What fiscal plans should SSA put in place to tame pandemic?

The International Monetary Fund (IMF) has emphasized the importance for governments around the world to start planning a return to more sustainable budgets with policies that can earn the trust of investors. This comes after an unprecedented fiscal stimulus was deployed to combat the effects of the COVID-19 pandemic. Vitor Gaspar, the Director of Fiscal Affairs at the IMF, shared insights on this matter in an interview with CNBC Africa. Gaspar highlighted that in advanced economies, there has been a noticeable improvement in economic conditions. The substantial fiscal support provided in 2020 and continued into 2021 has been unprecedented. While economic recoveries are underway, some countries have recently experienced a slight slowdown. The IMF projects that advanced economies will gradually return to their pre-pandemic paths over the medium term. Fiscal policy is expected to mirror the recovery in economic activity, with primary deficits and spending levels returning to pre-COVID-19 levels. However, the situation is starkly different in low-income developing countries. These nations did not witness a significant increase in public spending in 2020 and 2021. Their response to COVID-19 primarily focused on healthcare and supporting vulnerable groups and businesses. To maintain fiscal stability, these countries had to reprioritize spending, leading to more stringent trade-offs compared to advanced economies. Looking ahead, the IMF projects a persistent gap between economic activity and pre-COVID-19 projections in these countries, creating long-term financing challenges that could hinder sustainable development goals. Gaspar addressed the disparity in access to COVID-19 vaccines between rich and low-income countries. Advanced economies have largely vaccinated their populations, while the vaccination rates in many low-income countries, particularly in Africa, remain low. He stressed the urgency for global action to address this 'great vaxxine divide' and the 'great financing divide.' The IMF, World Bank, and World Health Organization support a plan to vaccinate at least 40% of the population of all countries by the end of the current year and 70% by mid-2022. In terms of fiscal policy recommendations, Gaspar underscored the need for tailored policy advice that considers each country's specific circumstances. Factors such as access to vaccines, economic dependencies, and financial constraints must be taken into account when offering guidance. At the same time, there is a growing emphasis on countries adopting credible monetary and fiscal frameworks to guide their long-term policy decisions. Gaspar highlighted a chapter in the IMF's fiscal monitor that delves into the importance of credibility in these frameworks. As governments navigate the complexities of fiscal policy in the post-pandemic recovery phase, the IMF's guidance on sustainable budget planning and tailored policy responses will be crucial in ensuring economic stability and growth.