries in AFE and AFW, the domestic debt-to-GDP ratio increased at a similar pace (11 percentage points) over 2012–23.
18 The narrative for public debt in Sub-Saharan Africa relies on data from the World Economic Outlook as of October 2023.

A F R I C A’ S P U L S E > 31
 debt-to-GDP ratio has risen, driven by persistent fiscal deficits and slowing growth. After the
COVID-19 crisis, persistent global inflation and tighter monetary policies have led to higher
borrowing costs for Sub-Saharan African countries and placed pressure on exchange rates.
At the same time, the economic recovery is decelerating due to specific factors affecting the
economies in the region (high input prices for businesses in Nigeria and the energy crisis in
South Africa) and general factors affecting the region, such as lower global metal prices, lower
external demand, drought, internal conflicts, and tight domestic monetary policies.

The shift toward more

FIGURE 1.32: Debt Service Obligations
expensive financing sources
a. Levels together with the increase
160
in public debt levels have
140
led to higher liquidity
120
pressures. Sub-Saharan
US$, billions

100 Africa’s debt service levels

80 have steadily increased
60 since 2012, adversely
40 affecting fiscal space and
20 increasing vulnerability
0 to shocks, especially for
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023
countries that have gained
SSA AFW AFE access to the international
b. Burden
bond market and other
50 non-concessional financing
45 sources. Total debt service
Percent of exports and revenues

40
increased by US$46.6 billion
35
30
between 2012 and 2022.
25 In addition, the expiration
20 of the Debt Service
15 Suspension Initiative at
10 the end of 2021 resulted
5 in a large increase in debt
0
service of US$50.6 billion
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

in 2023, making a total

Debt service to exports Debt service to revenues
cumulative increase of
Sources: World Economic Outlook, October 2023; World Bank staff calculations. US$97.2 billion (figure 1.32,
Note: AFE = Eastern and Southern Africa; AFW = Western and Central Africa; SSA = Sub-Saharan Africa.
panel a). During the same
period, the largest increase
in debt service was among AFE countries (US$81 billion), mostly South Africa (US$57.2 billion).
The ratios of total debt service to exports and debt service to revenues in Sub-Saharan Africa
were 30.6 and 47.5 percent, respectively, in 2023 (figure 1.32, panel b).

Public gross financing needs (GFN) are expected to remain higher than historical averages. GFN
in the region increased steadily from a median of 2 percent of GDP in 2012 to 11 percent in
2022 and decreased slightly to 10 percent of GDP in 2023. The median GFN for 2024 is projected

32 > A F R I C A’ S P U L S E
to decline to 9 percent of
FIGURE 1.33: Gross Financing Needs: Evolution and Decomposition
GDP, still above the pre-
COVID-19 historical average 14
(6 percent of GDP in 2012– 12
19). High GFNs are due
10
mainly to high debt service,
including the refinancing 8

Percent of GDP
of large domestic debt, 6
which has a much shorter
4
maturity than external debt
(figure 1.33).19 2

0
A few countries in
Sub-Saharan Africa -2
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
have returned to the Average primary deficit Average GFN
international capital Average external PPG debt service Median GFN
market since the start of Average domestic debt service
2024, although at higher Sources: World Bank–International Monetary Fund LIC–DSF database as of end-December 2023;
World Bank staff calculations.
borrowing rates. Still,
20
Note: GDP = gross domestic product; GFN = gross financing needs; PPG = public and publicly
many countries in the guaranteed.

region are locked out of

market financing. Hence, liquidity pressures remain elevated and bear close attention. In early
2024, Benin, Côte d’Ivoire, and Kenya issued international bonds in response to Eurobonds
and commercial loans falling due. However, these issuances came at higher rates. For instance,
the coupon of the new
Eurobond issued by Kenya FIGURE 1.34: Bond Spreads in Africa
this year is 9.75 percent, 1,200
which is above the 6.875 1,100
percent that the Eurobond 1,000
maturing in 2024 offered. 900
Since the onset of the 800
Basis points

pandemic, both benchmark 700

rates and spreads have 600
increased substantially, and 500
countries with lower credit 400
ratings have effectively 300
lost market access. This 200
12/31/20
2/28/21
4/30/21
6/30/21
8/31/21
10/31/21
12/31/21
2/28/22
4/30/22
6/30/22
8/31/22
10/31/22
12/31/22
2/28/23
4/30/23
6/30/23
8/31/23
10/31/23
12/31/23
2/29/24

trend is now reverting

due to expectations that
Africa EMBI Global
major central banks will Source: Bloomberg.
be cutting rates later this Note: Sovereign spread data are as of March 15, 2024. The EMBI spread for Africa includes 13 Sub-
Saharan African countries and 3 North African countries. EMBI = emerging markets bond index.
year (figure 1.34). Finally,
21

19 Public GFN data were obtained from the International Monetary Fund–World Bank LIC-DSF database.
20 International bond issuances stopped in 2020 following the COVID-19 crisis. Some issuances took place in 2021 and until April 2022, but only higher-income countries with market
access, such as Mauritius and South Africa, issued international bonds later in 2022 and 2023.
21 As of the end of February 2024, hotter-than-market expected US inflation clouded the Federal Reserve’s path to rate cuts.

A F R I C A’ S P U L S E > 33
 bond amortizations
FIGURE 1.35: PPG External Debt Service in 2024
are expected to
44.4
45 increase steeply in the
40 region in 2024–25,
Percent of government revenues

35 reflecting redemptions
30 of Eurobonds. Such
26.2 26.4
25 amortizations account
20 17.3
for a significant share of
15 15.0 government revenues in
11.8
10 9.7 8.5 some Sub-Saharan African
7.2 6.7
5
5.6 countries (figure 1.35).22
2.1
0 Amid low exports and
Ethiopia Kenya South Africa Zambia elevated external debt
Total external PPG debt service Bond debt service Bond amortization repayments, countries
Sources: Bloomberg; International Debt Statistics, World Bank, December 2023; World Bank staff
in the region may
calculations.
Note: Sovereign spread data are as of March 15, 2024. PPG = public and publicly guaranteed.
face external liquidity
pressures.

22 In 2023, total bond amortization reached US$1.2 billion, and it will increase to US$6.7 billion in 2024, mainly coming from South Africa (US$2.3 billion), Kenya (US$2 billion), Ethiopia
(US$1 billion), and Zambia (US$1 billion). Both Zambia and Ethiopia requested debt restructuring under the Common Framework. Zambia defaulted on its international bonds in
December 2020 and Ethiopia in December 2023.

34 > A F R I C A’ S P U L S E
1.4 RISKS TO THE OUTLOOK
Risks to the region’s growth outlook are still tilted to the downside. Slower-than-expected global
economic growth, subdued activity in Europe and China in recent months, conflicts in the Middle
East and Ukraine, trade fragmentation, and climate-related disasters from El Niño could lead to
weaker growth and exacerbate food security problems. Intensified conflict and political instability
across the continent, particularly in West Africa, the Sahel, and Eastern Africa, could deteriorate
investor sentiment and lead to an uptick in inflation, delaying the easing in the monetary policy
cycle. However, recent strong economic activity in the United States and declining inflation
indicate the possibility of more robust growth due to improved supply conditions.

External Risks
Underperformance of the Chinese economy. Structural weaknesses related to the property
sector dominate the growth outlook in China. Without restructuring policies, real estate
investment could slow down further and for a prolonged period. Lower consumer confidence
and subdued aggregate demand could hold back household consumption. Furthermore,
unplanned tightening of fiscal policy as a response to local government financing constraints
could also weigh on economic activity. Under this scenario, the commodity export prices of
many Sub-Saharan African countries—particularly for metals and minerals—could decline. The
underperformance of the Chinese economy would hit harder those countries in the region that
rely heavily on China as an export destination for their commodities.

Slower-than-expected return of global inflation to target levels. Headline and core inflation across
major economies are retreating, but the return to target levels may take longer than expected—
in particular, longer than expected by financial markets. Major central banks will then keep
interest rates higher for longer. Renewed disruptions in global supply chains (due to geopolitical
tensions) and persistent labor market tightness could increase inflation expectations—thus
raising financial stability risks, strengthening the dollar, and further tightening global financial
conditions. In Sub-Saharan African economies, this would again lead to capital outflows, weaker
currencies, and increasing external borrowing costs. These effects are more severe for countries
with weaker credit ratings, which already have higher debt levels and ballooning debt service
costs and have been mostly locked out of international markets since the pandemic.23

Rising geopolitical tensions. The ongoing war in Ukraine and the conflict in the Middle East
continue to take a toll on cross-border economic interactions in the global economy. These
tensions have intensified with the attacks of Houthi rebels on cargo ships sailing the waters
connecting Asia to Europe and the United States (the Red Sea crisis).24 These attacks in the
Red Sea led to a decrease in container ship transits per week and a surge in average shipping
container prices during the last week of December and the start of 2024.25 As a result,
disruptions in global oil supply could have potential knock-on effects on energy and other

23 Kenworthy, Kose, and Perevalov (2024).

24 The Red Sea is the conduit for about 12 to 15 percent of global trade (representing 30 percent of the world’s container shipping).
25 Sharp increases in daily shipping prices and insurance premiums have culminated in high overall shipping costs, as the re-routing of ships from the Suez and Panama Canals has
extended delivery times and generated extra expenses (up to two additional weeks for shipping and more than US$1 million in transportation costs). See UNCTAD (2024).

A F R I C A’ S P U L S E > 35
 commodity prices. In a small disruption scenario, global oil supply would fall by 0.5 million
to 2 million barrels per day, with oil prices ranging between US$93 and US$102 per barrel.26
Higher shipping costs lead to sizable increases in import prices and producer prices and
accelerate headline and core inflation—particularly in countries with large shares of imported
final consumption.27 For example, a 21.8 percentage point increase in global shipping costs
leads to an increase in domestic headline inflation of 0.15 percentage point over 12 months.28
Finally, these disruptions would harm the competitiveness of exporters that are dependent on
disputed trade routes and exacerbate food security concerns in areas where countries rely on
wheat imports from Europe and the Black Sea region—notably in East Africa, East Asia, South
Asia, and Southeast Asia.29

Massive electoral process throughout the world in 2024. About half of the population around the
globe will head to the polls in at least 64 countries—including the United States, the European
Union, and large emerging markets such as India, Indonesia, Mexico, and South Africa. These
elections can potentially weigh on economic activity and the global order through various
channels: (1) uncertainty and disputes around trade policy will reduce the efficiency of global
value chains30; (2) there will likely be delays in the consumption and investment decisions
of larger economies until after the election, while increases in election-related spending are
focused on domestic markets31; and (3) new commitments to international development
assistance and crisis response are likely to be subdued, with domestic spending commitments
taking priority prior to elections.

Growing geoeconomic fragmentation. Deeper geoeconomic fragmentation would make

countries in the region more vulnerable to shocks and volatility and yield significant domestic
and global output losses by restricting cross-border technological diffusion and hindering
innovation, reducing productivity, raising prices, reducing employment opportunities from
migration, and curtailing foreign trade and investment flows.32 These impacts would be
more severe among low-income countries,33 as they run the risk of greater poverty and
inequality.34 Geoeconomic alignment with major financing suppliers may alter the allocation
of development aid and delay sovereign debt renegotiations. The macro-financial volatility
arising from growing geopolitical tensions would undermine the stability of the global financial
system.35 Likewise, deeper geoeconomic fragmentation has the potential to undermine the
effectiveness of policies to address environmental challenges, including the shift toward low-
carbon economies.

26 The small disruption scenario assumes that the reduction in global oil supply is comparable to the supply change observed during the Libyan civil war in 2011 (nearly 2 percent decline
in global supply at the time). Under this scenario, oil prices would initially increase by 3 to 13 percent (US$3 to US$12 per barrel) above the fourth quarter of 2023 baseline of US$90 per
barrel (World Bank 2023).
27 Carrière-Swallow et al. (2023).
28 More recent evidence shows that in the Organisation for Economic Co-operation and Development, the persistence of the recent 100 percent increase in shipping costs could raise
annual import price inflation by close to 5 percentage points—or a 0.4 percentage point increase after about one year (OECD 2024).
29 Glauber and Mamun (2024).
30 Kleine and Minaudier (2019); Pervez (2015).
31 Ashraf and Shen (2019); Azzimonti (2018).
32 Góes and Bekkers (2022); World Bank (2024).
33 See, for instance, Bolhuis, Chen, and Kett (2023); Campos et al. (2023); IMF (2023a); WTO (2023).
34 WTO (2023).
35 IMF (2023b).

36 > A F R I C A’ S P U L S E
Domestic Risks
Intensified political instability in the region. Escalating conflict and violence will continue to weigh
on economic activity—as a result of heightened geopolitical tensions within countries and
subregions, weak institutions, and cost-of-living crises. Military coups, although confined to
small economies in the region so far, and the risk of “contagion coups” are severely impacting
international investor sentiment and risk perception toward the broader subcontinent. Nine
coups have taken place in AFW since 2020, and the regional and international responses to
restore democracy have been ineffective. Tensions have escalated even more with the decisions
of Burkina Faso, Mali, and Niger to leave the Economic Community of West African States, as
well as Senegal’s delayed elections. In Sudan, the conflict between the Sudanese Armed Forces
and the Rapid Support Forces continues, and its resolution through mediation may prove
difficult. In Ethiopia, security remains uncertain as bouts of violence in the Amhara and Oromia
regions persist. Finally, continuous conflict and organized violence may disrupt production and
access to food staples in several countries (Burkina Faso, Mali, Niger, Somalia, and Sudan,
among others).

Slippages in fiscal consolidation during the election year. Fiscal consolidation efforts should
be supported by credible medium-term plans, and the speed of adjustments should be
tailored to country-specific circumstances. Policy makers need to strike the right balance of
improving fiscal balance while protecting support to the vulnerable and priority investments.
Fiscal slippages should then be avoided—particularly among countries in the region holding
elections. Sub-Saharan Africa also has a busy election calendar this year, with 17 countries
slated for presidential or general elections.36 African governments tend to expand primary
deficits, government expenditures, and government wage bills in election years—and these
slippages tend to be stronger in countries with higher corruption perception scores.37 Likewise,
government wage bills, energy tariffs, and public social spending are already key constraints
in the region and likely to exhibit significant political cyclicality.38 Uncertainty around elections
may hinder private sector investment plans, with fears of political instability having measurable
consequences on a series of financial prices, including equity risk premia, stock volatility, price-
earnings ratios, default spreads, and corporate bond rates.39

Climatic shocks. Adverse climate and weather events can worsen fragility and hinder
development prospects for rural populations in the region.40 Rainfall anomalies induced by the
El Niño phenomenon are leading to excessive dry conditions in Southern Africa and will likely
result in below average harvests this year (including in surplus producing countries like South
Africa and Zambia) and reduce the availability of food in the worst affected areas—particularly
southern and western Zimbabwe, southern Malawi, southern and central Mozambique, and
southern Madagascar. Floods in Eastern Africa are leading to loss of lives and livelihoods and
displacement—thus magnifying food security problems (Ethiopia, Somalia, Tanzania, and
Uganda) and leading to a surge in cases of vector- and water-borne diseases.41 Disruption of

36 Two-thirds of the elections in Sub-Saharan Africa are being held in the last quarter of the year.
37 Iddrisu (2023).
38 Gaspar, Gupta, and Mulas-Granados (2017); Abdallah, Coady, and Jirasavetakul (2023).
39 Dai and Zhang (2019).
40 Diallo and Tapsoba (2022); Di Falco et al. (2024).
41 In Kenya, the likelihood of heavy rainfall during March-May 2024 remains a risk that could create food security problems.

A F R I C A’ S P U L S E > 37
 rainfall patterns, along with the black pod disease, are threatening cocoa production and the
livelihoods of farmers in Côte d’Ivoire and Ghana. Climatic shocks tend to affect the poorer
segments of the population more than proportionally. Recent data show that an estimated
105 million people across 34 countries in the region are facing severe food insecurity from
September 2023 to May 2024.42 Some of the countries with greater levels of concern about
hunger, according to the latest Famine Early Warning Systems Network update, include Burkina
Faso, the Democratic Republic of Congo, Malawi, Mali, Mozambique, Nigeria, Somalia, South
Sudan, and Sudan.

42 This figure represents the number of people in crisis, emergency, and catastrophic food security levels (IPC/CH Phase 3 or above) according to the Integrated Food Security Phase
Classification (IPC 2024).

38 > A F R I C A’ S P U L S E
Section 2. Tackling inequality for inclusive growth
and poverty reduction
2.1 INTRODUCTION
Sub-Saharan Africa encompasses countries with varying historical, demographic, and political
characteristics that have major implications for economic growth, inequality, and poverty
reduction. However, volatile growth and slow poverty reduction are common features among
the countries in the region. This section focuses on the characteristics of growth across
different country categories, and the role of inequality in limiting growth and slowing the
transmission of the benefits of growth to the poor in Sub-Saharan Africa. This issue of Africa’s
Pulse concludes with policy recommendations for leveling the playing field, drawing on a
forthcoming regional report.1

Growth across countries in the region has displayed recurrent long-term swings between
episodes of rapid and slow growth, which have in turn led to relative income per capita
diverging considerably from that of upper- and lower-middle-income countries in other regions
over the past three decades. Furthermore, in Sub-Saharan Africa, economic expansions are
driven by factor accumulation—including natural capital—rather than total factor productivity
(TFP), a feature that is less viable as a source of growth in the long term and less likely to be
inclusive. Indeed, countries that are resource abundant and non-fragile tend to exhibit the
greatest degrees of volatility in addition to having lower long-term growth. Fragility and conflict
pose additional challenges to Africa’s development progress.

The episodic nature of economic growth in Sub-Saharan Africa suggests that countries in
the region are more likely to be exposed to shocks with long-lasting effects, such as conflict,
climate, and commodity price shocks. In addition, they tend to have inadequate policy
frameworks and fiscal space to address these shocks. On top of lacking strong expansionary
episodes, recessions tend to be longer and more sizable, especially in resource abundant
economies, thereby canceling out some of the benefits of growth. These challenges mean that
the region runs the risk of losing another decade of growth.

The region also faces the triple challenges of high extreme poverty, high inequality, and low
transmission of growth to poverty reduction. The speed of poverty reduction has decreased
tremendously since 2014. The rate of reduction was 3.1 percent between 2010 and 2014,
subsequently decreasing to 1.2 percent between 2014 and 2019. In contrast, the rest of
the world reduced extreme poverty on average by 9.2 percent per year within the same
time horizon, suggesting that the Africa region is falling further behind. In addition, there is
substantial regional heterogeneity in where the poor are, with Nigeria and the Democratic
Republic of Congo accounting for one in three of those living in extreme poverty.

The COVID-19 pandemic, the war in Ukraine, as well as various climate shocks have further
diminished opportunities for accelerating poverty reduction in the region. Recovery has
been very uneven, leaving more people in poverty than in the baseline scenario without
these global shocks. Around 42 percent of the region’s population is at risk of a climate-

1 Sinha, Inchauste, and Narayan (forthcoming).

A F R I C A’ S P U L S E > 39
 related shock, elevating the chances of more people falling below the poverty line. The
region’s high vulnerability is rooted in its strong reliance on agricultural production and low
level of climate preparedness.

Sub-Saharan Africa exhibits high levels of income inequality, second only to the Latin America
and the Caribbean region. Countries that start out with high levels of inequality tend to
experience slower growth. More worryingly, high inequality means that fewer of the benefits
of growth reach the poor. As growth slowed down between 2010 and 2019, the importance
of addressing inequality as a means to reduce poverty rates across the region increased. In
Sub-Saharan Africa, gross domestic product (GDP) growth of 1 percent per capita is associated
with poverty reduction of only 1 percent. In the rest of the world, this number is as high as
2.5 percent. This weak transmission of growth to poverty reduction is an outcome of unequal
distribution of incomes among people on the one hand and the quality of growth on the other,
as reflected in limited structural transformation and low economic diversification.

The region can accelerate growth and poverty reduction substantially by tackling inequality,
specifically structural inequality. Structural inequality is the extent to which differences in
incomes across individuals are driven by the circumstances into which people are born and are
beyond their control, as well as the result of market and institutional distortions, as opposed
to differences in individuals’ talent or effort. The overall high levels of inequality in Africa are
mostly structural in nature. These structural inequalities and their drivers affect people’s ability
to build productive capacity and use this productive capacity for income generation. Market
failures, inequitable public investment, small market size, and high and uninsurable risks,
among other structural challenges, also reduce the efficiency with which growth reaches
those in the bottom of the income distribution. Fiscal capacity is limited and cannot match
the need for redistribution in the absence of broad-based growth of people’s productive and
earning capacities. Policies that address economic growth as well as structural inequalities
are therefore required. Examples include pro-competition policies, greater connectivity, and
market integration policies. Rationalizing subsidies and increasing the coverage and benefit
level of social assistance programs can better target resources to the poor and vulnerable, while
domestic revenue mobilization efforts can be designed to protect the poor. Options include
efforts to tax high net worth individuals through property taxes and to eliminate value-added
tax exemptions, which mainly benefit high-income individuals. Most importantly, the policies
must account for the interlinkages, complementarities, and trade-offs across the three stages of
income generation (building productive capacity, efficient use of the productive capacity, and
fiscal redistribution).

40 > A F R I C A’ S P U L S E
2.2 GROWTH IN SUB-SAHARAN AFRICA: LOW, VOLATILE,
AND UNSTABLE 2
A great deal of optimism has permeated much of Sub-Saharan Africa over the past two
decades. Nearly half of the 25 fastest growing countries in the world were in Sub-Saharan Africa
in 2000–14, with their GDP growth exceeding the annual average rate of 6.5 percent per year.
The growth record of the region during this period has been attributed to both external and
domestic factors. On the external front, the commodity supercycle, rising South-South trade
(with China, India, and Southeast Asia as key partners), and increasing inflows of foreign capital
helped to propel growth in the region. Domestically, improved macroeconomic management
supported rising consumption and investment across resource-intensive sectors (extractives)
and non-resource sectors (telecommunications, finance, retail, real estate, and transportation).3

Growth performance during the first decade and a half of the twenty-first century translated
into progress in human development outcomes across the countries in Sub-Saharan Africa. Life
expectancy rose from 51 years in 2000 to 59 years in 2014. Gross enrollment rates for primary
schooling jumped from 80 percent in 2000 to 98 percent in 2014. Infant mortality rates dropped
from 91.4 per 1,000 live births in 2000 to 59 in 2014, while fertility rates declined from 5.7 births per
woman in 2000 to 5 in 2014. The incidence of malaria and HIV fell by 33 and 60 percent, respectively.
Foreign direct investment in 2014 (US$54.5 billion) was five times as large as that at the start of the
century. Technology appeared to be spreading faster in the region—as mobile penetration soared
from less than 1 mobile phone per 100 people in 2000 to nearly 13 per 100 people in 2014.

Despite these development

FIGURE 2.1: Real GDP per Capita in SSA, 1960–2022
gains, growth per capita
1,700
in the region was neither
impressive nor adequately 1,600
inclusive. Instead, real
income per capita grew 1,500
US$ at 2015 prices

at an annual average rate

of 2.4 percent during 1,400

2000–14. This growth spurt

1,300
lifted the region’s income
per capita from a trough 1,200
in the mid-1990s to levels
exceeding its previous 1,100
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022

peak—taking Sub-Saharan
Actual HP trend
Africa more than three
Source: World Development Indicators.
decades to surmount Note: The figure depicts the actual and trend income per capita (green solid and yellow dashed lines,
respectively. The trend component is computed using the Hodrick-Prescott (HP) filter adjusted for
its previous peak in living changes in the frequency of observations (Ravn and Uhlig 2002). The shaded area in grey corresponds
to 2000–14. GDP = gross domestic product; SSA = Sub-Saharan Africa.
standards (figure 2.1).4

2 This subsection draws heavily from a study by Calderon, Dabalen, and Qu (2024).
3 There was hope that livelihoods would continue to improve at this remarkable rate in the years ahead. The surge in economic activity in Sub-Saharan Africa was broad-based: resource
rich nations rode the wave of commodity prices and had protracted periods of rapid GDP growth (for example, Chad, Equatorial Guinea, Mozambique, Nigeria, and Zambia), while non-
resource rich low-income countries experienced growth spurts supported by sound macroeconomic and structural policies (for example, Ethiopia, Rwanda, Tanzania, and Uganda).
4 In 2008, Sub-Saharan Africa’s GDP per capita (US$1,539 in 2015 constant prices) finally exceeded its previous peak (US$1,533 in 2015 constant prices) in 1974.

A F R I C A’ S P U L S E > 41
 Over the past six decades,
FIGURE 2.2: Relative Income per Capita in SSA, 1960–2022
growth in the region
50 has exhibited long-term
swings from episodes
45
of rapid growth to low
Average world GDP per capita = 100

growth, including growth

40
spurts, stagnation, and
35 collapses.5 This episodic
nature of growth has taken
30 different forms across the
region. The multiplicity
25 of growth topographies
across countries reflects
20 differences in the array
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Actual ratio Ratio, average for the decade
of shocks hitting these
Source: Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015).
economies as well as
Note: The figure depicts the ratio of income per capita in Sub-Saharan Africa vis-à-vis the world differences in their
(dark green line) and its average across decades (light green dotted line). The shaded area in grey
corresponds to 2000–14; GDP = gross domestic product; SSA = Sub-Saharan Africa. economic structures and
policy frameworks. In other
FIGURE 2.3: SSA Relative Income per Capita, 1960–2022: words, most countries
Comparison with Income Groups in the region have been
100 unable to sustain growth
over the long term.
90

80 The inability to sustain

growth over longer
70
horizons is especially stark
60 compared to the relative
World = 100

50 prosperity experienced in
other regions. Sub-Saharan
40
Africa’s real GDP per capita
30 has lost ground relative to
20 the world over the past six
decades: its relative income
10
per capita dropped from
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022

Sub-Saharan Africa Low income less than half of the world’s

Lower-middle income Upper-middle income in 1960 to less than one-
Source: Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015). quarter in 2000 (figure 2.2).6
Note: The figures depict the ratio of income per capita in Sub-Saharan Africa and other selected income
and regional groups vis-à-vis the world. SSA = Sub-Saharan Africa.
It slightly increased during
2000-14 but has continued
its backslide relative to the world since 2015. In particular, Sub-Saharan Africa’s relative income
per capita has diverged considerably from that of upper- and lower-middle-income countries

5 See Ndulu (2007) and Toh (2016).

6 Overall, annual average growth per capita in the region was 0.7 percent during 1960–2022, which was nearly one-fifth the growth recorded by developing countries in other regions (3.2
percent) and about one-third that recorded by industrial countries (2.2 percent).

42 > A F R I C A’ S P U L S E
over the past three decades
FIGURE 2.4: SSA Relative Income per Capita, 1960–2022:
(figure 2.3) as well as from Comparison with East and South Asia
East Asia and South Asia 90
(figure 2.4).7
80
The short-lived episodes
of rapid growth have 70

prevented countries in 60
the region from reducing

World = 100
extreme poverty. Policies 50
that promote investments 40
in human capital (such as
boosting the quality of 30
primary education and
20
access to safe water and
sanitation), structural 10
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
transformation of African
economies (by improving Sub-Saharan Africa South Asia East Asia excl. HICs

agricultural productivity Source: Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015).
Note: The figure depicts the ratio of income per capita in Sub-Saharan Africa and other selected income
and inducing the shift and regional groups vis-à-vis the world. HICs = high-income countries; SSA = Sub-Saharan Africa.

toward nonagricultural
jobs), and economic diversification (thus reducing the reliance on natural resources) would help
to ensure that the benefits of growth are shared more equally across the population and have a
larger impact on poverty.

In what follows, the main features of growth in Sub-Saharan Africa are documented: (1) its
instability and greater variability across countries, (2) the diversity of growth experiences across
countries, (3) shorter and smaller expansions relative to other country groups, (4) slightly longer
and larger recessions relative to other country groups, (5) the negligible contribution of TFP to
long-term growth, and (6) growth driven by the use of natural capital rather than TFP.

Long-term growth exhibits great variability across countries and over time
The low, volatile, and unstable long-term growth described above masks the great variability of
growth experiences across the region. For instance, only three countries in the region exhibited
annual growth per capita over 3.5 percent in 1960–2022, while income per capita contracted
in six countries during the same period. The average growth differential between these two
groups of countries was 5 percent—a margin that can yield rapid movements in relative income
per capita over time as well as rising divergence.8

At the same time, Sub-Saharan Africa experienced long-term fluctuations in economic activity
over time during 1960–2022, shifting from periods of positive growth to negative growth and vice

7 If Sub-Saharan Africa’s growth per capita since 1990 had kept pace with other regional or income benchmarks, its level of income per capita in 2024 would be double the current level,
and it would be 3.5 times the current level if the region had grown as fast as emerging East Asian economies.
8 The gap between the best and worst performers in the region changed across subperiods and was the largest during 1981–2000. The differential between these two groups amounted
to 6.5 percent per year—with the worst performers (22 countries) experiencing an annual contraction of 1.4 percent and the best performers (five countries) recording growth per capita
of 5.5 percent. Over the past two decades (2001–22), the gap between good and bad performers was still large but slightly smaller (5.2 percent)—and more than half of the countries in
the region grew at rates of more than 2 percent per year.

A F R I C A’ S P U L S E > 43
 versa. In contrast to advanced economies, the trajectory of real GDP per capita of Sub-Saharan
African economies cannot be characterized by exponential trend growth with moderate cyclical
fluctuations.9 Instead, the region has experienced episodic growth—as characterized by short-
lived growth spurts followed by collapses, stagnation, and economic decline—over the past six
decades. On average, a modest expansion in real output per capita in 1960-80 (1.1 percent per
year) was followed by a contraction in 1981-2000 (-0.9 percent per year). The period of economic
decline and stagnation can be attributed to many countries in the region fighting bouts of
macroeconomic instability, failed structural reforms, external debt crises, violent conflict, and
political instability—including civil wars, insurgencies, and coups.

Growth per capita in the region accelerated to 1.5 percent per year in 2001–22. Livelihoods
were lifted over the past two decades thanks to a more favorable external environment (marked
by stronger institutions supporting macroeconomic policy frameworks in advanced economies
and the supercycle of commodity prices). Buoyant domestic demand supported growth:
investment (private and public) grew in both resource-intensive sectors (oil and mining) and
non-resource sectors (telecommunications, finance, transportation, real estate, and retail,
among others).10 Still, African economies were growing at half the speed of other developing
countries (3.4 percent).11 Overall, these long swings over time suggest that the narrative of the
region’s growth record is not one of persistently poor performance but a case of short-lived,
unsustained, or episodic growth (table 2.1).

TABLE 2.1: Long-Term Growth in Sub-Saharan Africa, 1960–2022: Basic Statistics (percent)

Sub-Saharan Africa
Developing
Advanced countries All Resource-rich Non-resource-rich
economies excl. SSA countries Fragile Non-fragile Fragile Non-fragile
I. Average (weighted)
1960–80 3.36 3.68 1.13 -0.92 1.49 1.68 1.45
1981–2000 2.24 2.59 -0.85 -3.80 -1.03 -0.24 -0.51
2001–22 1.02 3.40 1.74 1.65 2.05 1.89 1.58
II. Coefficient of variation
1960–80 0.33 1.05 1.39 3.08 1.53 1.15 1.13
1981–2000 0.38 3.91 6.75 -1.44 5.38 -20.12 1.64
2001–22 0.67 0.83 0.71 0.89 0.62 1.14 0.50
Sources: Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015); World Development Indicators, World Bank.
Note: The coefficient of variation is defined as the ratio of the standard deviation to the (simple) average. Resource abundant countries are defined as those with
natural resource rents exceeding 10 percent of gross domestic product over the past decade. Fragile countries are those with fragility and conflict-affected status
at some point between 2006 and 2023. SSA = Sub-Saharan Africa.

Another feature of economic growth in Sub-Saharan Africa is its larger extent of volatility in
relation to its (simple) average—particularly during the 1980–2000 period of stagnation and
decline. During 1981–2000, the coefficient of variation of economic growth in African countries
(6.8 percent) was significantly higher than that of other developing countries (3.9 percent). The

9 See Pritchett (2000).

10 See Calderon and Boreux (2016).
11 The 2014–15 plunge in commodity prices as well as other global shocks—such as the COVID-19 pandemic and the war in Ukraine—weighed on economic activity in the region, and
real GDP per capita again contracted at an annual rate of 0.3 percent per year during 2016–22.

44 > A F R I C A’ S P U L S E
ample volatility during this period might be attributed to the fact that countries in the region
were highly exposed to real shocks (including commodity prices and natural disasters) and had
policy frameworks that might amplify rather than mitigate such shocks.

During the first decade of the twenty-first century, the stable global environment during the
Great Moderation and the strengthening of policy frameworks across many Sub-Saharan African
countries led to lower growth volatility compared with its average for all country groups in the
region in 1981–2000. The coefficient of variation was the lowest among non-fragile countries,
regardless of their condition of resource abundance (table 2.1). During the expansionary period
of the past two decades (2001–22), the coefficient of variation across African countries declined
dramatically (0.71 percent) and was comparable to that of advanced economies (0.67 percent).

Idiosyncratic factors account for the diversity and uniqueness of country

growth experiences in the region
The patterns of economic growth over time across countries in the region have been widely
heterogeneous and to some extent unique. Differences in the incidence and exposure to
shocks, economic structure, geographical features, and other idiosyncratic factors reveal a
diverse landscape of growth patterns in the region.12 Although some key dates may mark
transitions in multiple countries, the start and stop dates of long-term swings were by no means
widespread across the region. Moreover, global drivers such as commodity price swings, global
liquidity levels, and political events have not been evenly impactful across the region.

The trajectory of long-term growth across African economies is visually distinct when charted,
with diverging characteristics (figure 2.5).13 Countries that have experienced fast growth over
long periods (that is, those with an upward-sloping trend) appear to have grown steadily with
intermittent recessions over the past six decades (Mauritius) or reached a plateau due to a
marked growth deceleration in recent years (Botswana). Others have exhibited rapid growth
over the past two decades after remaining stagnant for a prolonged period (Ethiopia). Similarly,
countries with stagnant growth tend to have experienced a slow rise in income per capita
although with differences in timing and pace. For example, Togo’s relative recovery since the
mid-2000s contrasts with the recent decline in Burundi and the sharp decrease in the Central
African Republic in the early 2010s. Finally, some countries in the region have had large swings
in output per capita, often as a result of idiosyncratic economic crises that left large footprints
on economic prosperity. Nigeria in the 1980s and Zimbabwe in the late 2000s are pertinent
examples. Perhaps one benefit of these diverging growth paths is the implied lack of contagion
from such crises across countries in the region.

The instability and volatility of growth rates that render the different trajectories of output per
capita across Sub-Saharan African countries imply that understanding growth behavior from the
perspective of a representative country may be misleading. In other words, the uniqueness of
country experiences across the countries implies that the diagnostics should focus on what triggers
or halts growth spells, and what can sustain their duration and pace. Policy recommendations to
sustain growth across African economies should be tailored to the country context.

12 Pritchett’s (2000) growth analysis for 111 countries during 1960–92 found a wide array of growth topologies across developing countries, including countries with steady growth (hills
and steep hills), rapid growth followed by stagnation (plateaus), rapid growth followed by decline (mountains) or catastrophic falls (cliffs), continuous stagnation (plains), and steady
decline (valleys).
13 See Calderon, Dabalen, and Qu (2024) for details on the classification of the patterns of growth.

A F R I C A’ S P U L S E > 45
 FIGURE 2.5: Different Growth Topologies across Sub-Saharan Africa

a. Botswana Uphill reaching plateau b. Ethiopia Emerging uphill c. Mauritius Uphill

10 10 10

9 9 9
Ascendent

8 8 8

7 7 7

6 6 6

1950
1956
1962
1968
1974
1980
1986
1992
1998
2004
2010
2016
2022

1950
1956
1962
1968
1974
1980
1986
1992
1998
2004
2010
2016
2022
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
d. Nigeria Mountain ranges e. Zambia Basin (U-shaped) f. Zimbabwe Valley (V-shaped)
9 9 9

8 8 8
Swinging

7 7 7

6 6
6
1950
1956
1962
1968
1974
1980
1986
1992
1998
2004
2010
2016
2022

1955
1961
1967
1973
1979
1985
1991
1997
2003
2009
2015
2021

1954
1960
1966
1972
1978
1984
1990
1996
2002
2008
2014
2020
g. Burundi Plain h. Central African Republic Downhill i. Togo Foothills
9 9 9

8 8 8
Stagnant

7 7 7

6 6 6
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020

1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020

1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
Source: Calderon, Dabalen, and Qu 2024.
Note: The figure depicts the natural log of gross domestic product at chained purchasing power parity per capita (2017 US$) from Penn World Table 10.01
(Feenstra, Inklaar, and Timmer 2015).

Failure to sustain growth I: Expansions in the region are shorter

and smaller in magnitude
Economic growth in Sub-Saharan Africa can be characterized by its inability to sustain longer
and stronger expansions.14 This reflects the fact that countries in the region are more prone
to shocks with persistent effects (for example, due to conflict or commodity prices) and have
inadequate policy frameworks to address such shocks. The average duration of expansions
in Sub-Saharan Africa tends to be significantly shorter (3.3 years) than in other developing
countries (5.1 years) and industrial countries (6.7 years). The expansions tend to be even
shorter among fragile countries (2.7 years) in the region regardless of their extent of resource

14 An examination of the episodic nature of economic growth involves estimating the main features of expansions and recessions, namely, their incidence, duration, and depth. The analysis
is conducted on a sample of 23 advanced countries, 45 Sub-Saharan African countries, and 115 developing countries outside Sub-Saharan Africa over the past six decades (Calderon,
Dabalen, and Qu 2024). The Bry-Boschan algorithm is used to identify turning points (peaks and troughs) in real GDP per capita—as implemented by Harding (2002) for long time series
annual data. After computing these turning points, recessions or contractions are defined as episodes from peak to trough in GDP per capita, while expansions are episodes from trough
to subsequent peak.

46 > A F R I C A’ S P U L S E
abundance.15 Expansions
FIGURE 2.6: Main Features of Expansions in Sub-Saharan Africa, 1960–2021
in non-resource abundant 8
a. Average duration of expansions
and non-fragile countries 8
7
in the region (4.2 years) 7
6
tend to be the longest in 6
Sub-Saharan Africa (figure 5
5

In years
2.6, panel a). The (median) 4

In years
4
cumulative increase in 3
3
income per capita during 2
expansions (“depth”) in 2
1
Sub-Saharan Africa (6.7 1
0
percent) tends to be 0 Industrial Developing SSA SSA SSA SSA resource- SSA resource-
smaller than that of other Industrial
countries Developing
countries SSA SSA
non-resource, SSA
non-resource, SSA resource-
rich, SSA resource-
rich,
countries countries non-resource,
fragile non-resource,
non-fragile rich,
fragile rich,
non-fragile
developing countries (11.8 fragile non-fragile fragile non-fragile
percent) and advanced b. Median depth of expansions
14
economies (12.3 percent) 14
(figure 2.6, panel b). Fragile 12
variation

12
variation

countries exhibit shallower 10

10
expansions—particularly
percentage

8
percentage

fragile countries that 8

are also natural resource 6
6
Cumulative

abundant (5.2 percent). The

Cumulative

4
4
depth of expansions among
2
non-resource abundant 2
0
and non-fragile countries 0 Industrial Developing SSA SSA SSA SSA resource- SSA resource-
(7.5 percent) is the largest Industrial
countries Developing
countries SSA SSA
non-resource, SSA
non-resource, SSA resource-
rich, SSA resource-
rich,
countries countries non-resource,
fragile non-resource,
non-fragile rich,
fragile rich,
non-fragile
within the region. Finally, Source: Calderon, Dabalen, and Qu 2024.
fragile non-fragile fragile non-fragile
the (median) pace of these Note: Developing countries refers to the group of developing countries excluding countries in SSA.
Duration is defined as the number of years from trough to the subsequent peak during expansions. Depth
expansions tends to be is computed as the maximum increase of gross domestic product from trough to peak during episodes
of expansion. For instance, the amplitude of an expansion, AE, measures the log difference in real gross
slower among Sub-Saharan domestic product from peak (y0) to trough (yK), that is, Ak = yK – y0. SSA = Sub-Saharan Africa.

African countries (3.1

percent per year) than other developing countries (3.7 percent) and slightly faster among non-
fragile and non-resource abundant countries in the region (3.2 percent).

Existing evidence shows that the length of expansions in economic activity is sustained by
sound macroeconomic policies (leading to lower inflation and reduced debt-to-GDP ratios),
more outward-oriented trade policies, and higher investment ratios. Strong structural policies—
resulting in reduced market distortions and improved institutional quality—can help to sustain
growth.16 Furthermore, there is evidence that growth spells can be sustained for a longer period
in more egalitarian societies. More specifically, a 1 percentage point reduction in the Gini
coefficient is associated with an 11 to 15 percent longer duration of the growth episode.17

15 This finding is consistent with the fact that, on average, Sub-Saharan African countries tend to spend a smaller percentage of their time in expansions (63 percent) relative to other
developing countries (76 percent) and industrial countries (84 percent). Within the region, resource abundant and fragile countries spend the least proportion of time in expansions (53
percent), while non-resource abundant and non-fragile countries spend the largest proportion of time (71 percent). See Calderon, Dabalen, and Qu (2024) for more details.
16 Arizala et al. (2017).
17 Berg, Ostry, and Zettelmeyer (2012).

A F R I C A’ S P U L S E > 47
 Failure to sustain growth II: Recessions are longer and more sizable—
particularly among resource abundant countries
There are no significant differences in the lengths of recessions across country groups worldwide.
On average, the duration of recessions in Sub-Saharan Africa (2 years) is comparable, although
slightly longer, than that of other developing countries (1.8 years) and advanced economies
(1.5 years). Within the region, the duration of recessions among resource abundant countries
(whether they are fragile or non-fragile) is longer than the regional average (figure 2.7, panel
a). However, recessions
FIGURE 2.7: Main Features of Recessions in Sub-Saharan Africa, 1960–2021
across Sub-Saharan African
2.5 a. Average duration of recessions
countries tend to be
2.5 deeper (4.4 percent) than
2 those of other developing
2
countries (3.9 percent)
1.5 and industrial countries
In years

1.5
(2.2 percent) (figure 2.7,
In years

1 panel b). Recessions tend

1
to be significantly deeper
.5
.5
among resource abundant
countries, and especially
0
0 Industrial Developing SSA SSA SSA SSA resource- SSA resource- among those that are
countries Developing
Industrial countries SSA non-resource,
SSA non-resource,
SSA rich,
SSA resource- rich,
SSA resource-
countries countries fragile non-resource,
non-resource, non-fragile fragile
rich, non-fragile
rich, also fragile (6.6 percent).
fragile non-fragile fragile non-fragile Recessions among non-
b. Median depth of recessions resource abundant and
0 non-fragile countries in the
0
-1
region are the smallest in
magnitude within the region
variation

-1
variation

-2
-2
(3.7 percent). In terms of the
percentage

-3 (median) pace of recessions,

percentage

-3
-4
real output per capita
-4 contracted at an annual
Cumulative

-5
Cumulative

-5
rate of 2.7 percent, and the
-6 magnitude of the downturn
-6
-7 was larger among resource
-7 Industrial Developing SSA SSA SSA SSA resource- SSA resource- abundant countries.
countries countries non-resource, non-resource,
Industrial Developing SSA rich,
SSA SSA rich,SSA resource- SSA resource-
countries countries fragile non-resource,
non-resource, non-fragile fragile
rich, non-fragile
rich,
Source: Calderon, Dabalen, and Qu 2024.
Existing evidence suggests
fragile non-fragile fragile non-fragile
that recessions in economic
Note: Developing countries refers to the group of developing countries excluding countries in SSA.
Duration is defined as the number of years from trough to the subsequent peak during expansions. Depth
activity tend to coincide
is computed as the maximum increase of gross domestic product from trough to peak during episodes
of expansion. For instance, the amplitude of an expansion, AE, measures the log difference in real gross
with higher public
domestic product from peak (y0) to trough (yK), that is, Ak = yK – y0. SSA = Sub-Saharan Africa.

expenditure, surges in debt

ratios, increased aid flows, and overvalued exchange rates. Collapses in private investment,
market distortions (labor, land, and credit), and weak institutions contribute not only to shorten
growth episodes, but also to reduce the likelihood of avoiding a hard landing.18

18 Arizala et al. (2017); Berg, Ostry, and Zettelmeyer (2012).

48 > A F R I C A’ S P U L S E
Failure to sustain growth III: The contribution of TFP growth to long-term
growth is negligible
Factor accumulation explains the bulk of growth in Sub-Saharan Africa over the long term, and
the contribution of TFP growth is negligible (figure 2.8, panel a).19 During 1960–2019, factors
of production such as
physical and human capital FIGURE 2.8: Growth Accounting in Sub-Saharan African Countries
expanded at average
a. Growth over 1960–2019
annual rates of 1.7 and 0.8 4.0
percent, respectively, while 3.5
TFP contracted at a rate
3.0
of 0.2 percent. Hence, the
2.5
contribution of physical
Percent per year
2.0
capital accumulation to
1.5
economic growth in the
region accounted for nearly 1.0

four-fifths, while that of TFP 0.5

growth was negative but 0.0

negligible (-0.13 percent). -0.5
In contrast, TFP growth -1.0
Industrial Developing SSA SSA SSA SSA resource- SSA resource-
accounts for one-third of countries countries non-resource, non-resource, rich, rich,
growth per capita among fragile non-fragile fragile non-fragile
industrial countries and Physical capital Human capital Demographics TFP Output p/c
nearly one-sixth among
developing countries. b. Change in growth from 1981–2000 to 2001–19
4.0
Over the past six decades,
3.0
demographics made a
modest contribution to the 2.0

dynamics of GDP per capita

Percent per year

1.0
in Sub-Saharan Africa.
0.0
Within the subcontinent, -1.0
non-resource abundant
-2.0
countries outperform
resource abundant -3.0
SSA SSA SSA SSA SSA SSA
countries regardless of resource-rich, resource-rich, resource-rich, resource-rich,
non-fragile fragile non-fragile fragile
their condition of fragility.
For instance, non-resource, 1981-2000 2001-19

non-fragile countries Physical capital Human capital Demographics TFP Output p/c
outperform resource, non- Source: Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015).
fragile countries in terms of Note: Developing countries refers to the group of developing countries excluding countries in
SSA. p/c = per capita; SSA = Sub-Saharan Africa; TFP = total factor productivity.
GDP per capita (1.5 and 0.3

19 The growth accounting exercise presented in this section estimates the contributions of the drivers of long-term growth in Sub-Saharan African economies, namely, factor accumulation
(including demographics) and TFP growth. Demographics, as captured by the labor participation rate and the share of working age population, are included in the analysis following
the Loayza and Pennings (2022) framework. The methodology used to examine the relative importance of factor accumulation and TFP growth in driving long-term growth per capita is
described in Calderon, Dabalen, and Qu (2024).

A F R I C A’ S P U L S E > 49
 percent)—and this gap is primarily attributed to the more rapid expansion of physical capital (per
capita) in non-resource, non-fragile countries (2 percent) relative to resource abundant, non-fragile
countries (0.33 percent). Resource abundant and fragile countries exhibit the poorest performance
over the long term. This might be attributed to inefficiencies in the use of factors of production—
as signaled by the large negative contribution of TFP growth (figure 2.8, panel a).

Capital accumulation and TFP growth account for a large portion of the differences between
the economic downturn in 1981–2000 and the expansion in 2001–19 (figure 2.8, panel b). The
acceleration of growth since the start of this century has come along with a solid contribution
of TFP growth over the past two decades. TFP growth accounted for 30 percent of growth per
capita in Sub-Saharan Africa over during 2001–19—as opposed to the negative contribution
registered during the contractionary period of 1981–2000.20 The contribution of physical capital
also improved over the past two decades: it explained about 40 percent of growth per capita. In
other words, Africa shifted from a period of decline in capital deepening and allocative inefficiency
(1981–2000) to a period of increase in the quantity and efficiency of the factors of production.

In 2000-14, growth was driven by the use of natural capital rather than
TFP—particularly among resource abundant countries
The contribution of TFP to growth per worker across Sub-Saharan Africa tends to decline
when the measure of growth accounts for the use of natural capital—particularly among
resource abundant countries (figure 2.9). Natural capital—as measured by the stock of all
extractable resources, such as geological resources, soils, air, water, and living organisms—

FIGURE 2.9: Growth Accounting for 2000–14: The Role of Natural Capital (percent)

4
Percent per year

-1
Conventional Natural Conventional Natural Conventional Natural Conventional Natural
resource resource resource resource
Developing countries SSA SSA resource-rich, fragile SSA resource-rich, non-fragile

Physical capital Natural capital Human capital TFP Output p/c

Source: Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015).
Note: Developing countries refers to the group of developing countries excluding countries in SSA. Natural capital refers to the stock of all extractable
resources such as geological resources, soils, air, water, and living organisms. The natural resource decomposition, unlike the conventional one, includes
natural capital as an additional factor of production. See Calderon (2021) for details on the methodology for computing the output elasticity of physical and
natural capital as well as the specification of technology. p/c = per capita; SSA = Sub-Saharan Africa; TFP = total factor productivity.

20 These findings need to be taken with caution as the TFP in the traditional accounting exercise might not capture the increasing use of other factors of production—for instance, natural
capital (such as energy, mineral, and metal commodities).

50 > A F R I C A’ S P U L S E
accounted for about half the region’s growth per worker during 2000–14. The increased share
of growth due to TFP in Sub-Saharan Africa using the “conventional” growth decomposition
may conceal the contribution of natural capital in sectors such as energy (as in Gabon,
Nigeria, and the Republic of Congo) and extractives (as in Botswana, the Democratic Republic
of Congo, and Zambia). Accounting for the accumulation of natural capital (the “natural
resource” growth decomposition) reduces the contribution of TFP to growth per worker by
more than 1 percentage point per year. This decline is even larger for Sub-Saharan African
countries that are resource abundant and non-fragile (figure 2.9). This finding is consistent
with alternative evidence from studies that analyze natural resources as a “missing goods”
problem in a standard productivity setting,21 or those that estimate a production frontier
approach to growth accounting.22

21 Freeman, Inklaar, and Diewert (2021).

22 Merkina (2009).

A F R I C A’ S P U L S E > 51
 2.3 POVERTY AND INEQUALITY IN SUB-SAHARAN AFRICA 23
While Sub-Saharan Africa has had recent episodes of growth, it has struggled to deepen and
lengthen these episodes. Growth tends to be volatile, and when recessions arrive (with high
frequency), they are deeper and longer than in other regions. This has had substantial impact
on how broad-based growth of people’s consumption spending is in the region. Sub-Saharan
Africa stands out globally as having the highest extreme poverty rate, high levels of inequality,
and the weakest transmission of growth to poverty reduction. Of the 700 million people living
in extreme poverty in 2019, 60 percent of them were in Sub-Saharan Africa. Along with pockets
of high poverty across the region, almost a third of the extreme poor live in two countries—the
Democratic Republic of Congo and Nigeria—and another third live in six countries: Ethiopia,
Kenya, Madagascar, Mozambique, Tanzania, and Uganda.

At the same time, with an average Gini index of 41.5, Sub-Saharan Africa is the second most
unequal region in the world.24 The inequality in countries in the region is higher than that in
countries in other regions at similar income levels. High levels of inequality have consequences
for growth as countries that start out with high levels of inequality tend to experience slower
growth.25 Inequality also affects the distribution of growth among different income groups and
therefore affects the transmission of growth to poverty reduction. The evidence across countries
over the past 30 years shows that for a given increase in per capita growth, countries with
higher initial levels of inequality have lower reductions in poverty than countries with low levels
of inequality (figure 2.10). While the pace of reduction of monetary poverty in Sub-Saharan
Africa has mirrored that of aggregate per capita growth, the rate of transmission of growth to
poverty reduction is among
FIGURE 2.10: Growth Leads to Greater Poverty Reduction in Countries with the lowest in the world,
Low Levels of Inequality (percentage points) largely on account of high
0.8 inequality in the region.
0.6 Overall, economic growth
0.4 in Sub-Saharan Africa
Annualized change in poverty

0.2
has been less “efficient”
in reducing poverty as
0
reflected by its median
-0.2
growth elasticity of poverty
-0.4
being the lowest among
-0.6 all regions. This has been
-0.8 the case even during years
-1 of high growth. Moreover,
-0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6
the structural causes of the
Annualized change in per capita growth
high levels of inequality
Initial Gini <40 Initial Gini 40-50 Initial Gini 50+
have impacts on growth
Source: Calculations based on data from the World Bank Poverty and Inequality Platform.
Note: Change in international poverty headcount based on the annualized change in the survey
itself, as the productive
mean. The figure is based on 575 consecutive spells with both start- and end-year poverty rates of at
least 2 percent. The Gini index is for the initial year of the time spell.
potential of the population
is not being fully utilized.

23 This subsection draws heavily from a forthcoming study by Sinha, Inchauste, and Narayan (forthcoming).
24 The Gini index takes values between 0 and 100. Values close to 0 (100) correspond to low (high) inequality.
25 Cerra et al. (2022) summarize the literature on the relationship between growth and inequality.

52 > A F R I C A’ S P U L S E
The pace of poverty reduction has declined since the mid-2010s in line
with the slowdown in growth
Poverty reduction has been slow relative to the rest of the developing world since 1990. In
line with the 2000–14 high-growth period, Sub-Saharan Africa’s extreme poverty rate fell from
56.5 percent in 2000 to 37.6 percent in 2014. However, rapid population growth resulted in the
number of poor only falling by 10 million, from 379 million in 2000 to 369 million in 2014
(figure 2.11, panel a).

FIGURE 2.11: Extreme Poverty in the Africa Region Relative to the Rest of the World, 2000–19

a. Number of poor b. Extreme poverty rate (percent)

2,000 60 60
1,800
50 50
1,600
1,400
40 40
1,200
Share (%)
Millions

1,000 30 30
800
20 20
600
400
10 10
200
0 0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
AFR Other SAR EAP AFR share (RHS) EAP SAR AFR LAC World

Source: World Bank Poverty and Inequality Platform (October 2023).

Note: Estimates are based on the poverty line of $2.15/day (2017 purchasing power parity). AFR = Africa; EAP = East Asia and the Pacific;
LAC = Latin America and the Caribbean; SAR = South Asia.

As the commodity boom ended and growth slowed, so did the pace of poverty reduction.
While the rest of the world reduced extreme poverty on average by 9.2 percent per year
between 2014 and 2019, the corresponding percentage for Sub-Saharan African countries was
only 1.2 percent per year, which was significantly lower than the rate of reduction in the region
between 2000 and 2009 (2.7 percent) and between 2010 and 2014 (3.1 percent) (figure 2.11,
panel b). Thus, poverty reduction in Sub-Saharan Africa, which was already lagging the rest of
the world, has fallen further behind since the mid-2010s. In 2019, Sub-Saharan Africa’s extreme
poverty rate of 35 percent was the highest of all regions.

Multidimensional measures of poverty highlight the multifaceted face of poverty in Sub-

Saharan Africa. Approximately 54 percent of Sub-Saharan Africa’s population lives in
multidimensional poverty, a measure that captures nonmonetary components of poverty, such
as access to educational and infrastructural services.26 Even when accounting for GDP per capita

26 This measure goes beyond counting households that are unable to afford a basic bundle of goods; it also counts households that experience substantial deprivations in access to crucial
services for healthy and productive activities (water, education, sanitation, and electricity).

A F R I C A’ S P U L S E > 53
 levels, the Africa region
FIGURE 2.12: Multidimensional Poverty Rates, by GDP per Capita
exhibits higher levels of
90 BDI multidimensional poverty
SSD
80 MDG compared to other regions
MOZ
70 ETH (figure 2.12).
ZMB
60 BFA These rates are particularly
TZA
50 BEN SDN elevated in fragile countries,
Percent

KEN AGO
40 NGA SWZ such as Niger and South
CIV
GHA Sudan. Deprivation in
30 SEN NAM access to improved
20 GMB BWA ZAF
sanitation, an important
10
CPV GAB input for human capital
0 development, is particularly
0 2,000 4,000 6,000 8,000 10,000
lagging in the region, with
Log of GDP per capita (constant 2015 US$)
more than 90 percent of
Others AFR Expon. (Others) Log. (AFR)
the population lacking
Source: Calculations based on data from the World Bank Poverty and Inequality Platform. access to improved
Note: The multidimensional poverty measure (MPM) analysis is limited to the subset of countries
with sufficiently detailed surveys to estimate the MPM. AFR = Africa; GDP = gross domestic
sanitation in Burundi,
product. For a list of country codes, go to https://www.iso.org/obp/ui/#search.
Ethiopia, and Sudan. In
contrast, education has
shown major improvements, with access to schooling provided to even the poorest fraction of
the population. In general, the multidimensional poverty rate is positively correlated with the
monetary poverty rate.

The COVID-19 pandemic and subsequent shocks have further dampened

the pace of poverty reduction
Due to the sharp slowdown in economic activity during the pandemic, most estimates indicate
that there was a significant one-year increase in extreme poverty in many countries in 2020.
This was followed by a slow and uneven recovery, which has led to poverty remaining higher
than would have been expected without these shocks. Figure 2.13 shows nowcasted estimates
of poverty rates since 2019. The results suggest that 17.1 million more people in Sub-Saharan
Africa lived in extreme poverty in 2023 compared to a scenario in which pre-pandemic trends
would have prevailed. Similarly, extreme poverty rates decreased by a third of the amount by
which they would have decreased in absence of this shock.

Furthermore, climate shocks have placed additional stress on the region’s development
progress. The countries of Sub-Saharan Africa are overrepresented among the most vulnerable
and least prepared for climate change shocks globally, including 13 of the 15 lowest ranked
countries. An estimated 42 percent of the region’s population were at risk of a climate-related
shock in 2019/2020—including flooding and worsening droughts. Reliance on agricultural
livelihoods makes the region particularly vulnerable to climate shocks. In Sub-Saharan Africa,
16 percent of the population is both exposed to risks of climate shocks and living in poverty,

54 > A F R I C A’ S P U L S E
 FIGURE 2.13: Extreme Poverty in Sub-Saharan Africa Since 2019

a. Number of poor b. Extreme poverty rates

440 38
431.30 37.3
430 37

420 36 35.4
414.20
410 35 34.7

Percent
Millions

400 397.37 34
33.4
390 33
War in Ukraine War in Ukraine
380 COVID-19 32 COVID-19
& climate shocks & climate shocks
370 31
2016 2017 2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 2022 2023

Pre-COVID-19 COVID-19 and subsequent shocks

Sources: Calculations based on data from the World Bank Poverty and Inequality Platform (October 2023); Yonzan, Mahler, and Lakner 2023.
Note: Nowcasting of the number of poor and the poverty rate is based on the poverty line of $2.15/day (2017 purchasing power parity).

compared to 5 percent of the world’s population. This poor and at-risk population is less likely
to have savings, access to credit, or insurance to compensate for their losses of incomes and
assets. Furthermore, they are less likely to be able to switch their income-earning activities due
to low levels of education, financial resources, and market access.

Fragility, conflict, and urbanization influence the pace of poverty reduction

Fragility and conflict share a large part of the responsibility for the slow poverty reduction in
many of the countries in the region. Twenty of 39 countries affected by fragility, conflict, and
violence (FCV) in 2023 were in the Africa region. Thirty countries in the region are or have been
in FCV status at some point in time since 2006. They contain 74 percent of the region’s extreme
poor and more than 70 percent of the region’s population. This combination increases the
probability of these countries getting caught in a “fragility trap” in which they struggle to escape
a slow growth–poor governance equilibrium. The trap is further amplified by political instability,
violence, corruption, and insecure property rights, thereby hindering economic growth and
development. Poverty is particularly pronounced in countries that are afflicted by fragility or
conflict—including those with significant natural resource wealth—but this difference has
narrowed since 2000 (figure 2.14).

Although there are regional differences in extreme poverty, urbanization constitutes a common
theme for poverty reduction. Only 41 percent of Sub-Saharan Africa’s population lived in an
urban area as of 2020, where poverty rates were less than half as high as in rural areas (figure 2.15,
panel a). Due to its large share, rural poverty reduction drove overall total poverty reduction in
the first decade of the 2000s. In contrast, poverty rates decreased marginally in rural and urban

A F R I C A’ S P U L S E > 55
 areas in the 2010s, leaving
FIGURE 2.14: Poverty Trends, by Fragility and Resource Wealth Status
poverty reduction solely
70
to continued urbanization
60 (figure 2.15, panel b). This
trend is likely to continue
50
since Sub-Saharan Africa
Poverty rate (%)

39.4
40 is the fastest urbanizing
region in the world, with
30
the urban population
27.2
20 expected to overtake the
rural population by 2035.
10
While urbanization and
0 connectivity of rural to
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
urban areas will play a
Non-resource-rich but FCV Non-resource-rich, not FCV
Resource-rich and FCV SSA resource-rich not FCV
growing role, the extent of
Source: World Bank Poverty and Inequality Platform.
growth in rural areas will
Note: Estimates based on the $2.15 poverty line (2017 purchasing power parity). FCV = fragility, continue to be critical for
conflict, and violence; SSA_RR_nofcv = resource rich non-FCV countries in Sub-Saharan Africa.
poverty reduction.

FIGURE 2.15: Poverty in Urban and Rural Areas in the Africa Region

a. Poverty rates in urban and rural areas b. Decomposition of poverty reduction across urban and rural
areas and shifts in the population
60 5
Change in poverty (percentage points)

54
Urban, 0.8
50 49 Rural, 0.4
0
-1.7
44
40
36 -5 -10.9
Percent

30
23 -10
20 18
-3.9
-15 -1.1
10

0 -20 2004–10 2011–19

2004–10 2011–19
Rural Urban Overall Rural Urban Population shift

Source: World Bank Poverty and Inequality Platform (October 2023).

Note: The values in panel a were calculated using the international poverty line of $2.15/day (2017 purchasing power parity). Due to data limitations, urban
and rural poverty rates were extrapolated based on a subset of countries in the Africa region and adjusted to reflect the overall regional poverty rates.
Panel b is based on a Huppi-Ravallion decomposition (Ravallion and Huppi 1991) using data from a subset of 17 countries with comparable poverty data
for the relevant years of analysis (within three years of 2000, 2010, and 2019).

Growth has been low and inefficient at reducing poverty compared

to other regions
Most of the reduction in poverty occurred on account of the level growth rather than its
distribution (“redistribution”) (figure 2.16). Growth accounted for 84 percent of the reduction
in poverty between 2000 and 2010, whereas redistribution accounted for the remaining 16
percent. As growth slowed between 2010 and 2019, it remained responsible for all the poverty

56 > A F R I C A’ S P U L S E
reduction across the
FIGURE 2.16: Decomposition of Poverty Reduction through Income Growth
region, while increasing versus Income Redistribution, 2000–19
inequality levels limited the
reduction of poverty. Two 0 1.1
-1.4
conclusions emerge from

Change in Poverty (percentage points)

this analysis. First, stronger -5
and more sustained growth -13.4
is necessary for poverty
-10
reduction. Average growth
needs to be around 3
-2.5
percent simply to keep -15

pace with the growing

population. Second, there -20
2000-10 2010-19
are large potential gains
Growth Redistribution
from tackling inequality to
reduce poverty. Source: Calculations based on data from the World Bank Poverty and Inequality Platform (October 2023).
Note: This figure is based on a Datt-Ravallion decomposition (Datt and Ravallion 1992) using data
from a subset of 17 countries with comparable poverty data for the relevant years of analysis (within
Beyond increasing the three years of 2000, 2010, and 2019).

rate of economic growth,

growth also must become more efficient at reducing poverty. A comprehensive analysis of
the period between 1981 and 2021, based on a sample of 575 successive and comparable
growth spells for countries across the world, reveals that economic growth in Sub-Saharan
Africa has been less poverty reducing relative to other regions, measured by the growth
elasticity of poverty. The low growth elasticity of poverty prevails even after controlling for
initial differences in poverty, income levels, and inequality. GDP per capita growth of 1 percent
is associated with poverty reduction of only 1 percent in the region, compared to 2.5 percent
in the rest of the world (figure 2.17). This is worrisome as the limited poverty reduction in
Sub-Saharan Africa since
2000 was driven primarily FIGURE 2.17: Elasticity of Poverty Reduction to Growth, by Region
by growth as opposed to MNA ECA SAR EAP LAC SSA World
0
distributional changes in
income. Moreover, these -1
-1.1
elasticities are even lower
when considering FCV and -2
-2.0
-2.2 -2.2
resource-poor countries in
-3 -2.8
the region.
-3.6
-4
The weak transmission
of growth to households’ -5
consumption is mediated
by inequality. This weak -6 -5.8
transmission is also Source: Wu et al. 2024.
Note: Values in the figure are based on the elasticity of poverty change to growth in household
associated with the quality expenditure and per capita gross domestic product, across all nonoverlapping spells with available
data for each country, between 1990 and 2019 (limited to cases with poverty rate > 2 percent and
of growth as reflected in winsorizing to remove outliers). EAP = East Asia and the Pacific; ECA = Europe and Central Asia;
LAC = Latin America and the Caribbean; MNA = Middle East and North Africa; SAR = South Asia;
lower levels of human SSA = Sub-Saharan Africa.

A F R I C A’ S P U L S E > 57
 capital development, weak structural transformation, and low economic diversification. Higher
net primary enrollment rates and youth literacy are associated with a stronger transmission
from per capita GDP growth to change in poverty (Wu et al. 2024). Similarly, higher levels of
electrification, safe drinking water, and basic sanitation amplify the effect of economic growth
on poverty. In contrast, higher shares of employment in agriculture and greater natural resource
dependence are associated with a weaker link between GDP growth and average household
welfare. Structural change has occurred mainly from low-productivity jobs in agriculture to
low-productivity jobs in services, whereas the majority of the population in Sub-Saharan Africa
is still reliant on agriculture. Moreover, the structural shifts in employment that have occurred
have not brought about the expected boost to labor productivity, as Africa’s economic growth
is dominated by low-
FIGURE 2.18: Inequality in Sub-Saharan Africa
productivity services.
Poverty reduction in the
a. Average Gini coefficient, 2011–19 (unweighted)
50 region requires higher and
50
stable growth and a higher
40
40 responsiveness of poverty
to growth. Key to both
30
30 objectives is leveling the
playing field by tackling
20
20 structural inequalities.
10
10 Inequality underpins
0 both low economic
0 ECA SAR MENA EAP AFR LAC
ECA SAR MENA EAP AFR LAC growth and low
b. Inequality and economic output: Countries in Africa
responsiveness
compared to other regions, 2000–19 of poverty reduction
70
70 to growth
65
65 Sub-Saharan Africa
60
60 stands out for its high
55
55 and persistent levels of
coefficient

50
Ginicoefficient

50 income inequality, which

45
45 are second only to those of
40
the Latin America and the
Gini

40
35
35 Caribbean region (figure
30
30 2.18, panel a). More than
25 half of the countries in
25
20 Sub-Saharan Africa with
20 5.5 6.5 7.5 8.5 9.5
5.5 6.5 7.5 8.5 9.5
Log of GDP per capita (constant 2015 US$) inequality data have a
Log of GDP per capita (constant 2015 US$)
Gini index higher than 40.
Others AFR Poly. (Others) Poly. (AFR)
Others AFR Poly. (Others) Poly. (AFR) Moreover, countries in the
Source: Calculations based on data from the World Bank Poverty and Inequality Platform (October 2023). region exhibit inequality
Note: Panel b is a scatter plot of Gini coefficients and log of GDP per capita between 2000 and 2019.
To focus on low- and middle-income countries, only observations with GDP per capita less than $14,000 that is 10 Gini points higher
(2015 US$) are included. The fitted lines reflect the best fitting polymials of order 2 for the set of Africa
region countries and for all other countries. AFR = Africa region; EAP = East Asia and the Pacific; on average than other
ECA = Europe and Central Asia; GDP = gross domestic product; LAC = Latin America and the
Caribbean; MENA = Middle East and North Africa; Poly = polynomial trendline; SAR = South Asia. regions for a given level of

58 > A F R I C A’ S P U L S E
GDP (figure 2.18, panel b). This includes countries with the highest inequality levels in the world.
In this high-inequality environment, the occurrence of major shocks can push households with
limited access to markets, capital, and basic services into poverty traps.

High inequality in the region is largely structural in the sense that it is not simply the result of
differences in individual talents or effort. As such, structural inequality is detrimental to the pace
of economic growth because it implies that people are not reaching their productive potential.
This has important implications for economic growth, as there is an inefficient allocation of
human resources. In addition, inequality prevents growth from reaching the bottom of the
income distribution and, hence, it is less effective in reducing poverty. Reducing structural
inequalities would lead to a higher responsiveness of poverty reduction to growth and increase
growth itself. Growth alone will not be enough to increase the pace of poverty reduction,
since that would require sustained growth of a magnitude that is unprecedented and nearly
impossible for the region.

Income inequality is rooted in structural inequalities

Structural inequality is the extent to which differences in income across individuals are driven
by circumstances beyond their control, including the results of market and institutional
distortions, as opposed to differences in individual talent or effort. For instance, structural
inequality includes what the literature often refers to as inequality of opportunity, which is
differences between groups due to inherited characteristics over which an individual has no
control, such as location of birth, ethnicity, gender, parent’s education, and socioeconomic
status. These differences lead to accumulating disparities in three distinct stages. First,
these disparities arise when people are building their productive capacities (the pre-market
stage). Their location of birth, gender, or other unalterable characteristics can determine
whether a person has access to schooling and other basic services. Second, when people
engage in productive activities, poorly functioning markets, distortions, and frictions can
systematically limit certain groups’ access to productive income-generating opportunities
(the in-market stage). This leads to an unequal playing field, limiting structural transformation,
and ultimately preventing people from reaching their full potential. Finally, disparities can be
exacerbated or redressed through taxes and social transfers and subsidies (the post-market
stage). Importantly, these stages are not separate from each other but interconnected, with
spillovers occurring from one stage to the other. Inequality in access to quality education
will be compounded by labor market distortions or lack of competition, which could then be
exacerbated by regressive taxes. Similarly, tax incentives or subsidies in the post-market stage
can lead to greater labor market distortions in the in-market stage.

Although measuring the extent of structural inequality is difficult, one method for doing so is
to decompose the portion of inequality that can be statistically attributed to predetermined
attributes outside the control of individuals. By that measure, at least half of the overall
inequality in consumption can be explained by birth characteristics, such as place of birth,
religion, ethnicity, and parental education and sector of employment, in Sub-Saharan African
countries (figure 2.19). These shares are comparable to the numbers in Latin America and South
Asia (Lebow et al. 2024). However, these estimates are a lower bound measure of structural
inequality, as it is likely that there are other circumstances that are not included in the analysis.

A F R I C A’ S P U L S E > 59
 Moreover, distortions,
FIGURE 2.19: Inequality of Opportunity (share of inequality explained by
circumstances, percent) such as monopoly power,
100 which affect the ability of
90 individuals to participate
80 in some markets or benefit
70 from competitive prices,
60 are not captured by this
Percent

50 measure.
40
As such, the high levels
30
of inequality observed
20
10
in Africa are rooted in
0 structural inequalities,
Mali
Niger

Gabon
Ghana
Benin

Malawi
Uganda
Nigeria
Senegal

which not only weaken the

Ethiopia
Tanzania
South Africa

Gambia, The

Côte d'Ivoire
Burkina Faso

Guinea-Bissau

link between economic

growth and poverty
Inequality of opportunity (inherited circumstances) reduction, but also
Residual inequality (effort, choice, etc.)
significantly undermine
Source: World Bank staff estimates based on household budget surveys. economic growth
itself. Three channels
stand out as essential for understanding how structural inequality has undermined Africa’s
poverty reduction. First, structural inequality reduces the region’s growth by constraining the
productive capacity of households and narrowing the pathway of upward mobility across
generations. Second, structural inequality arises from market and institutional distortions that
affect the extent to which these productive capacities are utilized. To the extent that human
resources are not efficiently allocated to their productive potential, structural inequality has
direct implications for the composition of the region’s growth itself—Africa’s lack of economic
transformation is partly attributable to structural inequality. Moreover, the lower levels of
productive capacity of households and economic transformation also undermine the efficiency
of growth in reducing poverty. Third, taxes and benefits can exacerbate or mitigate structural
inequality and have an impact on poverty.

The experiences of countries such as Bangladesh and Viet Nam showcase how policies
can successfully operate through these channels (box 2.1). While these countries still face
challenges, they have been able to spur growth with poverty reduction, and without
significantly driving up inequality. They are globally known for their innovations in financial
inclusion (for example, microfinance in Bangladesh) and export orientation and participation
in global value chains (Bangladesh and Viet Nam). In Africa, Kenya has experienced spells of
relatively high growth and declining poverty and inequality particularly between 2005 and
2015.27 This progress was supported by market-oriented reforms and progress in pre-market
outcomes such as education and health.28 Since 2015 the link between growth and the pace of
poverty reduction has weakened due in large part to factors related to the performance of the
labor market and households’ resilience to frequent and multiple shocks (World Bank 2023).

27 Driven by strong growth among the bottom 40 percent of rural households, the Gini index declined from 0.45 in 2005/06 to 0.40 in 2015/16.
28 Kenya achieved the highest Human Capital Index (HCI) score in mainland Sub-Saharan Africa. The proportion of households with a primary school-aged child not attending school
declined from 17 percent in 2005 to 5 percent in 2021, thanks to the Government’s efforts to provide free primary education.

60 > A F R I C A’ S P U L S E
BOX 2.1: Country Experiences: Bangladesh and Viet Nam

Bangladesh and Viet Nam are among the fastest growing economies in their respective
regions that have also experienced periods of falling inequality and poverty. Market-oriented
reforms in each of these countries helped to boost growth. In Bangladesh, extreme poverty
measured by the US$2.15 a day poverty line fell from over 40 percent in 1991 to 5 percent in
2022, while the Gini index for consumption remained at about 33 (World Bank Poverty and
Inequality Platform, 2024). Viet Nam eradicated extreme poverty as the international extreme
poverty rate declined from 45 percent in 1993 to 1 percent in 2022. The country has not
experienced major increases in income inequality, with its income Gini index (37 in 2020)
remaining substantially lower than those of other high-growth countries.

The two countries’ development trajectories have been characterized by policy attention to
building productive capacities, particularly investments that equalized access to health and
education services. In Bangladesh, nongovernmental organizations joined the government in
promoting social services to communities, resulting in remarkable progress in the country’s
human development indicators. For example, the mortality rate of children under five
dropped from 36 per 1,000 live births to 25 between 2017 and 2022. Between 2000 and 2016,
the net primary enrollment rate increased from 72 to 93 percent, the fastest growth in the
South Asia region. Improvements in schooling were broad-based and reduced inequalities
between gender and socioeconomic groups. Viet Nam has delivered wide access to basic
services, including broad access to primary education and health care, alongside infrastructure
such as paved roads, electricity, piped water, and sanitation. There is also relatively little
variation in students’ performance scores by socioeconomic status. Viet Nam has also made
great progress in reducing child mortality and child stunting. Among the contributing factors
were a large expansion of health care facilities and workers and implementation of a series of
measures, including special programs targeting women’s and children’s health, promotion of
family planning, and targeted use of community health workers.
The countries have followed differing trajectories in creating opportunities for workers to use
their productive capacities, but in all cases these opportunities were especially important for
the bottom of the distribution. Bangladesh and Viet Nam have been successful in creating
labor-intensive wage employment opportunities for workers in manufacturing by becoming
an attractive destination for foreign direct investment in the aftermath of broad-based trade
liberalization and domestic market reforms. Bangladesh’s reforms in the 1990s enabled
greater private sector participation in trade, finance, and land ownership. These reforms were
accompanied by complementary reforms in agriculture (liberalization of agricultural input
markets and seed sector reforms). Structural improvements between the early 1990s and
mid-2000s provided strong impetus to the rapid expansion of export-oriented, labor-intensive
readymade garment industries. Strong job creation was accompanied by a continuous shift
of labor from agriculture to industry and services and from rural to urban areas. Female
employment increased at a faster pace than male employment. This brought millions of
women into the labor force and increased their economic empowerment. In Viet Nam, initial
reforms included decentralized decision-making, price liberalization, and replacement of
central planning with market-based resource allocation. Trade and foreign exchange controls
were lifted, setting the stage for the country’s reintegration into the global economy. The
relatively equitable allocation of land rights provided the basis for broad-based growth and

A F R I C A’ S P U L S E > 61
 a surge in poverty-reducing agricultural production during the 1990s (World Bank 2016).
Private sector enterprises—both domestic and foreign—have sprung up since the early 1990s
and especially after enactment of the Enterprise Law in 2000, which legalized the creation of
private firms. As a result, inclusive growth continued with the rise of labor-intensive, export-
driven manufacturing and expansion of employment opportunities in the service sectors in
the 2000s. Viet Nam has become a major destination for inflows of foreign direct investment
and a thriving export economy. Underpinned by decisive trade liberalization, today it is one
of the most open economies in the world and strongly integrated into global value and
production chains.
Source: Elaboration based on review of the literature.

Structural inequalities in building productive capacity

Structural inequality in the pre-market phase reflects income inequality arising from disparities
in building people’s productive capacities and can be measured in several ways. One approach
is to focus on children and account for access to services using the Human Opportunity Index
(HOI). This is a composite indicator combining two elements: (1) the level of coverage of basic
opportunities for human development, such as access to education, clean water, sanitation, and
electricity; and (2) the degree to which the distribution of those opportunities is conditional on
children’s circumstances. The latter is measured by the dissimilarity index, which penalizes the
HOI for unfairly distributed access to services. This penalty implies that if the HOI is below the
coverage rate, then there are inequalities in access to services.

Although there have undoubtedly been improvements in the coverage of access to basic
services in Sub-Saharan Africa over the past two decades, these remain highly unequal. For
instance, coverage of educational opportunities is still below universal, especially in FCV
countries. Access to education is limited, with an average of 46 percent of children finishing
primary school on time. Moreover, it is unequal, as the average HOI is only 39 percent.
Access to basic services is highest for water (HOI 66 percent), compared to electricity (HOI
36 percent), which is
FIGURE 2.20: Average Contributions of Circumstances to Inequality of better than improved
Opportunities (percent)
sanitation (HOI 27 percent).
Critically, inequality in
access to services is
Consumption heavily influenced by the
Number per capita
19% circumstances in which a
of children
5% Location child is born, suggesting
Child’s gender (region/urban) that structural inequalities
3% 49%
Head of household are prevalent early in the
(education/gender)
24% pre-market stage. Figure
2.20 decomposes the
average contributions to
the dissimilarity index,
Source: Calculations based on data from the World Bank Global Monitoring Database.
which is a measure of

62 > A F R I C A’ S P U L S E
structural inequality at the pre-market stage, or inequality of opportunity. On average, a child’s
location accounts for around half of the dissimilarity index, especially in resource rich countries
where regional disparities account for 54 percent of the dissimilarity index.

These results point to high levels of structural inequality, and evidence suggests that these are
persistent enough to limit intergenerational mobility. For example, prior to the expansion of
access to schooling, the probability that a child in Sub-Saharan Africa surpassed her parents’
education was the lowest among all regions, and it was especially low in FCV countries.
Moreover, while girls lagged boys until the 1980s, this gender gap largely closed around the
world but remained significant in Sub-Saharan Africa. In addition, the correlation between the
level of education of a child and that of her parent is high in Sub-Saharan Africa, second only
to South Asia. This implies that structural inequalities today can worsen inequality tomorrow,
in turn affecting growth and the elasticity of growth to poverty reduction. This can happen
because inequality of opportunities in building human capital can have lifelong consequences
for earnings and create persistence across generations.

Structural inequalities arising from the use of productive capacities

People utilize their productive capacities in firms or farms to earn income. Structural inequality
is the income disparity that arises due to distortions that affect the performance of firms
and farms. Market imperfections and institutional distortions have the power to limit the
productivity and earnings of some workers, firms, and farms, leading to an uneven playing field
where the most talented or most efficient is not necessarily the most profitable. Market frictions,
weak enforcement, inadequate market regulation, and corruption decrease the efficiency of
economic activity and shape the distribution of earnings. Market imperfections and institutional
distortions not only shape how individual productive capacity is used and the returns to that
productive capacity, but also the structure of the economy itself as evidenced by the type of
sectoral structural transformation in the region. They also misallocate labor and capital across
producers toward low-productivity activities, thus reducing aggregate output. Distortions also
affect the size distributions of firms and farms. Correcting distortions can therefore reduce
poverty and inequality, boost growth, and affect the size/scale of firms and farms.

Sub-Saharan Africa exhibits one of the highest labor force participation rates, at 68 percent,
but around half of all workers are engaged in family farms and nonfarm household enterprises,
where opportunities are limited. Workers at the lower end of the distribution are engaged
mostly in agriculture, while wage employment is most prevalent for the top decile (figure 2.21).
Only a few workers are employed in large-scale establishments (figure 2.22), which are more
likely to be productive and provide ample earning opportunities. The landscape of firms in Sub-
Saharan Africa is dominated by many small-scale enterprises, thereby limiting the potential for
economies of scale.

A F R I C A’ S P U L S E > 63
 Market imperfections and
FIGURE 2.21: Share of Income from Agriculture, Household Enterprises, and
Wage Jobs, by Consumption Deciles institutional distortions
mean that firms and farms
60
face pervasive credit
50 constraints. For instance,
farmers in Kenya sell right
40 after the harvest, when
prices are lowest, to meet
Percent

30
their immediate cash needs
20 rather than waiting for
prices to go up (during the
10 lean season), due to lack of
credit, thus considerably
0
Poorest 2nd 3rd 4th 5th 6th 7th 8th 9th Richest reducing farmers’ incomes
and contributing to large
Wages HH enterprises Agriculture
Remittances Other None seasonal price variations
(Burke, Bergquist, and
Source: Calculations based on Living Standards Measurement Study surveys in Ethiopia, Ghana,
Malawi, Nigeria, Tanzania, Uganda, and the West African Economic and Monetary Union. Miguel 2019). Most own-
Note: Household enterprises include own-account workers. HH = households.
account workers and
FIGURE 2.22: Firm Size and Employment Distributions in Sub-Saharan African household enterprises rely
Countries and the United States (percent) on their own resources,
100 resources from family and
90 friends, or informal sources
80 to obtain the capital to start
70 up their businesses. Only
60 about one in 10 firms with
50
85 87 80 92 fewer than 19 workers relies
40
on bank financing. Credit
30
20
52 market constraints could
10 result in potentially high-
0 return investments not
Burkina Faso Cameroon Ghana Rwanda United States being realized.
1-4 5-9 10-19 20-99 100+ workers
Source: Abreha et al. 2023, based on establishment census data and United States Business
Similarly, access to product
Dynamics Statistics.
Note: The employment distributions for countries in Sub-Saharan Africa are based on census
markets is constrained,
data covering both registered and unregistered business establishments, across all sectors in the
economy. Year coverage: Burkina Faso (2015), Cameroon (2008), Ghana (2013), Rwanda (2013), and
which prevents firms and
the United States (2013).
farms from scaling up their
production. In particular, the
lack of connectivity and market integration means that markets are segmented, allowing firms or
farms with market power to capture benefits, contributing to income inequality. Studies from the
Africa region consistently find spatial differences in prices of imported goods (food and nonfood)
as well as nontraded agricultural staples, indicating that markets are not well-integrated and
the retail prices of products are affected by distance (Fackler and Goodwin 2001; Abdulai 2006).
For instance, trade costs are four to five times higher in Ethiopia and Nigeria than in the United
States, due to poor road infrastructure, low competition in the transportation sector, topography,

64 > A F R I C A’ S P U L S E
and insecurity (Atkin and
FIGURE 2.23: Main Customers for Own-Account Workers and Household
Donaldson 2015). As a result, Enterprises
most African enterprises 100
sell locally, mostly to nearby 90
consumers, and few firms 80
70
are exposed to global 60

Percent
markets through exports 50 91 77 88 74 94 93 93
(figure 2.23). 40
30
20
Costly job search, high
10
transport costs, and lack 0
Benin Côte Guinea- Mali Niger Senegal Togo
of information together d’Ivoire Bissau
with costly screening of Local Market or business Other
potential workers also create Source: Calculations based on household surveys.

frictions in the labor market, Note: Values are based on own-account workers and household enterprises.

which prevent workers

from accessing productive opportunities. Given the high rates of labor force participation, labor
market frictions determine where people work—which sector, what type of contract, and what
type of firm or farm. For instance, high commuting costs meant that workers who lived further
from the center of Addis Ababa had less favorable employment opportunities compared to
similar workers located close to the center (Franklin 2018). Small firms in Ghana that participated
in an apprenticeship placement program grew their revenues and profits because the program
reduced the firms’ cost of screening workers (Hardy and McCasland 2023).

At the macro level, low legal certainty, weak state capacity, and lack of competition have strong
effects on the functioning of markets, with implications for inequality that are unrelated to
individual effort or talent.
Global analysis of World
FIGURE 2.24: Product Market Regulations in Sub-Saharan Africa (higher
Bank and Organisation for values indicate greater restrictions)
Economic Co-operation State control
and Development 3.5
3
indicators of product 2.5
market regulations suggests 2
1.5
that barriers to competition 1
in product markets tend 0.5
Barriers to
to be higher in African Overall PMR 0
entrepreneurship
countries, due to a high
degree of state involvement
in markets, legal and
administrative barriers to
entrepreneurship, as well Barriers to trade and investment
as barriers to trade and
investment (figure 2.24). Kenya Senegal South Africa OECD average
In this environment, it Source: World Bank and OECD indicators of product market regulations.
Note: The time period is the latest available year between 2013 and 2018. OECD = Organisation for
is comparatively easy to Economic Co-operation and Development; PMR = product market regulations.

A F R I C A’ S P U L S E > 65
 impose market power, which allows powerful firms to set prices above competitive levels and
extract larger profits, with detrimental consequences for workers and consumers. Barriers to
competition also limit innovation and the growth of firms, which in turn limits job opportunities
and the growth process itself.

Tax and benefit policies affect structural inequalities

Inequality can be exacerbated or redressed through taxes and social transfers and subsidies.
Although these fiscal instruments do not directly address the root causes of structural
inequality, they can seek to mitigate the effects of unequal opportunities and market
imperfections on the distribution of income. Moreover, to the extent that investments in
human and physical capital for the next generation need to be financed, fiscal policy plays
an important role in mobilizing tax revenue. To measure the extent of fiscal redistribution,
country-level fiscal incidence analysis can be used to assess the level of inequality before
taxes, transfers, and subsidies (referred to as market income inequality); after direct taxes and
transfers (disposable income inequality); and once indirect taxes and subsidies are accounted
for (consumable income inequality).

A first insight from fiscal incidence analysis across 20 countries in Sub-Saharan Africa is that
market income inequality is higher in countries in the region than in countries in other regions
with comparable levels of income (figure 2.25). This highlights the high levels of inequality in
the pre- and in-market stages. A second insight from the analysis is that the combined effect
of taxes, transfers, and subsidies leads to a reduction in inequality that is higher than in non-
African countries with comparable levels of income. This is a testament to the redistributive
efforts in the region, even though lower income countries have relatively less to redistribute.
However, the level of
FIGURE 2.25: Fiscal Redistribution in Africa inequality after this fiscal
effort is still higher than
70
the pre-fiscal level of
high inequality

65
inequality in other regions.
60
Therefore, although more
55 can be done to improve
Gini index

50 the progressivity of fiscal

45 policy, that alone will
be insufficient to tackle
low inequality

40
35 structural inequality in
30
the region.
HIC&UMIC

LMIC

LIC

HIC&UMIC

LMIC

LIC

NRR

RR

NRR-FCV

RR-FCV

A third insight from the

incidence analysis is that
Non-AFR AFR AFR
while taxes, transfers, and
Market income Disposable income Consumable income subsidies reduce inequality,
Source: Estimates based on data from studies conducted by the World Bank and the Commitment to they do not reduce poverty.
Equity Institute, Tulane University.
Note: AFR = Africa; FCV = countries affected by fragility, conflict, and violence; HIC&UMIC =
This is because the poor
high-income and upper-middle-income countries; LIC =low-income countries; LMIC = lower-middle-
income countries; NRR = non-resource rich countries; RR = resource rich countries. can pay more in taxes
than they receive in cash

66 > A F R I C A’ S P U L S E
benefits, even if taxes are higher for the rich. While the poor also receive in-kind benefits in
the form of education, health, and other services, these benefits do not solve their immediate
consumption needs. As a result, poverty rates are higher after taxes and benefits in most
African countries for which fiscal incidence analysis is available (figure 2.26). Poorly targeted
subsidies and limited social assistance are unable to compensate poor African households for
the indirect taxes that they pay, even after accounting for the fact that low-income households
largely purchase goods in informal markets. This highlights the fact that fiscal policy design can
be improved to limit the impact on the poor, particularly in middle-income and resource rich
countries. Although it would be unrealistic to expect the poorest countries to undertake more
redistribution, given their very limited tax bases and high levels of poverty, the same is not true
for middle-income countries and some resource rich countries. In these settings, it may be
possible to raise domestic revenue with well-designed taxes on the nonpoor while at the same
time protecting the poor through better targeted social assistance.

FIGURE 2.26: Impacts of Taxes and Transfers and Subsidies on Poverty

4
Change in poverty (p.p.)

-2

-4

-6
Mauritius (2017)

South Africa (2015)

Namibia (2016)

Non-SSA HIC&UMIC

Angola (2018)

Senegal (2019)

Ghana (2023)

Comoros (2014)

Zambia (2015)

Eswatini (2017)

Lesotho (2017)

Tanzania (2018)

Benin (2019)

Kenya (2015)

Côte d’Ivoire (2019)

Non-SSA LMIC

Guinea (2019)

Niger a/ (2014)

Mali a/ (2014)

Uganda (2016)

Mozambique (2020)

Burkina Faso a/ (2014)

Non-SSA LIC

HIC&UMIC LMIC LIC

Direct taxes and transfers Indirect taxes and subsidies Total poverty increase
Source: Estimates based on data from studies conducted by the World Bank and the Commitment to Equity Institute, Tulane University.
Note: HIC&UMIC = high-income and upper-middle-income countries; LIC =low-income countries; LMIC = lower-middle-income countries; p.p. =
percentage points; SSA = Sub-Saharan Africa.
a. Pensions are treated as government transfers.

A F R I C A’ S P U L S E > 67
 Section 3. Policy Implications
Recent developments in Sub-Saharan Africa suggest that the post-pandemic recovery in the
region remains fragile and there is an urgency to revive growth. Economic policies need to
foster inclusive growth that is longer and stronger while avoiding hard landings. Historically,
the inability of the region to sustain growth over longer horizons has resulted in Sub-Saharan
Africa falling behind the rest of the global economy. Growth in the region has been unstable,
with shorter and weaker expansions followed by slightly longer and larger recessions relative to
other world regions. Economic expansions have been driven by factor accumulation—including
natural capital—rather than total factor productivity, while economic contractions have been
driven by inefficiencies in the allocation of factors of production. Moreover, fragility and conflict
as well as reliance on natural resources have been significant challenges to sustaining growth
and reducing poverty. Growth is weakly transmitted to household incomes, making it inefficient
in reducing poverty in Sub-Saharan Africa compared to other regions.

This issue of Africa’s Pulse argues that structural inequalities are at the root of the weak
transmission of growth to poverty reduction and contribute to low growth. Structural
inequalities in Sub-Saharan Africa are driven by wide-ranging factors, and addressing them
requires multisectoral actions. The factors include market failures (such as in credit markets
as well as lack of competition), inadequate and inequitable public investment (in education,
health, and infrastructure, including roads and electricity), small market size (low population
density and limited market integration), and high and uninsurable risks (including climate
change and conflict). The scope for using fiscal redistribution policies to close welfare gaps is
limited, given the scale of needs relative to the fiscal space that is available in most countries.
Therefore, reducing inequality cannot simply rely on fiscal redistribution policies. It requires
addressing both the structural drivers of inequality in people´s ability to build their productive
capacities, and market and institutional distortions that limit people’s ability to use and benefit
from those productive capacities.

Addressing structural inequality requires policies to create a level playing field and enhance the
productive capacity of the disadvantaged. Identifying and prioritizing the policies that do so will
promote equity and economic growth instead of trading off one for the other. It is impossible
to imagine progress on poverty reduction without macroeconomic stability.29 Adhering to
monetary fiscal discipline and improving debt management and transparency can lead to lower
borrowing costs and thus generate fiscal savings, which can then be used for development
objectives. Independent central banks are important for politicians from boosting the economy
artificially with stimulus spending prior to an election.30 Political transparency through medium-
term budget planning and publication of fiscal accounts can establish transparency and
institutional credibility in economic management.31 Strong public debt transparency practices
are closely related to improvements in the diversification of the investment base and result in
the buildup of resilient debt portfolios.32 Reaping these benefits involves the adoption of sound

29 Evidence from the economic crises during the 1980s and 1990s shows that the number of people living in poverty increased by as much as 25 percent during large contractions in
output (Farah-Yacoub et al. 2022).
30 Alpanda and Honig (2010); Hiroi (2009).
31 Vicente, Benito, and Bastida (2013).
32 Enhancing data transparency has a favorable effect on countries’ financing conditions, as reflected by lower sovereign bond spreads (Kubota and Zeufack 2020). In contrast, lack of
disclosure of debt data may lead to mispricing sovereign bonds and associated default risks (Horn, Reinhart, and Trebesch 2019).

68 > A F R I C A’ S P U L S E
practices in the operating framework of public debt management and its reporting, public
disclosure of external audit reviews (conducted, for instance, by the General Auditor),33 and
setting up institutional arrangements based on transparency of the roles and instruments for
public debt management.34 Comprehensive, timely, and accurate reporting of the public debt
portfolio could be supported by the development of a consolidated/updated database in a
debt management information system.35

Addressing the drivers of inequality in building productive assets and promoting

intergenerational mobility includes investment in human capital, access to basic services,
and expansion of land registration and secure property rights. Investments in health and
education should focus on early childhood development, where the evidence is strongest. For
instance, recent analysis for Sub-Saharan Africa finds that the combination of teacher training
and ongoing teacher support and the provision of classroom learning materials for students
is most effective in improving learning.36 Increasing learning time, school feeding programs,
and improvements in the process of hiring teachers are also important. For women and girls,
investments in basic education and reproductive health have far-reaching impacts, influencing
factors such as age at first marriage, fertility, and intergenerational poverty transmission.
Similarly, targeting basic water, sanitation, and electricity investments toward underperforming
populations and regions is likely to have strong returns.37 Finally, expanding land registration
and securing property rights are an essential part of pre-market interventions that have large
impacts on ensuring that people can maximize their productive capacity. These actions require
improvements in service delivery through strengthened local capacity.

Addressing the structural inequality in incomes arising from the use of productive assets
requires pro-competition policies, greater connectivity and market integration policies,
anti-discrimination legislation, as well as effective justice service delivery to facilitate market
transactions. Proactively engaging with the private sector to encourage market access, public
investment in connective infrastructure, particularly rural roads, can help to tackle weak market
integration. When complemented with a competitive transport sector, these investments can
yield high returns for rural farmers. In this context, the African Continental Free Trade Area
presents a unique opportunity to expand market access for the private sector. Removing
size-dependent distortions that target small firms could reduce talent misallocation, while
improved justice service delivery can greatly facilitate market transactions between farmers
and input providers or between small and medium-size enterprises and financial institutions.
Finally, a modern yet transparent regulatory framework that is conducive to the establishment
and growth of private firms can be a major step in creating a more inclusive private sector.
Developing organizational structures such as corporations, cooperatives, and partnerships
allows for crucial investment leading to formalized and stable work arrangements, but the
legal frameworks supporting such entities are often cumbersome. Transparent schedules

33 World Bank (2021).

34 IMF and World Bank (2014).
35 IMF (2023c).
36 Gatti et al. (2021).
37 Foster et al. (2023).

A F R I C A’ S P U L S E > 69
 for systematic policy reviews could improve the quality of the regulatory environment
while limiting the extent of regulatory uncertainty. Coupling such reviews with technical
consultations, stakeholder engagement, and studies of best practice could ensure that the
regulatory framework minimizes distortions and properly incentivizes enterprising behavior.

Addressing structural inequalities through progressive taxation systems is essential. Fiscal

policy can help by rationalizing subsidies and increasing the coverage and benefit level of
social assistance programs, while domestic revenue mobilization efforts can be designed
to protect the poor. Efforts to tax high net worth individuals, including through property
taxes, can help. For instance, taxation of land and property can provide effective mechanisms
to support local governments. Adopting low-cost technologies (for example, geographic
information systems and digital maps) and using local para-surveyors can help broaden the tax
base. Valuation methods need to match current or projected capacity to be effective.38 Digital
solutions to property ownership records, billing and payments, and dealing with appeals can
eliminate opportunities for corruption and administrative discretion. Finally, linking taxes to
public investment can help to improve tax compliance.39 Moreover, eliminating value-added
tax exemptions, which largely benefit high-income households, could also yield revenue with
minimal impacts on the poor due to the high levels of informality. Boosting value-added tax
collection may require broadening the tax base rather than increasing the rate.40 A thorough
review of nonstandard exemptions and zero rates might be required, as they tend to distort
consumer and producer choices, discriminate against foreign trade, increase administrative
complexity, and discourage tax compliance.

On the spending side, a measure that is critical for reducing poverty and inequality is targeted
adaptative social assistance, which can significantly improve the redistributive impact of fiscal
policies, while at the same time safeguard against shocks. A utility reform agenda that addresses
energy subsidies and water tariffs, among other things, would improve efficiency, equity, and
environmental sustainability, as these largely benefit higher income households at a very high
fiscal cost, and in some cases with considerable sustainability consequences. For instance,
reforms to boost the performance of energy utilities would require an independent and
transparent setting of cost-recovery tariffs, subsidies to public service objectives (such as rural
electrification), and transparent procurement of contracts with independent power producers.41
Finally, pursuing cooperation between governments in the region could assist with reducing
tax evasion by multinational firms and extractive industries, minimizing the risk of a “race to the
bottom” between countries.

38 In the absence of deep capital markets and adequate local resources, area-based tax value assessment constitutes the simplest form of standardized land/property assessment (for
example, in Ethiopia and Mozambique). Other factors influencing property values (for instance, access to roads and schools) are considered in “points”-based valuation systems (Malawi
and Sierra Leone).
39 Collier et al. (2018); Monkam and Moore (2015).
40 Current value-added taxes in Africa are plagued with exemptions, exclusions, and zero rates on domestically consumed goods and services.
41 Semikolenova, Driscall, and Lee (2021).

70 > A F R I C A’ S P U L S E
Addressing the drivers of structural inequalities calls for country development policy
frameworks that recognize interlinkages, complementarities, and trade-offs across the three
phases of the income generation process. For instance, countries could succeed in improving
the education of their youth, but if market and institutional distortions are not addressed, young
graduates will have no viable work options that use their skills. Similarly, efforts to promote
women’s financial inclusion will be ineffective if women continue to face legal barriers to their
ownership of land and assets that could serve as collateral. Moreover, greater trade integration
without rural connectivity could risk isolating remote rural areas. Accelerating poverty reduction
therefore requires multisectoral and integrated policy solutions. Although no country can afford
to ignore the presence of inequality, and in particular, the presence of structural inequality that
precludes progress toward poverty reduction, prioritizing policies certainly depends on the
context. For instance, for countries affected by fragility, conflict, and violence, the priority should
be on actions that can restore confidence by providing citizen security, jobs, and key basic
services, particularly in the conflict-affected areas.

A F R I C A’ S P U L S E > 71
Appendix: Country Classifications
TABLE A.1: Western and Central Africa Country Classification

Resource-rich countries
Non-resource-rich countries
Oil Metals & minerals
Chad Guinea Benin Gambia, The
Equatorial Guinea Liberia Burkina Faso Ghana
Gabon Mauritania Cabo Verde Guinea-Bissau
Nigeria Niger Cameroon Mali
Republic of Congo Sierra Leone Central African Republic Senegal
Côte d’Ivoire Togo

Note: Since July 2020, for operational purposes, the World Bank Africa Region has been split into two subregions—Western and Central Africa and Eastern and
Southern Africa. The analysis in this report reflects this setup. Resource-rich countries are those with rents from natural resources (excluding forests) that exceed
10 percent of gross domestic product. The words “resource-rich countries” and “resource-abundant countries” have been used interchangeably throughout
the document.

TABLE A.2: Eastern and Southern Africa Country Classification

Resource-rich countries
Non-resource-rich countries
Oil Metals & minerals
Angola Botswana Burundi Mozambique
South Sudan Democratic Comoros Rwanda
Republic of Congo Eritrea São Tomé and Príncipe
Namibia Eswatini Seychelles
South Africa Ethiopia Somalia
Zambia Kenya Sudan
Lesotho Tanzania
Madagascar Uganda
Malawi Zimbabwe
Mauritius

Note: Since July 2020, for operational purposes, the World Bank Africa Region has been split into two subregions—Western and Central Africa and Eastern and
Southern Africa. The analysis in this report reflects this setup. Resource-rich countries are those with rents from natural resources (excluding forests) that exceed
10 percent of gross domestic product. The words “resource-rich countries” and “resource-abundant countries” have been used interchangeably throughout
the document.

A F R I C A’ S P U L S E > 73
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