African economies have managed to weather the energy crisis brought on by the Iran war, but a decline in aid has left the continent vulnerable to future shocks, the head of the International Monetary Fund’s Africa department said Thursday.
The IMF forecasts growth in Africa at 4.5% this year, slightly higher than its earlier estimate, recovering to 5% in 2027. But development assistance for the continent fell sharply last year and is forecast to fall another 12% this year, Zeine Zeidane said at a meeting of the IMF and World Bank in Bangkok.
“That leaves the region with little room to absorb another shock. Renewed disruption to energy supplies, a sharp increase in global risk aversion, or a strong El Nino could all intensify pressures,” he told reporters.
Persisting conflict and insecurity are other drags on the regional economy, posing a threat to food security in some regions.
“Overall risks remain firmly tilted to the downside and the challenges are significant, but so is the region’s ability to adapt and move forward,” Zeidane said.
Many African nations have enacted reforms to improve their economic resilience, and some are benefiting from surging prices for their exports of critical minerals used in advanced technologies such as artificial intelligence.
The IMF has urged those countries to use those windfalls wisely and adopt AI to improve their competitiveness.
Some African finance ministers attending the Bangkok meetings outlined strategies for fostering job creation and sustainable growth.
Mariama Cire Sylla, the minister of Economy, Finance and Budget for the Republic of Guinea, said a railway project linking mines in Simandou to the coast was part of a long-term economic transformation program.
Guinea has rich mineral resources, but half its people live in poverty. The government is banking on the Simandou iron ore project to boost the economy.
“How can we leverage mining to really develop other sectors and diversify the economy?” Sylla said. “It’s really critical because financial resources are scarce. We need to create enclaves of investment. We need to create growth poles.”
Ensuring African countries benefit more from their valuable strategic resources such as gold, cobalt and copper is vital, said Aboubakar Nacanabo, finance minister of Burkina Faso.
Burkina Faso, a major gold exporter, has opened its first gold refinery as its military-led government seeks greater economic sovereignty after severing ties with traditional Western partners.
Governments across West Africa have been moving to reclaim control over their natural resources by rewriting mining codes, banning exports of raw produce and boosting government ownership. Guinea and Ghana recently restricted gold exports. Mali said it was building a gold refinery together with Russia’s Yadran Group and Ivory Coast has announced it will open one next year.
“The first step is to create the value chain,” Nacanabo said, “to create opportunity for our youth.”
The long-term impacts of AI on African economies, both direct and indirect, remain to be seen. But in the coming decade, the IMF estimates that “adoption, adaptation and scaling of AI” could increase economic growth by more than 4% over 10 years, Zeidane said.
“So, it’s not only about who benefits from AI, but the use of AI can actually make a big difference and in particular in sectors like agriculture where you have low productivity today, low yields compared to international yields, but also in education, health, government services,” he said.