East Africa’s economic growth is expected to recover to an average of 4.1 percent in 2021, from 0.4 percent in 2020, according to the latest African Development Bank economic outlook report for the region. . In 2022, average growth is expected to reach 4.9%.

The flagship report, launched on October 28, reviews the socio-economic performance of 13 countries: Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda.

According to the report’s findings, Covid-19 containment measures and global disruptions in supply and demand have hit businesses and livelihoods hard and increased poverty, while political fragility in some countries and limited economic diversification in others were significant obstacles to growth.

The report, on the theme Debt Dynamics in East Africa: The Road to Post-Covid Recovery, notes that the region’s rapid recovery is fueled by sustained public spending on infrastructure, improved performance in the agricultural sector and deepening regional economic integration.

According to the report, as East Africa experiences a transition to a more service-oriented economy, some countries are experiencing deindustrialization.

To accelerate recovery and build post-Covid-19 resilience, the report recommends that countries accelerate structural transformation through digitization, industrialization, economic diversification and the consolidation of peace, security and stability.

In his opening speech at the launch, Somali Finance Minister Abdirahman Dualeh Beileh warned that the pandemic could continue to hamper progress towards inclusive growth.

“The contraction of economic activities, the increase in budget deficits due to high public spending to respond to the Covid-19 pandemic in a context of reduced public revenues, and the depreciation of the exchange rate following the reduction in income exports of raw materials, created risks of over-indebtedness and over-indebtedness in the region in 2020 ”, declared Minister Beileh.

The outlook report predicts a full recovery from 2023, due to the increased deployment of vaccines, the recovery of the global economy, rising commodity prices and increasing economic diversification in the region.

“A combination of policy interventions is needed to accelerate East Africa’s economic recovery and build post-Covid-19 resilience. These include scaling up vaccinations, designing and implementing economic stimulus packages, and stabilizing public debt by addressing debt related to state-owned enterprises, among others, “said Nnenna Nwabufo, director. General of the African Development Bank for East Africa.

She noted that the region’s resilience in 2020 was due to relatively higher economic diversification and swift policy responses from governments to counter the impacts of the pandemic.

Still, Marcellin Ndong Ntah, senior economist at the African Development Bank, warned that risks to the region’s positive outlook remain significant due to uncertainties surrounding the longevity and severity of the pandemic, the slowness in the use of drugs. vaccines, rising world oil prices for non-oil-exporting countries in the region, slow structural transformation, conflict and civil unrest, and climatic shocks and locust plagues in the region.

Emmanuel Pinto Moreira, director of the Bank’s Country Economics Department, said many East African economies continue to need short-term debt relief and funding. external emergency from multilateral lenders. He added that many had received budget support under the Bank’s Covid-19 Response Facility and emergency funding from the International Monetary Fund.

Economic experts present at the launch called for better economic governance, including the clearance of domestic arrears, improved debt management and transparency, and the treatment of debt related to public enterprises.

“For countries with significant external financing risks, innovative financing instruments such as non-debt equity, risk sharing with the private sector, including through guarantees and increased participation of Foreign investors in local currency debt markets should be explored to diversify sources of development finance, ”said Edward Sennoga, chief economist at the Bank. This, he added, will protect the region’s economies from global volatility shocks.

Louis Kasekende, executive director of the Institute for Macroeconomic and Financial Management in Eastern and Southern Africa, stressed that policies aimed at diversifying sources of public finance, improving public revenue mobilization and prioritizing investments in infrastructure will be essential to ensure debt sustainability. “Public debt, if used correctly, can help boost essential services, leading to better economic growth,” he said.

Read the report here.