The International Monetary Fund (IMF) has raised concerns that the surge in domestic borrowing across African nations is heightening the risk of government debt exposure in banks’ portfolios. In its latest report, “Sub Saharan Africa: Steady Growth Amid Fiscal Challenges,” the IMF highlighted that as governments shift from external to domestic financing, banks are increasingly shouldering the burden of sovereign debt.
Abebe Selassie, Director of the IMF’s African Department, urged governments, including Nigeria, to focus on social protection programs for vulnerable populations. He emphasized that savings from petrol subsidy removals should be redirected toward healthcare and education, rather than used for austerity measures, as investment in these sectors is crucial for long-term growth and social stability.
The IMF report also pointed to inflationary pressures, which, while easing overall, remain above 10% in about one-fifth of African economies. Selassie stressed that governments should prioritize revenue mobilization through improved tax collection and more effective debt management, noting that countries like Ghana, Rwanda, and Tanzania have successfully increased revenue through digitized tax systems and reform programs that build public trust.
Improved debt management, according to the IMF, is essential not only to reduce borrowing costs but also to attract investment. Transparent debt data, credible institutions, and stronger oversight can support access to innovative financing solutions, such as blended finance and debt-for-development swaps, which link borrowing to social and environmental outcomes.
Finally, Selassie highlighted that reforms should combine technical improvements with visible enhancements in public service delivery. Citizens are more willing to pay taxes when they see money spent responsibly, making transparency, accountability, and anti-corruption measures crucial. Properly implemented, these strategies can help African nations build more resilient and inclusive economies amid ongoing fiscal challenges.
source: The nation