Africa turning away from conditional lending
IMF conditionality is losing traction in Africa as governments prioritise politically feasible reforms over externally imposed targets. By Jason Mitchell.
IMF programmes in Africa are stalling or being abandoned in countries such as Kenya, Senegal and Ghana, while others, including Nigeria and Angola, have exited altogether. Zambia’s August 2025 request for a one-year extension and an additional US$145m under its existing facility highlights the limits of the current model.
Even reform-minded administrations are stepping back as frustration with multilateral lenders grows and political costs mount. While Rwanda remains a notable exception, most countries are shifting towards home-grown frameworks.
Tatonga Gardner Rusike, chief economist for Africa at Bank of America Merrill Lynch, said: "We have Ghana that has gone through a debt restructuring and various reforms under the IMF. Their programme expires in May 2026, and they have signalled that they won't be renewing another programme. Now, we also have Zambia, whose programme is expiring October 2025 but have sought only a 12-month extension to the existing programme which runs until October 2026.
"Normally, programmes are for three years. So, the idea I think for countries is if they have solved balance of payment problems or fiscal issues, they would rather pursue domestically driven policies. They don't want to be seen as dependent on the IMF for too long because it can create political challenges domestically.”
This shift reflects a broader realignment. Governments are increasingly aware that investor confidence can be earned through credible domestic fiscal and monetary discipline rather than prolonged reliance on IMF programmes.
Bank of America research notes that sovereign spreads for countries outside IMF arrangements — including Nigeria and Angola — have remained broadly stable, with no significant market penalty for the absence of fund cover. Kenya and Ivory Coast both returned to the Eurobond market in early 2025. Rather than accept politically costly conditions, these governments are choosing to shoulder market risk — and, so far, markets are adjusting. Investors are increasingly pricing risk based on national policy credibility rather than IMF endorsement.
Analysts note that IMF conditionality today is less about economic fundamentals than political feasibility. Reform fatigue and resistance to subsidy cuts are weakening programme implementation, while foreign donor support is weakening.
Mixed results
This has produced mixed results across the continent. Ethiopia received a US$262m IMF disbursement in July 2025 under its US$3.4bn programme, but reform momentum is stalling amid fiscal gaps and waning donor support. Ghana continues to miss targets despite restructuring its debt, as political pressure erodes reform discipline. In Senegal, the IMF disclosed in August 2025 that over US$10bn in previously hidden debt had been accumulated, prompting concern over fiscal transparency and programme credibility.
Egypt, Africa’s third-largest economy at US$347bn, faces similar strains. Its IMF programme has been repeatedly revised as the government struggles to reconcile subsidy reform, exchange rate flexibility and social stability in a volatile political context.
Rwanda, by contrast, continues to maintain credibility with the fund. It has used IMF engagement to support fiscal consolidation and reassure investors — demonstrating that conditionality can still work where domestic politics allows.
The divergence highlights a deeper challenge: conditionality is not uniformly broken, but its effectiveness increasingly depends on tailoring programmes to political and institutional realities.
Several of Africa’s largest economies are already managing without fund oversight. Kenya’s programme expired in April 2025; Angola exited in 2021; and South Africa has not signed a multiyear programme, though it accessed US$4.3bn in emergency financing in 2020. Nigeria has had no multiyear IMF lending programme since 2001, apart from a US$3.4bn emergency Rapid Financing Instrument in April 2020, fully repaid by April 2025.
This evolving dynamic raises fundamental questions about who drives the reform agenda, how politically neutral the IMF can remain, and what trade-offs governments are willing to accept. The real challenge lies in balancing national reform ownership with the political adaptability of IMF programmes — a tension complicated by the persistent information asymmetries between borrowers and lenders.
Irmgard Erasmus, senior financial economist at Oxford Economics Africa, an economic consultancy, said: “Unfortunately, it will never be as easy as just getting the balance right. There will be an inherent tension because of this problem that we have with informational asymmetry, which is really leaning much more towards the debtor country. And it places the lender in a less advantageous position. So that is an inherent tension that we will not get around to.
"So, just adapting to political pressures in itself is a very complicated question. In a way, the IMF needs to retain political neutrality. The ownership of a programme still falls on the country itself. And the regime in charge still falls under their accountability.
“That burden cannot be shifted towards a multilateral organisation. With or without the IMF, it is crucial to know that there will be short-term transitory costs to economic reforms. We see that in countries that do it without the IMF and with the IMF.
"Even in the case of Nigeria, there’s always a political cost involved and a short-term socioeconomic burden of policy transition. This is inevitable and inescapable. Now, how to navigate that? What transitory costs are acceptable? That is what is up for negotiation.”
These short-term costs are now central to how markets distinguish between reform narratives — with or without IMF involvement — and to how investors judge the credibility of policy commitments.
Charles Robertson, head of macro-strategy at FIM Partners, an emerging markets asset manager, said: “I’ve been looking at Uganda, Rwanda, Kenya — all of whom have let IMF deals expire in the last 12 months. And that’s not what used to happen. What used to happen was you’d have a deal and it would roll straight into another deal and straight onto another deal and so on.
"The IMF has become less important in the last decade. In the 1980s and 1990s, people wouldn’t buy African bonds without the IMF. But markets have grown up, they’ve become more sophisticated, they differentiate between reformers and non-reformers. Investors care about whether deficits are narrowing, whether debt ratios are stabilising. The IMF is still relevant, but it’s a support act rather than the main show.
“The reality is that markets are less obsessed with the IMF than they used to be. Investors are still looking at whether reforms are happening, whether fiscal deficits are being reduced, whether debt is stabilising. But the idea that without the IMF nobody would invest, that’s gone. The IMF matters, but it’s no longer the be-all and end-all for market confidence.”
BofA's Rusike agrees that investor perceptions are shifting, with markets placing greater weight on domestic policy signals than on IMF engagement alone.
“If you look at what is happening in the Eurobond market, investors are still differentiating between countries based on reforms," he said. "So, yes, IMF programmes can help in some instances, but increasingly investors are making their own judgements about fiscal consolidation, debt sustainability and whether reforms are credible. That’s why spreads for countries outside IMF programmes haven’t widened dramatically.
"There is a lack of political appetite to push through tougher reforms — especially when growth is already weak and elections are approaching. In these cases, countries delay action or abandon programmes altogether."
Bank of America argues that markets will continue to differentiate between reformers and laggards. For some, IMF engagement is becoming less a signal of credibility and more a tool to support governments already committed to reform. Others are choosing to manage without the fund — with mixed results. This divergence has become increasingly visible as resistance to conditionality has grown.
The political consequences of IMF-backed reforms are becoming increasingly difficult to ignore, as evidenced by Kenya's explosive response to a controversial tax package. In mid-2024, the country saw its worst unrest in years after the government introduced the Finance Bill — part of an IMF-endorsed revenue drive that included steep levies on bread, fuel and digital services.
The proposals sparked a week of mass protests between June 20 and 27, during which demonstrators stormed parliament. The crackdown left at least 22 people dead and dozens injured before president William Ruto withdrew the bill under mounting pressure.
Gen Z backlash
What set the unrest apart was its Gen Z character — leaderless, coordinated online and driven by frustrations with state governance as much as austerity. Civil society groups and opposition figures openly criticised the IMF’s role.
Protesters carried placards reading "Kenya is not IMF's lab rat" and painted murals declaring "IMF, keep your hands off Kenya", making clear the fund had become a lightning rod for public anger. This backlash was reminiscent of what happened in Argentina in 2001, when citizens blamed the IMF for pushing austerity measures that exacerbated the country’s economic collapse.
In the aftermath, Kenya allowed its IMF programme to lapse, having missed deficit and revenue targets after shelving key tax hikes. While the arrangement was not formally terminated, planned reforms were left incomplete.
The IMF has not publicly challenged the lapse, but Kenyan authorities have confirmed they are seeking a new deal. The previous US$3.62bn programme — a combined Extended Fund Facility and Extended Credit Facility approved in April 2021 — disbursed US$3.12bn before unravelling in 2024.
Central bank governor Kamau Thugge has stated that Nairobi still seeks a funded IMF programme, highlighting the delicate balance between reform credibility, fiscal constraints and political feasibility in Africa's larger economies.
While the Kenyan protests have not directly derailed IMF-backed reform efforts elsewhere on the continent, they have served as a powerful warning. Analysts caution that the unrest has heightened awareness of the political risks surrounding externally driven adjustment — particularly in vulnerable economies where trust in the state is already thin.
Isaac Matshego, an economist at South Africa's Nedbank, said: “My high-level view is that the situation will differ across countries, with conditionalities accepted in some jurisdictions. At the same time, outright social resistance to fiscal austerity will be well pronounced in other countries. Nigeria’s phased austerity, underpinned by the reduction of fuel subsidies, has so far solicited limited public rejection, while in Kenya, moderate tax hikes triggered widespread public protests.”
The contrast highlights how similar reforms can provoke sharply different reactions depending on local politics.
“Kenya, for instance, actually had quite a successful IMF programme," said Erasmus at Oxford Economics Africa. "But because of political considerations and the socio-political burden that it placed on the electorate, we saw the retraction of certain reforms and also the deterioration of that IMF programme. One of the biggest challenges is how to deal with that political dimension. And I think that’s where a lot of these countries are grappling. Do they have the political capacity and the appetite to push through these reforms? And in some instances, unfortunately, the answer is no.”
Independent approach
Meanwhile, Nigeria, Africa's biggest economy at US$474.5bn, provides another example of reform without IMF cover. In 2024/25, the government removed fuel and electricity subsidies, devalued the naira, and liberalised the FX regime — reforms that helped it post a US$6.83bn balance of payments surplus, regain market access via Eurobond issuance and attract renewed investor interest. The country’s foreign reserves surpassed US$40bn, and a N4trn (US$2.66bn) electricity sector refinancing plan is set to deliver long-term fiscal savings.
A comprehensive overhaul of Nigeria's tax authority and credit expansion efforts has also drawn positive responses. The IMF has praised these reforms in successive Article IV reviews despite Nigeria's absence from a programme. This suggests credibility can still be achieved through domestic reform ownership — even if the political costs remain high.
Rusike said: “Nigeria is doing their own reforms, and they have done quite a bit without a programme. The IMF has recognised the progress made on the fiscal side and also the progress that they’ve made in terms of improving the current account dynamics.”
Furthermore, Tunisia has continued to resist entering a formal IMF programme. Officials consistently cite the social and political risks of implementing subsidy cuts and wage restraint in an already fragile environment. President Kais Saied has publicly rejected IMF conditions, describing them as “foreign diktats” likely to worsen poverty and provoke political unrest.
Instead, it has turned to alternative sources of financing. In mid-2025, the country signed a financing agreement with the Saudi Fund for Development, while also exploring support from the Abu Dhabi Fund for Development. Additional backing has come from Algeria, which has extended direct financial assistance, and from the African Export-Import Bank, which approved a US$500m loan package in 2024.
However, the IMF insists that its engagement in Africa remains strong and tailored to each country’s context. According to Vitaliy Kramarenko, deputy director of the IMF’s African Department, the fund now places greater emphasis on country-led reform ownership, political constraints, and conditionality adapted to fragile settings.
Most sub-Saharan African countries with programmes have met key macroeconomic objectives despite shocks, including a food price crisis and a financing squeeze with declining aid flows. Around 80% of countries hit fiscal targets between 2022 and 2024, nearly 70% met monetary and reserve criteria, and growth in programme countries is projected to rise in 2025, unlike in those without IMF arrangements.
The fund notes that from May 2024 to April 2025, it allocated US$79m to capacity development in sub-Saharan Africa — the highest of any region — to strengthen programme implementation and policy design.
“Programmes in sub-Saharan Africa have generally performed well,” said Kramarenko. “In fact, performance in the region has been stronger than in other parts of the world, especially considering that the region was hit by very severe shocks — Covid-19, the war in Ukraine, global disinflation and climate events.”
Programmes have increasingly included targeted social spending to protect vulnerable groups. In Chad, Ethiopia and the Republic of Congo, arrangements created fiscal space for social programmes to offset reform impacts; in the Central African Republic, fuel price reforms were adjusted with IMF technical assistance to lower pump prices; and Niger and Burkina Faso made progress despite political sensitivities through careful pacing and technical support.
The fund also says it is adapting to political fragility and implementation risk. “We are adapting our toolkit to fragile contexts,” said Kramarenko. “For instance, we are piloting Fragility and Conflict-affected States strategies in a number of countries. These help us design more realistic programmes and provide support for capacity development. In fragile contexts, we are trying to calibrate conditionality to what is feasible and sequencing reforms to support implementation.”
Officials stress that programmes can be revised mid-course when shocks disrupt initial plans, while maintaining core stabilisation and poverty-reduction objectives.
“In countries like Ethiopia, we have to factor in both the fiscal and the peacebuilding dimensions of post-conflict stabilisation. In Niger, we are following developments closely and working with the authorities as they reengage” said Kramarenko.
He also pushed back on criticism that IMF programmes necessarily amplify social tensions: “The fund’s goal is to support macroeconomic stability while protecting the most vulnerable. That is why social spending floors are typically part of programme design. The adjustment path may involve difficult reforms, but these are aimed at restoring fiscal space and improving debt sustainability.”
Despite signs of recovery, Africa’s economic fundamentals remain under pressure. Public debt now exceeds US$1.3trn, including more than US$113bn in Eurobond issuance by African governments since 2004. Growth is projected at just 3.8% in 2025 — too weak to meaningfully reduce poverty. External financing remains essential but African governments are increasingly seeking terms that align with political realities.
As Africa’s economic landscape diversifies, governments are increasingly able to tap capital markets or secure funding from alternative lenders such as China or the Gulf. The IMF remains a significant player — but its dominance is no longer assured. To stay relevant, the fund must redefine its role: not as the enforcer of rigid policy frameworks but as a more flexible partner in Africa's evolving economic trajectory.