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(Ecofin Agency) – IMF Africa Deputy Division Chief Antonio David notes in the October 2024 regional outlook that while African public debt is stabilizing, its cost remains a concern. In one out of four countries, debt repayments consume over 20% of tax revenues, indicating budget pressures.
Ecofin Agency: For the October 2024 economic outlook in sub-Saharan Africa, what improvements have you noticed since last April, and where is there room for progress?
Antonio David: The economic outlook for Africa is gradually brightening, with some policy adjustments starting to yield results. Inflation is easing in several countries; almost half now report more manageable rates. In 2023, many also focused on public finance management—about two-thirds of nations took steps to reinforce their budgets.
Antonio David: “In 2025, we hope to see a slight economic growth acceleration, around 4.4%.”
As a result, debt levels have stabilized, though they remain high at roughly 58% of GDP. On a positive note, the debt is no longer climbing. In July, Cameroon even re-entered the Eurobond market. We also see modest improvements in the current account deficit for 2024, expected to shift from 4.2% to 4.3% of GDP on average across African countries. However, significant vulnerabilities persist, differing from one country to another. Africa is a diverse continent, and in a third of countries—such as Angola, Algeria, and Ethiopia—inflation remains high, with rates in the double digits.
In general, African countries still face challenges in debt repayment. A key indicator here is the debt interest-to-tax revenue ratio, which averages 12% across African countries but hits 20% in a quarter of them, signaling fiscal strain. Foreign currency reserves are also low, often covering less than three months of imports.
Ecofin Agency: What is the broader economic outlook?
Antonio David: In 2025, we expect a slight acceleration in economic growth, to about 4.4%. It’s an improvement over 2024 and 2023, but it’s not yet sufficient to significantly reduce poverty or catch up with wealthier nations and emerging markets. Fiscal balancing efforts are likely to continue, with a projected adjustment of roughly 0.6% of GDP, achieved through both revenue increases and expenditure reductions.
However, these projections are subject to risks—rising social tensions, climate change, natural disasters, global financial instability, the mpox pandemic, commodity price fluctuations, and geopolitical fragmentation all add uncertainties to the forecast.
Ecofin Agency: With high costs for debt refinancing and balance of payments, some countries managed to secure funds in the international financial market at relatively favorable rates. What can we learn from African Eurobond issuances in 2024? How does the IMF plan to help countries strengthen their position in international capital markets to address fiscal challenges?
Antonio David: The return to the Eurobond market is a positive development, signaling slight improvements in global financing conditions and a reduction in borrowing costs. It also reflects the efforts governments are making to adopt more prudent economic policies, effectively acting as a reward for these efforts. Yet, many countries still lack access to external financing, and the interest rates remain above historical averages. Whereas rates once hovered around 7%, some now exceed 10%.
The return to the Eurobond market reflects the cyclical nature of capital flows—more accessible during stable times but elusive during downturns. The IMF serves as a crucial source of emergency financing and a financial safety net globally. We support countries in three main ways: providing economic advice and engaging policymakers in dialog, direct financing, and capacity-building.
Through economic guidance, financing programs, and discussions, we help countries balance economic stability with prudent policy while encouraging sustainable, inclusive growth. To support market access, we promote reforms to improve the business environment, governance, budget transparency, and debt management.
Capacity-building is also essential, especially in enhancing data quality and transparency. Research shows a direct link between transparency in data and borrowing costs, where better transparency often results in more favorable financing terms.
Ecofin Agency: After the rapid mobilization of nearly $60 billion for the region since 2020 to respond to COVID-19, the unexpected mpox epidemic has added complications. With visible impacts from IMF support, what targeted steps would you recommend in your outlook to counteract this epidemic’s adverse effects, which remain concerning in certain areas?
Antonio David: The mpox virus has significantly impacted countries like the Democratic Republic of Congo, where high poverty levels worsen its effects. Public finances are under intense strain, particularly with vaccine costs to curb the virus’s spread. According to the OECD, these fiscal pressures may exceed 1% of GDP. Although the DRC launched a vaccination campaign in October, vaccine availability still falls far short of the three million doses required for effective containment.
In response, we’ve created the Resilience and Sustainability Trust, an IMF initiative designed to help countries address long-term structural challenges affordably. This tool supports reform efforts in crucial areas, and countries could use it to access funding to mitigate these risks.
Ecofin Agency: We see several leaders in ECOWAS and East Africa implementing systemic reforms to mobilize resources and balance their economies. However, these efforts often come with negative short-term impacts, like reduced purchasing power in Nigeria. How can the IMF guide these countries to manage transitional challenges and prevent short-term difficulties from derailing reforms?
Antonio David: You’ve highlighted a critical point for the region. Reforms must be carefully managed to avoid public discouragement and potential social unrest, especially since their benefits often take time to materialize while costs are felt immediately. Our report proposes a four-step approach to help ensure reforms are accepted and effective.
The first step involves clear communication and active consultation with the public. Governments should explain the anticipated benefits of reforms, the risks of inaction, and be open to feedback on minimizing short-term negative impacts.
The second step requires careful planning to implement reforms thoughtfully. This could include measures to soften the impact of price increases by providing targeted support to vulnerable groups or gradually adjusting prices, beginning with products consumed primarily by wealthier segments of the population.
Third, managing public funds transparently and equitably is essential. In Africa, public confidence in state resource management is often low. By improving transparency and fair distribution of resources, governments can help build public trust in the reform process.
Finally, fostering inclusive growth and protecting the most vulnerable are essential components. This might involve job creation initiatives, reducing barriers to business such as limited access to financing and electricity, investing in skill development, and addressing gender inequality. Our estimates show that equal labor force participation between men and women could increase regional GDP by 10% on average.
Ecofin Agency: Côte d’Ivoire has shown resilience against external financial shocks, securing capital at near-concessional rates around 4%. What lessons could other sub-Saharan countries (S. Africa not included) draw from Côte d’Ivoire’s approach, not as a absolute model but as an inspiration for improving their own financial standing?
Antonio David: Côte d’Ivoire provides valuable insights. It has consistently pursued prudent economic policies centered on stability and sustainable growth, managing to reduce its budget deficit from 6% of GDP in 2022 to a target of 3% by 2025 in line with regional goals.
Its resilience is especially notable considering the economic challenges posed by COVID-19 and the Ukraine crisis. A key reform under the IMF-supported program was the introduction of a medium-term revenue mobilization strategy in May 2024, aimed at simplifying the tax system and expanding the tax base. This should significantly boost the tax-to-GDP ratio, supporting better debt management.
IMF-backed programs have also supported other critical reforms, such as enhancing the business environment, promoting transparency and anti-corruption measures, investing in education and health, and advancing financial inclusion. This combination of reforms is largely responsible for Côte d’Ivoire’s recent success in international markets.
Biography: Antonio David is Deputy Division Chief in the IMF’s African Department and Mission Chief for Niger. He previously worked in the IMF’s Western Hemisphere Department and at the Institute for Capacity Development. Before joining the Fund, he served as an economist at the World Bank and also taught at the University of Essex in the United Kingdom. He holds a Ph.D. in Economics from the University of Cambridge. His research covers a broad range of international macroeconomic topics, including fiscal policy, capital flows, financial development, structural reforms, and inclusive growth.
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