## How to Stabilize Africa’s Debt

_IMF News, July 8, 2025_

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**Canonical URL:** [How to Stabilize Africa’s Debt](https://www.imf.org/en/news/articles/2025/07/08/cf-how-to-stabilize-africas-debt)

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## Bibliographic details
- Authors: Athene Laws
- Published: July 8, 2025

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### Overview
- Context: high global uncertainty, tighter global financial conditions, and rising borrowing costs have increased concerns about sub-Saharan Africa’s debt vulnerabilities.
- Main conclusion: Successful debt stabilization requires measures to strengthen public finances and institutions, alongside pro-growth structural reforms and a sound macroeconomic environment.
- Source context: analytical note in the IMF’s Regional Economic Outlook for sub-Saharan Africa using a new data set to analyze when, how often, to what extent, and how debt stabilization was achieved.

### Frequency and nature of debt-reduction episodes
- More than 60 debt reduction episodes (defined as periods of two or more years during which the public debt-to-GDP ratio fell).
- The probability that a country will experience such an episode in any given year is one in four.
- Many episodes occurred amid unfavorable external environments (after the commodity super cycle and in the wake of the COVID-19 pandemic).
- Magnitude and persistence:
  - Most episodes involved a decrease of more than 10 percentage points of GDP.
  - Almost half of those episodes lasted four or more years.
  - Examples:
    - Democratic Republic of Congo’s debt ratio fell by 15 percentage points of GDP during 2010–23.
    - Cabo Verde’s debt ratio decreased by more than 30 percentage points over 2021–23.

### Drivers of successful debt reduction
- Sustained debt reduction typically reflects both:
  - Budgetary consolidation (increase in primary balances).
  - Real economic growth.
- Interaction: Budgetary consolidation is itself more likely when growth is rapid.
- Exceptions: In fragile and conflict-affected states, as well as low-income countries, growth is the predominant driver of many successful reductions in debt.
- Institutional and external conditions that raise the probability, significance, and persistence of debt reduction:
  - A solid domestic institutional framework and a supportive domestic business environment.
  - Buoyant global growth.
  - Low global borrowing costs.
  - Presence of an IMF-supported arrangement (points to importance of international financial and policy support).
- Exchange rate considerations:
  - Exchange rate stability can support successful debt stabilization.
  - Maintaining an overvalued exchange rate can prove counterproductive as it is likely to lower growth and hamper overall macroeconomic stability.
- Example: Mauritius experienced a reduction in the debt ratio of almost 20 percentage points during 2003–08, supported by a favorable domestic and external environment, solid growth, and a stable currency.

### Policy implications and recommendations
- Fiscal adjustment works best when complemented by:
  - Pro-growth structural reforms.
  - Measures to strengthen institutional frameworks.
- Specific fiscal and institutional measures:
  - Well-designed fiscal rules to ensure off-budget fiscal operations do not undermine debt reduction.
  - Sustained budget consolidation to translate into debt consolidation.
  - Macroeconomic stability, including low and stable inflation, to support debt efforts.
- Efficiency in taxation and spending:
  - Seize the opportunity to tax and spend more efficiently.
  - Strengthen fiscal balances in a growth-friendly manner by broadening the tax base.
  - Remove inefficient tax exemptions.
  - Ensure that money is well spent.
- Role of external support:
  - Support from the international community, including technical support and concessional financing, is critical.
  - External support can help countries—especially fragile states and low-income countries—manage difficult trade-offs between short-term macroeconomic stabilization, longer-term development needs, and social acceptability of reforms.

*Athene Laws and Thibault Lemaire are economists, and Nikola Spatafora is a senior economist, in the IMF’s African Department. —This blog is based on an analytical note for the IMF’s Regional Economic Outlook for Sub-Saharan Africa authored by Athene Laws, Thibault Lemaire, Rachid Pafadnam, Nikola Spatafora, and Khushboo Khandelwal.*

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## References

- [SUB-SAHARAN AFRICA REGIONAL ECONOMIC OUTLOOK](https://www.imf.org/en/Publications/REO/SSA/Issues/2025/04/25/regional-economic-outlook-for-sub-saharan-africa-april-2025)
- [HOW TO SPUR ECONOMIC GROWTH IN AFRICA'S FRAGILE AND CONFLICT-AFFECTED STATES](https://www.imf.org/en/Blogs/Articles/2025/06/05/how-to-spur-economic-growth-in-africas-fragile-and-conflict-affected-states)
- [BREAKING THE TREND: DEBT STABILIZATION IN SUB-SAHARAN AFRICA](https://www.imf.org/en/Publications/IMF-Notes/Issues/2025/04/25/Breaking-the-Trend-Debt-Stabilization-in-Sub-Saharan-Africa-566178)
- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/07/08/cf-how-to-stabilize-africas-debt_