IMF Warns Unrealistic Budgets Are Widening Fiscal Deficits Across Sub-Saharan Africa

The International Monetary Fund has warned that weak budget credibility and unrealistic fiscal projections are worsening budget deficits across Sub-Saharan Africa, raising concerns about debt sustainability, fiscal discipline and long-term economic development across the region.

The warning was contained in a new IMF research paper titled “Budget Credibility in Sub-Saharan Africa,” which examined fiscal performance across 39 African countries between 2021 and 2024.

According to the report, large gaps continue to exist between approved national budgets and actual fiscal outcomes, with many governments consistently missing revenue targets while overspending on recurrent expenditure.

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The IMF stated that these fiscal slippages are structural and persistent rather than temporary disruptions caused by isolated economic shocks.

The paper found that fiscal deficits across many countries in the region routinely exceeded approved budget projections due to overly optimistic revenue assumptions and persistent expenditure overruns.

The authors stated, “Deficits are frequently higher than planned, driven mainly by optimistic revenue projections and overspending on primary current expenditures.”

According to the study, recurrent expenditure categories such as wages, subsidies, goods and services and social transfers often exceeded approved limits, placing additional pressure on public finances.

The report also found that capital expenditure was consistently under-executed during periods of fiscal stress, particularly when governments experienced revenue shortfalls or delays in external financing and grants.

The authors noted that “capital spending is typically under-executed, especially when tax revenues fall short or grants are delayed.”

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The study stated that infrastructure projects involving roads, hospitals, schools and other public investments are frequently delayed, scaled down or abandoned when governments face fiscal constraints.

The IMF further observed that interest payment obligations were often underestimated in budget projections, contributing to higher financing pressures and widening deficits.

According to the report, the persistence of fiscal slippages across the region reflects broader institutional weaknesses, including poor expenditure controls, weak fiscal governance and limited policy implementation capacity.

The study found that countries operating under IMF-supported programmes generally recorded lower fiscal deviations due to stronger external monitoring and policy discipline mechanisms.

In contrast, low-income and fragile states experienced larger budget deviations because of weaker administrative capacity, financing challenges and institutional limitations.

The report also noted that fiscal discipline tends to weaken during pre-election periods as governments increase spending beyond approved budget levels.

According to the IMF, budget credibility extends beyond accurate forecasting and is closely linked to institutional quality, governance systems and fiscal management structures.

The report highlighted the importance of stronger fiscal institutions in reducing the gap between approved budgets and actual government spending outcomes.

The IMF had earlier projected that Sub-Saharan Africa’s fiscal position would weaken further in 2026 despite improved commodity prices providing some support for external balances across parts of the region.

The Fund projects that the median fiscal deficit for Sub-Saharan Africa will widen to 3.2 per cent of Gross Domestic Product.

The findings come amid rising debt levels across several African economies as governments continue to increase borrowing to finance budget deficits, infrastructure projects and economic support programmes.

Analysts said persistent budget deviations could undermine investor confidence, increase debt servicing burdens and weaken long-term fiscal sustainability across the continent.

The IMF’s warning also comes as governments across the region grapple with high inflation, currency volatility, rising debt costs and weak economic growth.

In Nigeria, recent fiscal developments have reflected increasing borrowing requirements amid widening expenditure pressures and ambitious spending plans.

The Federal Government recently increased its planned borrowing for 2026 to N29.20tn following an expansion of the proposed national budget and fiscal deficit projections.

The revised borrowing figure represented an increase of N11.31tn compared to the earlier estimate of N17.89tn.

President Bola Tinubu had earlier requested approval from the Senate to increase the 2026 Appropriation Bill by N9tn, raising the total proposed budget from N58.4tn to N67.4tn.

Economists said the IMF findings highlight the growing need for African governments to improve fiscal planning, strengthen revenue mobilisation and enforce expenditure discipline.

They noted that weak budget credibility could worsen debt vulnerabilities and limit the ability of governments to fund infrastructure, healthcare, education and social development programmes.

Analysts also warned that continued underperformance in capital expenditure could slow economic growth and weaken long-term productivity gains across the region.

The IMF stressed that stronger fiscal institutions, realistic revenue projections and improved expenditure management would be critical to narrowing budget gaps and improving macroeconomic stability across Sub-Saharan Africa.