The IMF has said the ongoing war in Ukraine would lead to increased living and transport costs in most countries in Sub-Sahara Africa.
In its April 2022 Outlook for Sub-Sahara Africa, the International Monetary Fund (IMF) said economic recovery in Sub-Saharan Africa is now under threat from adverse effects of the Russian-Ukraine conflict.
For Oil importing African countries, the region could see its fuel import bill spike by almost $ 19 billion, while those with weaker economies could see an 0.8% deterioration in fiscal balances.
A protracted conflict, the IMF warns, could hit Sub-Saharan Africa severely since the region imports about 85% of its wheat from either Russia or Ukraine.
Foodstuffs comprise 40% of the Sub Sahara region’s consumption basket, and imports represent a crucial hedge against local harvest shortfalls.
In this context, the spillover of high global food prices to domestic food prices in Sub Sahara is relatively high, at over 30 per cent. The impact is severe in countries such as Ethiopia and Kenya, where imports of staples are significant.
Russia is considered a major producer of fertilizers and natural gas- a key input to fertilizer production, so an extended conflict will likely lift overall agricultural costs.
The IMF said the global economic shock triggered by this conflict is hitting Sub Sahara Africa when most countries’ ability to respond to it is minimal or nonexistent.
Most notably, the Fund said surging oil and food prices are straining the external and fiscal balances of commodity-importing countries and have increased food security concerns in the region.
IMF report talks about the Ukraine conflict as the new shock for Sub Sahara
The IMF report said Sub-Saharan Africa’s direct links with Russia and Ukraine are relatively modest.
While the region’s 8 net oil exporters and producers of critical commodities such as Gold, Copper, Diamonds and Palladium may benefit from higher prices and increased sales, the region’s remaining 37 non-oil exporting countries will be hard hit by the Ukraine conflict.
The negative impact of the Russian-Ukraine conflict will be transmitted in the form of higher oil and gas prices- resulting in a significant negative terms-of-trade shock—which will worsen trade balances, increase transport and living costs, and deteriorate fiscal balances, particularly for those countries with fuel subsidies such as Kenya.
Some countries may, however, benefit from the Ukraine conflict.
For instance, Nigeria, Senegal, Mozambique, and Tanzania have the largest proven natural gas reserves in Sub-Sahara Africa region.
These African countries may face more robust export demand from Europe, especially given the European Union’s recent decision to classify gas as sustainable.