The International Monetary Fund has warned that if geopolitical tension persists, sub-Saharan African nations could lose $10 billion in foreign direct investments as well as market access.
Nairametrics reported that according to IMF, in an essay that was released on May 1st, countries in sub-Saharan Africa would be hurt by rising import costs or would even lose access to important export markets as a result of an escalation of geopolitical tensions, potentially having an influence on half of the value of the region’s international trade.
The IMF also noted that sub-Saharan Africa would suffer the most if the globe were divided into two separate commercial blocs centered around China or the United States and the European Union
The sub-Saharan African countries have benefited from economic and trade alliances with new economic partners, primarily China, according to the IMF, but these alliances have also increased the vulnerability of these nations to global shocks, such as disruptions from the surge in trade restrictions following Russia’s invasion of Ukraine.
The IMF said: “If capital movements between trade blocs were interrupted because of geopolitical concerns, the losses might increase. According to an average projection for 2017–19, the region could lose an estimated $10 billion in foreign direct investment and official development assistance inflows, or around 0.5 percent of GDP annually.
“Long-term, the decline in FDI could potentially obstruct crucial technological transfer.”
According to the IMF, sub-Saharan African countries would do better if only the US/EU severed connections with Russia and the latter continued to engage in open trade. If this were to occur, trade flows would be redirected in the direction of the rest of the globe, opening doors for new collaborations and perhaps enhancing intra-regional commerce.
