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ECA discusses African Middle Income Countries’ challenges and solutions to accelerate sustainable growth despite obstacles

4 December, 2023
ECA discusses African Middle Income Countries’ challenges and solutions to accelerate sustainable growth despite obstacles

Rabat, 4 December 2023 (ECA) – The ECA Office for North Africa, in partnership with the Moroccan Ministry of Foreign Affairs, African Cooperation and Expatriates, held on Tuesday, November 28 a webinar on: “Addressing Gaps and Challenges in Africa’s Middle-Income Countries.”

The meeting took place in preparation for the international conference on middle-income countries scheduled in Marrakech on 5-6 February 2024 and scheduled to be jointly organized by Morocco in its capacity as Chair of the like-minded group for Middle-Income Countries, ECA and UNDP. The webinar provided policymakers, development practitioners, and academics with a platform to share their experiences and views on two critical challenges that African Middle Income Countries (MICs) are currently facing:

1)    The issue of strengthening human capital, given that the lack of human capital is a key aspect of the middle-income trap. To overcome the trap, countries will need to shift to innovation-driven growth, which in turn requires adequate human capital. Discussions thus focused on the improvements needed for African countries to be able to facilitate the development of new sectors, promote sustainable structural transformation, and seize the opportunities provided by the fourth industrial revolution to achieve high-income status.

2)    The overwhelming public debt issue: As multiple crises have brought about rising debt stock and costs and less favourable financing conditions for MICs compared to other countries, the speakers discussed the options and reforms, including debt restructuring, that can provide the countries with enhanced fiscal space while reducing the risk of debt crisis.

At the end of the session, Zuzana Brixiova Schwidrowski, Director of the ECA Office in North Africa, summarized the key points of the discussion:

Regarding human capital, it is important for countries to focus on the skills of the future and address new forms of education. New technologies must determine the 'how,' 'what,' and 'who' of training to increase MICs’ ability to escape the middle-income trap, which in North Africa was activated at lower levels of income than in Asia despite heavy investments in education, she explained.

Regarding MIC debt management, liquidity is currently a key issue given the elevated borrowing costs caused by higher, for longer, interest rates on the global financial markets. A priority is therefore  to find innovative solutions such as preventive debt restructuring or innovative sources of financing, provided they are accompanied by reforms, she added.

MICs are presently significant contributors to global economic growth with a third of global GDP and 75 percent of the world's population. In Africa, where more than half of the countries are MICs, they contributed 71 percent of the continent's GDP in 2022 while accounting for about 60 percent of its population.

Despite some differences in key characteristics (e.g. demographics, climate change impacts), African MICs and those from around the world are confronted with similar challenges in their struggle to reach sustainable growth, implement the SDGs and improve their populations’ living standards and well-being.

Many MICs faced with multiple crises since the Covid-19 pandemic have found themselves vulnerable to challenges such as food insecurity, debt burdens and the worsening climate crisis. Halfway towards 2030, most MICs struggle to implement the SDGs (Agenda 2030) including SDG 1 (end to poverty in all its manifestations).

African MICs are presently facing a double challenge: On the one hand, their middle-income status forces them to make significant investments to maintain it - especially due to the negative impacts of climate change. At the same time, their access to investments that can improve their climate resilience is limited by the lack of accessible concessional financing due to their MIC status.

Similarly, while African MICs are facing heavy public debt burdens that limit their ability to invest in the physical and human capital needed to implement the SDGs and Agenda 2063, their access to financing is further limited due to inflationary pressures and high interest rates over longer periods, which further reduces the ability of individuals, businesses, and governments to repay their debts, explained Antonio Pedro, Deputy Executive Secretary of the ECA in charge of Program Support.

"Given their rapidly growing economic weight, it is imperative that all MICs, including in Africa, play a commensurate role in the global economic governance. The African Union seat at the G20 and the decision of the IMF Board to grant Africa a 3rd Chair are important achievements and provide the continent with key platforms to amplify its common voice on key policy issues," he added.

"The recent poly-crisis has accelerated debt increase, making Africa the region most confronted with high risks of over-indebtedness, with 21 countries identified as presenting a high risk of external over-indebtedness or already caught in it," said Abdellah Ben Mellouk, Director of Multilateral Cooperation and International Economic Affairs at the Moroccan Ministry of Foreign Affairs.

It would be appropriate to rethink international development cooperation so as to make it more inclusive and fairer towards middle-income countries, promote an open and innovative dialogue on the multidimensional concept of Development, rethink indicators beyond GDP that can measure development progress, and design innovative cooperation frameworks that take into account the specificities and development needs of this category of countries, he added.

Participants at the webinar “Addressing Gaps and Challenges in Africa’s Middle-Income Countries” included Adnan Mazarei, Senior Non-Resident Fellow at Peterson Institute for International Economics and former IMF Deputy Director; Mohamed El Moctar Mohamed El Hacene, Head of the ESCWA Shared Economic Prosperity Cluster, ESCWA; Anthony Simpasa, AfDB Head of Macroeconomic Policy, Debt Sustainability and Forecasting Division; Rabah Arezki, Head of Research at CNRS and CERDI and Former AfDB Chief Economist and Vice-President; Audrey Chouchane, AfDB Lead Economist for North Africa; Martin Kessler, Executive Director of the Finance for Development Lab; Amal Elbeshbishi and Amandine Nakumuryango, Economists at the ECA Office for North Africa.

Visit the ECA YouTube! channel to watch the webinar in full:

Issued by:
Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Tel: +251 11 551 5826