A recent research paper by the International Monetary Fund (IMF) examines the growing challenge of budget credibility across sub-Saharan Africa as governments grapple with shrinking fiscal space, rising economic uncertainty, and mounting development demands.
According to the paper, although national budgets remain the primary instrument for outlining government priorities, allocating resources, and shaping fiscal policy, actual outcomes often differ significantly from approved plans during implementation.
The report explains that budget credibility is a cornerstone of effective public financial management. When governments fulfill their budgeted commitments, economic expectations remain stable, borrowing costs are better controlled, and fiscal policy becomes a more dependable tool for economic stabilization.
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Conversely, weak budget credibility creates uncertainty for investors and citizens, weakens the effectiveness of fiscal and monetary policies, and undermines long-term planning by obscuring the government’s true fiscal direction.
The IMF paper further notes that predictable fiscal management improves investor confidence because it reduces sovereign risk and creates a more stable environment for private-sector investment.
From a governance perspective, credible budgets also strengthen accountability by ensuring that governments align their stated objectives with actual spending decisions, thereby reinforcing public trust.
According to the fund, across sub-Saharan Africa, multiple domestic and external shocks have complicated governments’ ability to execute budgets as approved. The report identifies the COVID-19 pandemic, volatile commodity prices, climate-related disruptions, and tighter global financial conditions as major factors that have weakened fiscal buffers and exposed vulnerabilities in forecasting, liquidity management, and expenditure control.
The study highlights how widening fiscal deficits, surging food and fuel prices, and recurring climate shocks such as droughts and floods continue to generate unexpected spending pressures.
These developments frequently force governments to revise budgets midyear, cut capital expenditure, or accumulate arrears, making fiscal management increasingly difficult amid rising social and development needs.
In addition, the paper points to a growing “funding squeeze” driven by high global interest rates and declining concessional financing. Public debt levels across many African economies have climbed to historic highs, while debt servicing now consumes a larger share of government revenues, reducing the resources available for critical development spending.
At the same time, access to international capital markets has become more restrictive as investor risk appetite weakens and borrowing costs rise. The IMF research also identifies several structural weaknesses that continue to undermine budget credibility in the region.
Many African economies remain heavily dependent on narrow tax bases, commodity exports, and trade taxes, exposing public finances to revenue volatility and external shocks. This often leads to boom-and-bust fiscal cycles and repeated budget adjustments during the fiscal year.
On the expenditure side, rigid spending obligations such as public-sector wages, subsidies, and debt servicing leave governments with limited flexibility when revenues decline. As a result, authorities frequently resort to abrupt cuts in infrastructure spending or delay payments to contractors and suppliers, disrupting investment and service delivery.
Institutional and governance challenges further complicate budget execution. The paper notes that weak cash-management systems, fragmented treasury operations, incomplete Treasury Single Account implementation, and limited cash-forecasting tools reduce governments’ ability to match spending commitments with available resources. These inefficiencies often contribute to procurement delays and poor project execution.
Despite progress in adopting medium-term fiscal frameworks, the report argues that forecasting and planning processes in many countries still rely heavily on manual systems and ad hoc assumptions.
Limited independent scrutiny of macroeconomic and fiscal projections also contributes to optimism bias, with governments sometimes overstating expected revenues or understating expenditure pressures to meet policy or political objectives.
The paper additionally emphasizes that weak legislative oversight and delayed publication of audit reports reduce accountability in public financial management. Poor coordination between central and subnational governments also contributes to unpredictable transfers and mounting arrears at the local level, affecting service delivery across sectors.
According to the IMF study, these combined macroeconomic, structural, and institutional weaknesses continue to make it difficult for sub-Saharan African countries to translate approved budgets into credible fiscal outcomes.
The paper concludes that strengthening budget realism, improving fiscal transparency, enhancing cash management, and reinforcing oversight mechanisms will be critical to preserving fiscal sustainability and rebuilding trust in public financial management systems across the region.