The World Bank on Wednesday advised the Central Banks of Nigeria Ethiopia, and Uganda to refrain from unconventional measures that might undermine their monetary policies.
According to the Washington Bank, the measures included “monetizing the fiscal deficit, direct lending interventions, untargeted subsidy programs, and foreign exchange controls.”
The lender emphasised the critical challenge of inflation faced by monetary authorities in the region, particularly in countries struggling with “underdeveloped financial systems, a substantial informal sector, and a lack of coordination between monetary and fiscal policies.”
The organization highlighted the potential consequences, stating, “If monetary and fiscal actions are not adequately coordinated to bring down inflation, the risk of de-anchoring inflation expectations would fuel further inflation, accelerate interest rate increases, and exacerbate the deceleration of economic activity.”
In its Africa’s Pulse report, the World Bank underscored the persistent inflationary challenges faced by most regional countries.
Africa’s Pulse is a bi-annual publication of the Office of the Chief Economist in the World Bank Africa Region. It analyses the continent’s short-term economic prospects, current development challenges, and a special development topic.
The 2023 edition of the report attributed the inflationary challenges to several factors, including “a global demand slowdown, eased supply chain disruptions, lower commodity prices, and stricter monetary policies.”
