Although the International Monetary Fund (IMF) is known as a “lender of last resort”, according to its own statements it is much more. It works to achieve sustainable growth and prosperity by supporting economic policies that promote financial stability and monetary cooperation. How has this worked for Africa so far?
Although the IMF was created 80 years ago, it actually started full operations in 1952, and the first African country to access IMF resources was South Africa six years later in 1958, which was at that time a British protectorate and under apartheid rule. Since then, as independent sovereign nations and in the absence of an African Monetary Fund (which is still to be operationalised), African countries have turned regularly to the IMF for resources to navigate global shocks. Including SDR credits, 48 African countries collectively owe USD 42.2 billion to the IMF. This is about one-third of the IMF’s total outstanding credit implying that the African continent is a major borrower of the IMF.
But is Africa really a major IMF client? How dependent are African countries on the IMF, both compared to other countries around the world and other African creditors? Has it been easier for African countries to access IMF resources or more difficult, and why? In this brand-new infographic, based on the IMF’s historical commitments data, we take a long durée perspective to shed light on key trends and patterns in Africa’s relationship with the IMF.
There are four key findings of note:
1. African countries might look like they are major clients but the reality is they have only been able to access a fairly small share of IMF resources. Over the period 1952 to 2023, the IMF made a total 1529 loan commitments, of which around 40% (608 to be exact) were to African countries. In other words, on average, African countries together borrowed 10 loans a year from the IMF, within the global average of 23. This seems like a reasonable split. However, the disparity becomes clear with country level and volume-related data. The typical African country accessed IMF resources an average of 12 times, which is slightly higher than the global average of 10 times. This means that the typical African country accessed IMF resources just once every five years. Yet, over the same period 1952-2023, in volume terms, Africa accessed less than 10% of the IMF’s total commitments. The average IMF loan to an African country was approximately USD 200 million compared to a global average of USD 887 million. Overall, the typical African country has borrowed about a total US$ 1.5 billion from the IMF, compared to other countries borrowing an average of US$ 8 billion.
2. African borrowing from the IMF has been heavily skewed towards large economies. There are just three (3) African countries – Botswana, Libya and Eritrea – that have never borrowed from the IMF. The top five African borrowers from the IMF in terms of volume include Egypt, Cote d’Ivoire, Ghana, Kenya and Angola and account for over 40% of IMF lending to Africa. The top borrowers in terms of frequency include Liberia (24), Kenya (23), Morocco (22), Senegal (22), Mali (21) and Madagascar (20). However, each of the top five borrowers received over USD 4 billion each—Egypt (15bn), Cote d’Ivoire (4.3bn), Ghana (4.3bn), Kenya (4.1bn) and Angola (4.1bn) while all the least borrowers (Eswatini, Guinea-Bissau, Djibouti, Cabo Verde, Comoros and Sao Tome Sao Tome) received less than USD 100 million each. That said, Central African Republic is the country that owes the highest proportion of its external debt to the IMF – the average owed is more than every other African country.
3. African countries have primarily gone to the IMF for resources in a procyclical manner, indicating strong proactive fiscal management. The periods of the highest African borrowing from the IMF strongly coincide with periods of turbulence in the global economy. For instance, the highest number of loan commitments by Africa were made in 2020 (54) due to the COVID-19 pandemic followed by 2023 (27) due to global supply chain disruptions. This means that African countries seek less support from the IMF during periods of relative stability.
4. African countries have faced significant costs to borrow from the IMF, yet still work hard to repay. Part of the reason why African countries have had to seek finance from IMF instruments specifically to access IMF resources is a lack of Special Drawing Rights owned by the continent – which is in turn determined by the IMF’s – now fairly outdated – quota formula. SDRs give countries automatic, unconditional access to stabilisation finance. However, African countries only have 5% of the world’s SDRs. That means, for instance, of US$650 billion worth of new SDRs the IMF issued to help the world manage the COVID19 crisis, African countries only got US$33 billion. In turn, this was a small proportion of the US$ 160 billion we estimate that African governments spent to deal with COVID19 during 2020-2021. This therefore creates latent demand for IMF instruments. However, there remain other constraints. Right now, a member state can only borrow up to 200% of its quota annually and 600% of its quota cumulatively.
Given African countries want to borrow as cheaply as possible, the upshot is just three out of the multiple IMF’s instruments account for over 50% of IMF loans taken by African countries. The Extended Credit Facility (ECF), Extended Fund Facility (EFF) and Stand-By Arrangement (SBA). Yet, only the ECF has zero interest and it still has to be fully paid back within 5.5 – 10 years. And Africans do pay back in timely fashion. As of March 2024, 31 African countries had outstanding loans from IMF instruments while 18 did not. IMF projections show that from 2023 to 2027, African countries will have to make payments worth US$ 48 billion to the Fund.
The fact is, African countries are both dependent and not dependent on the IMF. African countries are – except for one or two exceptions (Egypt in particular), regularly access small amounts of stability funds, each requiring more conditions and different interest rates, making their use of the IMF as a lender of last resort extremely complex and problematic. Can this cycle be broken? Possibly, but only with significant reforms to the IMF and its quotas, meanwhile the case for an African monetary fund is very clear.
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Special thanks go to Trevor Lwere, Rugare Mukangaga, and Marry Ghenna for their work on the graphics and for collecting/analysing the underlying data and this accompanying article.
The data used was collected primarily from the IMF’s Financial Data and ONE Campaign.
If you spot any gaps or have any enquiries, please send your feedback to us at media@developmentreimagined.com, and we will aim to respond ASAP.
