HESPI NEWSLETTER, Volume XII/No.1/2022, December 2022

The Horn of Africa (HoA) has experienced slow recovery from the challenges of Covid-19, climate change and conflicts impacts, as well as the global effects of the Ukraine war on food and energy prices in 2022. These severe challenges contributed to slower economic growth in most countries, and by more than 2 percentage points decline for the larger economies of the HoA (Ethiopia, Kenya and Uganda).

The prevalent dislocations of insecurity and instability in most of the HoA countries, and the sharp rise in global inflation aggravated already rising food prices and contributed to severe food insecurity and threat of famine in some parts. The surge in inflation thus impacted severely on the most vulnerable communities, and those existing on marginal agro-pastoral lands and the urban poor.

These multiple challenges, particularly the worrisome intensity and frequency of droughts that is increasing in the region, and the insecurity and social instability are the key drivers of the poor economic performance. According to the Famine Early Warning Systems Network (FEWSNET- Jan.2023) report, “the world’s worst acute food insecurity emergency is occurring over the HoA”. Also, with forecasts indicating a potential fifth consecutive failed rainy season in October- December 2022, the already severe humanitarian emergency in the region is expected to further deepen”.

The prevailing climate related crisis is compounded by poor macroeconomic indicators and prospects, including public debt levels that have risen to unsustainable levels, which point to difficult policy choices. Consequently, the near-term outlook is extremely uncertain as the region’s prospects are tied to current unstable developments in the global economy and with a number of countries facing difficult socio-economic and security situations.

Within this near-term challenging environment, the policymakers must implement immediate corrective and sound reform policies, to reduce vulnerabilities to future shocks, build human resilience, and address the combination of low growth, high inflation, prevalent food insecurity, and severe debt distress. Moreover, the region’s future prosperity will depend on high-quality inclusive growth and the implementation of policies to set the stage for sustainable and broad based recovery.

The need to formulate and implement sound policies requires objective assessments and consistent commitment to reforms. It is vital to create and reinforce functional public institutions, design development conducive incentives, and deliver effective economic and social services to the public. It is also essential to enhance regional integration to support economic diversification and promote trade and investment to meet the multiple common challenges facing the HoA region.

Ali Issa (PhD)

Managing Director