The April 2026 Fiscal Monitor reveals that the global fiscal gap has nearly closed, yet Africa's picture remains deeply uneven. Several African countries have returned to international bond markets, raising nearly $31 billion since 2025, but at the cost of shorter maturities and higher yields.

In this exclusive interview, Era Dabla-Norris, Deputy Director of the IMF's Fiscal Affairs Department, assesses the real fiscal outlook for sub-Saharan Africa against a backdrop of tightening global financing conditions and declining official development assistance.

She addresses the risks of front-loading sovereign debt refinancing, the role of diaspora remittances, and the growing sovereign-bank nexus that threatens private credit in the region. She also explains why the IMF's call for tax base broadening is not about squeezing households further, but about closing compliance gaps and eliminating inefficient exemptions.

Ecofin Agency: What we've seen is that the April Fiscal Monitor documents the global fiscal gap has virtually disappeared. But what we've seen is that Africa is often treated as a monolithic reality by debt investors — those who are providing the funds. So my question is: we are in the middle of this conflict in the Persian Gulf, but before this reality, which we all hope will reach an end, what was the picture of the fiscal gap in Africa? Who was genuinely closing the gap, and who was having more challenges within the region?

Era Dabla-Norris: First, let me define what we mean by the global fiscal gap. By global fiscal gap, we mean the distance between countries' actual primary balances and the level needed to stabilise debt ratios. That's the gap we're looking at. And what we find in this Fiscal Monitor is that this gap is expected to narrow significantly — from 1.2% of GDP in the five years before the pandemic (2014 to 2019) to just 0.1% between 2024 and 2029. And this gap is really driven almost entirely by higher primary spending and weaker revenue performance.

That's the global picture. When you zoom in on low-income developing countries, including countries in sub-Saharan Africa, the picture is slightly different. Public debt is projected to decline on average from about 48.2% of GDP in 2025 to about 44% by 2031. So if you look at the longer-term trajectory, debt is projected to decline. And while this outlook is definitely encouraging — and much of it is coming from higher real growth in many countries — African countries in sub-Saharan Africa have been doing pretty well on the growth front, and that higher growth has supported stronger fiscal outcomes. But it masks substantial heterogeneity. Within the region, there is significant variation in the extent to which fiscal balances are improving. Let's not forget that many countries continue to remain in debt distress. Let's not forget that foreign aid flows have declined. And for many non-investment-grade, non-frontier market countries, access to financial markets remains very constrained. So there is considerable heterogeneity in fiscal outcomes, future growth prospects, and the availability of financing. And there remains considerable scope to strengthen primary balances across several countries.

EA: Since 2025, until very recently, with the DRC raising $1.25 billion in the international debt market, we have seen several African countries returning to the international bond markets. From our calculations, they have raised almost $31 billion. Some have been successful with attractive interest rates, but some have returned with really high yields. So my question is: how do you see the opportunities for African countries to continue relying on these international bond markets, given that some are facing fiscal space constraints? They cannot raise more taxes, but they still have significant fiscal spending needs from their populations.

Era Dabla-Norris: For the countries that have been able to borrow, it is a good thing — but as you said, it is also a bit of a mixed blessing. Let me make two points.

Firstly, we are seeing a broad rise in sovereign borrowing costs across even the systemically important, large economies. This reflects a combination of factors — domestic fiscal pressures in the US and other advanced economies, as well as external shocks and the uncertainty we have been discussing: geopolitical tensions, trade fragmentation, and heightened policy uncertainty. These are pushing up the term premium. While there was a window where financing conditions had eased, conditions since the war in Iran have begun to tighten again. Global investors are increasingly moving towards safer assets. And one big concern is that, irrespective of what countries in sub-Saharan Africa are doing, the global landscape really matters. Higher term premia in systemically important countries such as the US can spill over to other countries, as we show in the Fiscal Monitor. This can be very damaging, particularly for countries with limited fiscal space and low policy credibility, because it pushes up refinancing costs even if domestic policy does not change much.

Now, for lower-rated emerging-market borrowers — B-rated borrowers, including several African sovereigns — issuance volumes have fallen to about a third of 2017 levels. At the same time, average maturities have shortened from about 16 to 8 years. This sharp decline in maturity suggests that market access is really being maintained by front-loading refinancing risk, rather than measurably improving debt sustainability. So there is a real risk that countries could be vulnerable to further tightening in global financing conditions. Given the uncertainty we're facing, we don't know whether financing conditions globally will tighten further.

Now, for lower-rated emerging-market borrowers — B-rated borrowers, including several African sovereigns — issuance volumes have fallen to about a third of 2017 levels. At the same time, average maturities have shortened from about 16 to 8 years.

My second point is that, on top of these refinancing risks stemming from the external environment, interest payments for many countries have reached historic levels, averaging up to 15% of total revenues in low-income developing countries. This is more than 5 percentage points higher than in 2015. At the same time, official development assistance has fallen from about 1.8 to 1.5% of GDP over the same period. So there is good news for countries that have been able to borrow, but we need to be mindful that front-loading carries risks, and that interest payments are taking a significant chunk of revenues.

In the Fiscal Monitor, we underscore that even in this challenging environment, market access can continue — but it really hinges on credible domestic fiscal frameworks. Countries that have more realistic macro assumptions, clear medium-term anchors, and a track record of fiscal discipline are better positioned to contain spreads and maintain access. Fiscal discipline is an important ingredient in this equation.

EA: We keep talking about this, Era. I know these are tough questions, but African countries have been asked to maintain fiscal discipline, even though many developed countries are not at all disciplined in how they manage their finances. But now we have this war in the Middle East, raising the cost of energy and fertilisers, and it is going to raise the cost of imported goods because maritime transport will be more expensive. While reading the Fiscal Monitor, I still saw this warning about broad-based price subsidies. The IMF is still warning countries against jumping into broad-based price subsidies. But as you may know, in the African region, it is never easy because 60% of the economy is informal, and reliable data is hard to come by. Are you working on alternatives to these warnings?

Era Dabla-Norris: Let me answer your question in three points. I completely agree that many systemically important economies need to get their fiscal house in order. But the important point for emerging markets and developing economies, including in Africa, is that — as the saying goes — when a large country sneezes, the rest of the world catches a cold. Your availability of fiscal space is really conditional on the external shocks that come your way. The Fiscal Monitor makes this point forcefully: countries are subject to spillovers from uncertain market conditions and higher term premia in advanced economies, which means they have less room for manoeuvre automatically, even when the domestic situation is going well.

On top of that, countries in sub-Saharan Africa, like many other parts of the world, have a weaker starting point than existed before the pandemic. We are fundamentally in a different world. Initial conditions are different. The possibility of spillover shocks from large countries is high. There is rampant uncertainty. And there is more limited fiscal space. That is the environment in which all countries — not just in sub-Saharan Africa — are operating.

Having said that, when we consider the current war and energy subsidies, we recognise that this is very challenging for vulnerable households and some firms. But the advice is that in the face of energy price shocks, allowing domestic energy prices to adjust remains the first-best option where feasible. This does not mean an immediate pass-through of negative supply shocks, but rather an established mechanism to smooth the process, preserving price signals without compounding supply constraints.

Many African countries have in place surprisingly modern technologies to support citizens, such as mobile money wallets. Leveraging these ready-to-use digital technologies allows governments to reach the most vulnerable households rather than implementing broad-based mechanisms in an environment of much more constrained fiscal space.

Given that many countries in sub-Saharan Africa have much more limited fiscal space than they did in 2017, 2018, or even 2019, broad discretionary interventions should really be the exception rather than the norm. If governments are going to face pressures to provide support, it should be temporary, narrowly focused on measures that protect the most vulnerable, and scalable back as conditions normalise — rather than open-ended subsidies that are fiscally very costly and, as we know from experience, very difficult to unwind. Many of these subsidies are regressive.

I hear your point about low-capacity settings. But I think the COVID pandemic taught us something important: it is possible to leverage existing mechanisms, however imperfect, rather than building new systems to address shocks. For instance, many African countries have in place surprisingly modern technologies to support citizens, such as mobile money wallets. Leveraging these ready-to-use digital technologies allows governments to reach the most vulnerable households rather than implementing broad-based mechanisms in an environment of much more constrained fiscal space.

EA: It has been documented that diaspora remittances in Africa are almost exceeding both foreign direct investment and official development assistance, given that both have declined. Some countries, like Senegal and Nigeria, have engaged their diaspora through diaspora bonds. But most of the time, the extent to which diaspora remittances can contribute to fiscal consolidation or strengthen fiscal space is not well measured by African governments. How does the IMF see diaspora remittances playing a role in strengthening the fiscal space for African governments?

Era Dabla-Norris: It is very important to recognise that in sub-Saharan Africa and many other developing economies, remittances can be a very important source of income flows. They are fundamentally private transfers between families and households. When remittances are spent on goods and services domestically, they support economic activity and can have important fiscal implications. In many countries, they serve as a safety net for households and families.

When we think about fiscal adjustment and what governments can do, the heavy lifting should come from efforts to mobilise additional revenues — broadening tax bases and improving spending efficiency — rather than from trying to capture remittances directly. In fact, remittances are often a stable and counter-cyclical source of income: when things are going badly in a country, remittances from abroad tend to increase, and vice versa. They can be a very important source of consumption and investment.

With the right policies, countries can leverage their diaspora by reducing remittance costs, building communication strategies, relaxing legal barriers for diaspora investors, and marketing infrastructure bonds — channelling remittances not just into consumption but into investment that supports future growth.

With the right policies in place, countries can leverage their diaspora communities. There are a few practical steps the IMF has outlined. First, countries could reduce remittance costs by improving payment infrastructure, strengthening regulation, and enhancing competition, thereby allowing remittances to reach intended beneficiaries at a lower cost. Second, they could have a sound communication strategy that highlights the benefits of the diaspora and develops these networks — formal or informal — for communities. Third, governments could encourage investment by relaxing legal barriers and capital flow restrictions faced by diaspora members. They could support public investment by marketing bonds that cater to diaspora interests — such as infrastructure bonds. And more broadly, improving the overall business environment and governance can allow remittances to be channelled not just into consumption but into investment that supports future growth.

On diaspora bonds specifically, we always advocate that they be carefully designed, with proper safeguards against tax evasion, to ensure they do not crowd out other domestic funding priorities and align with broader fiscal management practices.

EA: The IMF has increasingly highlighted that borrowing from local commercial banks can have positive effects, yet one significant consequence is the crowding out of financing for the private productive sector. The IMF also argues that strengthening tax administration capacity could help generate additional revenue. However, higher corporate taxes risk making businesses less willing to cooperate with the state — fueling a perception that they are simply working to hand their earnings over to governments. So how do you see African governments breaking out of this double bind: on one side, sovereign borrowing from local banks that leaves those banks with less to lend to businesses; and on the other, raising the tax burden on companies in ways that may drive them to conceal part of their income?

Era Dabla-Norris: The pressures you identify are increasingly relevant. With high external borrowing costs, elevated financing needs, and limited international market access, governments in the region have definitely shifted to domestic financing. Domestic bank holdings of sovereign debt now exceed about 20% of bank assets in sub-Saharan Africa as of 2024, and they have grown faster than in the rest of the world. You are right that this growing sovereign-bank nexus could crowd out private credit and increase financial stability risks. A sharp decline in bond values would weaken bank balance sheets at precisely the time when governments have limited capacity to support distressed banks. That financial stability risk is well understood.

But I genuinely believe that broadening the tax base tends to alleviate rather than exacerbate this constraint. The government has a financing gap and is issuing debt held by commercial banks. If that financing could be done in a less distortionary way — without shakedowns, with the right processes and mechanisms in place — then it could be addressed through revenue mobilisation, as is done in many other parts of the world.

The Fiscal Monitor shows that, with tax gaps at about 5% of GDP in low-income developing countries, well-designed tax administration reforms — not even tax policy changes, not raising rates — can increase compliance and raise revenue by 0.8 to 1.8% of GDP per year. That is significant. These gains come from strengthening core functions: how taxpayers file, how they register. Countries can leverage digitalisation and AI for this. Countries can also rationalise tax expenditures — about 20% of tax revenues in low-income developing economies are effectively given away through the tax system. Closing these loopholes can generate additional revenue without raising statutory rates or placing an additional burden on existing formal-sector taxpayers. Countries in Africa — Nigeria, Rwanda, Togo, and Ghana — have actually pursued reforms precisely along these lines.

At the same time, countries will need to strengthen financial resilience to mitigate risks associated with the sovereign-bank nexus. Priorities include strengthened supervision, disclosures, and stress testing. And deepening local capital markets could also help reduce reliance on the domestic banking system for sovereign finance.

EA: The Monitor has shown that reforms — rather than simply raising tax rates — can bring more taxpayers into the system. And households are frequently identified as under-contributing to personal income tax, which does remain relatively low across many African countries as a share of total tax revenue. But one dimension the Monitor may not fully address is the already heavy burden of consumption taxes — a 20% VAT, steep excise duties, and high customs tariffs. When you add all of this up, out of every $100 a household earns in Africa, the effective tax burden approaches 70%, leaving very little disposable income for consumption, savings, or any further contribution to the fiscal system. So how do you see governments broadening the tax base to include more households, while being mindful that doing so risks further squeezing the already thin margins those households have left?

Era Dabla-Norris: The concern you raise about highly effective fiscal pressure on households is well taken — and I should emphasise this is not just true for sub-Saharan Africa, but for many developing economies more broadly, where corporate income tax and personal income tax collections tend to be very low. But this also underscores the need to clarify what we mean by broadening the tax base in practice.

In many low-income countries, as you have pointed out, simply raising tax rates is unlikely to address the root cause of low revenue collection. Our advice has not been about placing an income tax on poor households. Our advice focuses on broadening the base through two things.

In many low-income countries, as you have pointed out, simply raising tax rates is unlikely to address the root cause of low revenue collection. Our advice has not been about placing an income tax on poor households. Our advice focuses on broadening the base through two things.

First, eliminating inefficient tax exemptions. In most low-income developing economies, including sub-Saharan Africa, tax expenditures amount to about 20% of revenues. These are holes in the tax system — spending done through it. By removing some of these exemptions, you increase revenue and reduce preferential treatment that benefits some sectors or households over others.

Second, when we talk about broadening the tax base, we mean strengthening state capacity and tax administration to ensure better compliance. Compliance is the key aspect — reducing reliance on a very narrow pool of taxpayers. And part of improved compliance is that the public must know that if they pay their taxes, those revenues will be used better and in a way that is more tangible to them. In this Monitor and in past monitors, we have always emphasised that improving the efficiency and quality of public service delivery is absolutely critical. You cannot broaden a tax base and provide poor services to your people. By ensuring that existing revenues translate into better services, governments can reduce the private costs that households currently face for education, health, and infrastructure. We see this as two sides of the same coin: improving compliance and improving service delivery.

My final point is that bringing more firms and workers into the formal economy can expand the tax base without increasing the burden on already compliant taxpayers. Creating incentives for firms and households to formalise is not an instantaneous process, but countries have achieved this over time. It requires reforms that make formalisation more attractive and fundamentally reduce the cost of compliance for households.

Interview By Idriss Linge