A report by the African Development Bank (AfDB), dubbed Africa’s macroeconomic outlook for January 2026, has urged African countries need to build adequate foreign exchange reserve buffers to strengthen exchange rate stability.
The report said they should take advantage of recent improvements in current account balances to rebuild foreign exchange reserves, aiming to reduce vulnerability to external shocks and stabilize exchange rates.
In the near term, it added, policymakers should enhance macroeconomic coordination to manage volatile capital flows, curb excessive import dependence, especially for consumption goods that can be substituted by domestic production, and strengthen export competitiveness.
It said that improving the investment climate—through predictable regulations, efficient foreign exchange markets, and market mechanisms for allocating scarce resources and pricing assets and inputs—will help sustain investor confidence.
“Governments should also work to reduce remittance transfer costs, promote formal channels to unlock additional external resources that can support exchange rate stability and liquidity management, and mobilize resources for investment in growth-creating sectors,” the report said.
On the fiscal side, the report indicated that African countries need to rationalize recurrent spending and improve the efficiency of public spending, including by state-owned enterprises.
Governments need to strengthen fiscal governance by addressing leaks in public resource management and improving transparency and accountability in budget execution, it said.
“To contain spending pressures and mounting debt levels, countries could adopt fiscal rules as guardrails to foster fiscal discipline and establish strong fiscal institutions, such as fiscal councils, to improve compliance.
“Public investment programs need to be progressively restructured and aligned with national development plans to channel resources into productive, labor-intensive sectors, such as infrastructure and agriculture. Better targeting of social transfers is needed to protect the most vulnerable.
“Such reforms will enhance the quality of public spending, create jobs, and promote inclusive and sustainable growth,” the report said.
Source:3news.com
