The IMF’s October 2025 Fiscal Monitor examines fiscal sustainability and public spending efficiency amid sluggish post-pandemic growth, soaring debt, social pressures, and declining aid to low-income countries in Africa. It asks: how to “do more with less”? Reviving growth requires smarter budget composition and greater efficiency, not higher spending—essential for addressing the constraints faced by sub-Saharan Africa. New datasets (efficiency from 1980, rigidity from 2000) enable cross-country benchmarks. Era Dabla-Norris, IMF Fiscal Affairs Assistant Director, leading the report, shares insights with the Ecofin Agency. 

Agence Ecofin: How does the International Monetary Fund define, measure, and assess what has been called rigidity and efficiency in public spending, and how do these concepts differ between advanced economies and African economies, African countries?

Era Dabla-Norris (IMF): Spending rigidity refers to the challenges that governments face in adjusting the size or composition of public spending in the short term. This rigidity arises from factors such as legal mandates—in other words, obligations to pay for pensions or multi-year commitments—or institutional constraints. While some rigidity supports long-term budgetary planning, excessive rigidity can block necessary reforms. Efficiency, by contrast, refers to how effectively governments convert spending into tangible outcomes, such as improvements in education, health, or infrastructure. The term "efficiency gaps" describes the distance between a country's performance and best-practice benchmarks, given the same level of inputs. These concepts apply uniformly across countries, but their scale differs significantly. For spending rigidity, advanced economies typically see about one-third of spending as rigid, a proportion much lower in emerging market and developing economies, including those in Africa. This difference stems from larger aging populations in advanced economies, which impose more substantial mandates for pensions and healthcare. In terms of efficiency, advanced economies exhibit an average gap of 31 percent. Low-income developing countries, including many in Africa, face an average gap of 39 percent. Thus, the gap is notably higher in low-income developing countries compared to advanced or emerging market economies.

“Excessive rigidity can block necessary reforms. Closing spending efficiency gaps in Africa could substantially elevate long-term output In sub-Saharan Africa, the median efficiency gap for public infrastructure stands at 61%”

It is essential to recognize that, while significant efficiency gaps exist across African countries, substantial variations occur among them. These gaps prove largest in infrastructure and education. For instance, in sub-Saharan Africa, the median efficiency gap for public infrastructure stands at 61 percent, with a minimum of 34 percent and a maximum of 65 percent. This reveals considerable differences even within African countries. Most importantly, the Fiscal Monitor emphasizes that closing these spending efficiency gaps in Africa could substantially elevate long-term output.

Agence Ecofin: In measuring efficiency, how have you accounted for the fact that available resources are minimal? Developed countries raised unimaginable sums via central bank support during challenges, while African countries relied on international aid and limited local markets to maintain external equilibrium.

Era Dabla-Norris (IMF): Consider efficiency through a concrete example, such as education spending. Here, outcomes include measures such as the quality of education or primary school enrollment rates—these serve as key variables. Inputs represent the resources invested. The approach to efficiency focuses on this question: with the same level of resources, can other countries, including low-income ones, achieve superior outcomes? This captures the core concept of efficiency. It does not involve acquiring more resources. Instead, it assesses whether identical inputs yield better outputs. The analysis reveals that, in the context of many low-income countries and emerging market economies, there is considerable scope to achieve improved outcomes using the same number of resources.

Agence Ecofin: Beyond governance, transparency, and investment management issues flagged for Africa, which institutional policies does the released report identify as most critical and urgent for improving public spending efficiency?

Era Dabla-Norris (IMF): The report identifies several critical actions beyond the foundational elements of governance and public investment management. First, budget processes require enhancement, particularly through a medium-term orientation. This approach aligns spending not only with short-term imperatives but also with long-term development goals. Another vital area involves strengthening procurement systems. These systems often harbour significant waste, leakage, and opportunities for corruption. Robust, open, and transparent procurement mechanisms can substantially mitigate such losses. Digitalization and data utilization play a key role in fortifying public financial management systems and informing decision-making. In practice, this means deploying digital tools for budgeting, procurement, and expenditure monitoring to track how funds are allocated and spent. Spending reviews emerge as another powerful instrument for optimizing the use of existing public resources.

“Digital tools for budgeting, procurement, and monitoring can transform how funds are spent. Spending reviews are powerful instruments for optimizing public resources. Integrating payroll systems with personnel databases can eliminate ghost workers”

Even countries in Africa with limited capacity can incorporate practical elements such as benchmark tracking to gauge expected returns, performance indicators to evaluate results, and performance-based budgeting applied to major spending categories. A further beneficial strategy involves aligning public sector wages with those of the private sector. Merit-based hiring and promotions prove essential here, as they help control public wage bills, which typically account for about one-quarter of overall spending in most countries. In low-income developing economies, including those in Africa, integrating payroll systems with personnel databases and conducting regular audits of wage bills can effectively eliminate ghost workers. Collectively, these measures encompass improvements in processes and operational efficiency, enhanced data utilization, rigorous monitoring and auditing, and the establishment of systems to ensure proper expenditures. All contribute to achieving the most favourable outcomes.

Agence Ecofin: Given resource constraints requiring greater efficiency, according to the IMF, where should African countries prioritize for efficiency gains: infrastructure, education, health, or R&D? Or broader: human capital investment versus strengthening productive capital?

Era Dabla-Norris (IMF): The Fiscal Monitor addresses two interconnected elements. The first involves reallocating existing spending more intelligently—shifting resources to areas that enhance the overall productive capacity of economies and elevate citizens' living standards—the second centers on executing that spending with greater efficiency. The optimal allocation mix depends on several key factors, including a country's stage of economic development, its institutional capacity, and the most binding constraints to growth. Ultimately, the goal is to devise strategies that accelerate growth, enhance productivity, and foster more prosperous lives for citizens. For low-income countries, evidence suggests that investments in infrastructure and education often yield the most substantial long-term gains in economic output. Infrastructure investments stimulate near-term growth and employment while laying the foundation for a country's long-term productivity.

“Infrastructure and education yield the highest long-term gains for low-income countries. Efficiency is as vital as allocation—nations that curb waste achieve higher growth even with tight budgets. Reforms must focus on areas where each dollar yields the greatest productivity return”

Education investments build the human capital indispensable for enduring productivity. That said, health investments warrant equal attention, as they underpin worker productivity and resilience—particularly in nations with pronounced gaps in health systems. The Fiscal Monitor emphasizes that spending priorities must align with the specific, binding challenges hindering growth. Reallocation toward those areas holds paramount importance. Yet, efficiency in spending proves equally vital: nations that curtail waste, stem leakages, and refine the targeting of expenditures can secure markedly higher output gains, even within severely constrained budgets. In essence, priorities should target domains where incremental spending yields the highest returns in terms of productivity and growth, while reforms generate additional fiscal space for subsequent priority investments.

Agence Ecofin: Togo, Rwanda, and Brazil—as benchmarks for efficiency in the Global South—illustrate the policy space available to African governments. How do their experiences serve as examples for implementing successful fiscal spending efficiency?

Era Dabla-Norris (IMF): In each of these three cases, governments achieved superior outcomes by employing more innovative spending strategies, rather than relying on substantial increases in overall expenditure. Consider Togo first. In 2016, Togo initiated a comprehensive reform of its public investment management system. Reviewing the results, public spending efficiency rose by five percentage points between 2015 and 2023. This progress resulted from a sequence of targeted reforms, including the adoption of program-based budgeting, the introduction of rigorous cost-benefit analyses for projects before they were included in the budget, upgrades to procurement systems, and enhancements in the transparency of spending. These institutional adjustments enabled Togo to derive greater value from its prevailing resources. Turning to Rwanda, the Fiscal Monitor highlights the country's advancements in education efficiency and digital access. Between 2006 and 2012, Rwanda implemented a series of education reforms, encompassing 9-year and 12-year basic education programs, as well as the "One Laptop per Child" initiative.

“Togo’s reforms raised spending efficiency by five percentage points in less than a decade. Rwanda’s education reforms turned limited resources into transformative results. Brazil showed how social protection and education can work hand in hand to boost equity”

These efforts collectively resulted in nearly universal primary school enrolment and significant improvements in performance. Per-person spending in education increased from approximately $150 to $420—a figure still below the sub-Saharan African average—yet it generated outsized, transformative results. Accountability in spending execution and strategic resource deployment was central to these successes. Brazil provides an exemplary instance of complementary reforms. It integrated social protection with education through the Bolsa Família program, which delivers conditional cash transfers. This linkage increased school attendance rates and reduced dropout rates, particularly among low-income children. By conditioning social protection benefits on education participation and bolstering related spending, Brazil advanced equity and learning outcomes without necessitating large-scale expenditure growth.

Agence Ecofin: Reforms require investment, and governments recognize benefits. The report's model explains how GDP percentage gains can be achieved through more efficient spending. Explain the model and based on your assessment, potential gains for sub-Saharan African countries facing similar issues, in GDP percentage or absolute terms, if implemented.

Era Dabla-Norris (IMF): Although the underlying paper does not address sub-Saharan Africa in isolation, it encompasses emerging market and developing economies broadly. The model examines two primary dimensions. First, it poses this scenario: what occurs if 1 percent of GDP spending shifts from low-impact administrative overhead to infrastructure that augments a country's capital stock? Alternatively, to human capital enhancements, such as upgrading national curricula or equipping schools? This reallocation exercise—conducted within the existing budget envelope—can elevate output by 3.5 percent to 6 percent over the long term in emerging market and developing economies.

“Reallocating just 1% of GDP from low-impact to high-impact spending can lift output by up to 6%. The combined effect of smarter allocation and better efficiency can be profoundly significant”

These figures represent the average effect attributable to reallocation alone, applicable across a wide array of countries. However, actual gains can surpass these levels when paired with enhanced spending efficiency. Institutional reforms that combat corruption, alongside broader upgrades to budget and investment processes, enable countries to extract far greater value from each unit of expenditure. This holds especially true in developing contexts, where efficiency gaps are more pronounced. Consequently, the combined impact on output—from reallocating to more productive applications and spending more efficiently—can prove profoundly significant.

Agence Ecofin: The report and data offer a free self-assessment tool for identifying gaps and positive strengths. How should African governments use the current Fiscal Monitor report, data, and datasets to improve fiscal spending efficiency? Why is it useful today and for the next three to five years?

Era Dabla-Norris (IMF): This question aligns precisely with the current economic juncture. Countries confront sharply limited fiscal space for maneuver. Although financing constraints have somewhat eased, they remain stringent for many nations, while development imperatives intensify. The growth agenda demands urgent action. In such conditions, governments must prioritize deriving maximum value from constrained resources—a principle at the heart of this Fiscal Monitor. The report accentuates three foundational elements: commitment, institutions, and reforms. It delineates benchmarkable actions that countries can pursue. Two databases accompany the release: one evaluates the rigidity of spending; the other scrutinizes efficiency gaps, not merely at a snapshot in time but longitudinally—tracking progress in public infrastructure, education, research and development, and health. These tools highlight precise areas that require improvement. The included case studies—such as those on Togo and Brazil, alongside others in the Monitor—demonstrate that such reforms transcend theoretical ideals. They represent practical, proven pathways that countries have successfully navigated.

“Governments must derive maximum value from limited fiscal space. The Fiscal Monitor provides practical, benchmarkable actions—these reforms are achievable. Africa’s strength in digital innovation can make efficiency reforms even more impactful”

Achievability stands as a core message. Moreover, the Monitor outlines a spectrum of policies, though each must adapt to unique national circumstances, including prevailing issues and constraints on growth, institutions, and capacity. Three pivotal reform domains merit focused consideration: institution-building, which involves fortifying processes for investment resource management and budgetary operations while elevating transparency and accountability; fiscal space expansion, which includes refining subsidy targeting to prioritize the vulnerable over broad-based distributions, reassessing tax expenditures for greater precision, and benchmarking public sector wage bills against private sector norms to prevent labor market distortions; and public service delivery, which leverages digitalization alongside public-private partnerships to streamline operations. Africa repeatedly demonstrates prowess in technological leapfrogging, making private sector collaboration instrumental for advancing core service provision. These elements furnish policymakers with tangible, forward-looking guidance.

Interview by Idriss Linge