Tackling Inequality is Necessary for Growth and Poverty Reduction

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Policy Responses

Africa’s Pulse calls for several policy actions to foster stronger and more equitable growth. These include restoring macro-economic stability, promoting inter-generational mobility, supporting market access, and ensuring that fiscal policies do not overburden the poor.

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Governments should adhere to monetary and fiscal best practices such as central bank independence, fiscal rules, fiscal councils. They should implement measures to enhance transparency in budget planning and procurement, and build their technical capacity around debt management and transparency.

African countries should invest in nutrition to reduce stunting in early childhood, for example through school feeding programs, and expand foundational learning and teacher training during basic schooling. They should focus on broadening access to services for under-served populations and regions.

Governments should remove distortions that keep firms from growing and result in the misallocation of people’s skills. They should improve the delivery of justice, so that the rules are better applied and more predictable. And they should proactively engage with the private sector to encourage market access by implementing regional trade agreements such as the African Continental Free Trade Area (AfCFTA) and investing in transport corridors.

Because taxes and poorly targeted subsidies can have an outsized impact on the poor, reforms should focus on more effective and efficient utilities by reforming energy subsidies and water tariffs, so they support access to better services without penalizing the poorest households. Governments can grow their revenues by eliminating VAT exemptions and implementing stricter oversight of new tax expenditures, coordinate and harmonize regional taxes, and focus domestic revenue mobilization on high-net-worth individuals through income and property taxes.

Tackling Inequality is Necessary for Growth and Poverty Reduction

Main Messages

ImageThere are signs of a fragile economic recovery in Sub-Saharan Africa. After bottoming out at 2.6% in 2023, economic growth is expected to reach 3.4% in 2024 and 3.8% in 2025. The recovery is primarily driven by private consumption growth as declining inflation boosts the purchasing power of household incomes.

 

Inflation is cooling in most Sub-Saharan African economies but remains high compared to pre-pandemic levels. The median inflation in the region is projected to fall from 7.1% in 2023 to 5.1% in 2024 and 5% in 2025–26.

 

The risk of debt distress remains high with more than half of countries facing unsustainable debt burdens. In 2023, governments in the region spent over 45% of their revenues on debt repayments and interests, up from 31 % in 2022.  

 

The impact of an uncertain global environment is compounded by increased fragility, conflict, and the impacts of climate change. As a result, an estimated 105 million people in the region were potentially experiencing severe food insecurity as of March 2024.

 

The pace of economic expansion in the region remains below the growth rate of the previous decade (2000-2014) and is insufficient to have a significant effect on poverty reduction. Moreover, economic growth reduces poverty in Sub-Saharan Africa less than in other regions. Per capita GDP growth of 1% is associated with a drop in the extreme poverty rate of only 1% in the region, compared to 2.5% in the rest of the world.

 

African governments must tackle structural inequality to foster stronger and more equitable growth, by restoring macro-economic stability, promoting inter-generational mobility, supporting market access, and ensuring that fiscal policies do not overburden the poor. 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.

Data

Inequality in Sub-Saharan Africa, Compared to Other Regions