Budget Credibility as an Anchor for Better Economic Outcomes for Africa

This article is published in association with IMF.

Policy priorities include more realistic forecasting, stronger expenditure controls, improved cash management, and institutional reforms to better align budgets with outcomes

Budgets people can trust—because spending and revenues stay close to what was promised—are critical to delivering better economic outcomes. Yet across sub-Saharan Africa, it has become increasingly challenging to deliver on budget plans. Tighter financing conditions, rising spending pressures, and frequent shocks have widened the gap between what governments promise and what they deliver, ultimately undermining broader fiscal policy credibility and effectiveness. 

A recent IMF departmental paper examines why budget credibility remains elusive in much of the region, why it matters for macroeconomic outcomes, and what policymakers can do to strengthen fiscal frameworks in a world with elevated uncertainties. In this Q&A, the authors—Pablo Lopez Murphy, Can Sever, Félix F. Simione and Qianqian Zhang—distill the paper’s key findings and policy lessons.

1. 1. What does the paper find—and what might surprise readers?

Deviations between budget plans and fiscal outcomes in sub-Saharan Africa are not occasional; they are persistent and often large. Based on a new dataset covering 39 countries between 2021 and 2024, the paper shows that actual fiscal outcomes routinely diverge from approved budgets across the region. 

Deficits are frequently higher than planned, driven mainly by optimistic revenue projections and overspending on primary current expenditures. Current spending—public wages, goods and services, and transfers—consistently exceeds budget targets and accounts for most spending overruns. Notably, these overruns tend to rise during revenue windfalls, pointing to weak expenditure controls and procyclical behavior. Policymakers also often underestimate interest payments, adding more pressure to deficits. 

By contrast, capital spending is typically under-executed, especially when tax revenues fall short or grants are delayed. In practice, investment in roads, schools, healthcare, and infrastructure becomes the residual adjustment tool when fiscal pressures emerge, raising concerns in a region with vast development needs. Overly optimistic assumptions about grants often widen financing gaps that only become visible well into the fiscal year.

2. 2. How does this work add to—or challenge—conventional thinking on budget credibility?

The paper goes beyond documenting whether and by how much budget targets are missed. It systematically examines why they are missed. 

To help better understand this, the paper focuses on the composition of deviations rather than just the headline deficit slippages. It highlights how optimistic revenue projections, procyclical current spending, and the systematic under-execution of capital investment interact during budget implementation. The distinction matters: similar deficit slippages from budgets can reflect different underlying problems, and hence, require different policy responses.

The findings point to deep structural weaknesses as the main impediments to budget credibility in the region. This challenges the narrative that deviations primarily reflect isolated forecasting errors, unforeseen shocks, or exceptional spending needs, as policymakers often assume.

The analysis also reinforces the role of fiscal institutions by highlighting how in practice they operate as effective policy anchors. Overall, the paper emphasizes that budget credibility goes beyond just accurate forecasting—it’s a broader policy and institutional issue that significantly affects how economies are managed.

3. 3. Can you explain that a bit more? Why does budget credibility matter—especially for sub-Saharan Africa and right now?

Budgets are more than technical documents. They reflect the core policy commitments of a government: setting priorities, allocating scarce resources, and signaling the fiscal stance. When these commitments are repeatedly missed, fiscal discipline weakens and macroeconomic uncertainty rises, eroding confidence among citizens, investors, and development partners. 

The stakes of budget credibility are particularly high in sub-Saharan Africa at the current juncture. Amid declining foreign aid and rising debt burdens, governments face tighter financing, while having to cope with recurring shocks—ranging from pandemics to climate-related disasters and commodity price swings. High poverty, and large development and social needs only compound these pressures, especially alongside low domestic revenue mobilization. In this context, credible budgets are critical to anchor expectations, macroeconomic stability, and long-term development.

4. 4. How do these budget deviations play out on the ground?

Budgets often begin with ambitious revenue projections and spending plans. When revenues underperform or financing is delayed, adjustments are inevitable. But, it is politically and socially difficult to cut current spending, such as wages or transfers. As a result, governments often scale back or postpone the implementation of capital projects. 

The consequences are tangible: unfinished roads, delayed infrastructure, and weaker service delivery in critical sectors such as education, health, and utilities. Meanwhile, excess current spending can lead to arrears accumulation, unexpected borrowing, and higher financing needs, increasing fiscal vulnerabilities over the medium-term. These in-year adjustments make budgets less predictable and harder to manage, gradually eroding policy credibility and the social contract as commitments are repeatedly revised or left unfulfilled.

5. 5. Do these outcomes differ across countries—and if so, why?

Yes. As we noted earlier, institutions and policy anchors matter. 

Countries with stronger fiscal institutions—such as fiscal rules and independent fiscal councils—tend to show smaller gaps between plans and outcomes. IMF-supported programs are also associated with smaller fiscal slippages compared to budget plans, suggesting that program conditionality and monitoring can help support governments in achieving their commitments.

Meanhile, low-income and fragile countries typically experience larger deviations, reflecting deeper institutional, capacity, and financing constraints. Political-economy factors play a role as well: fiscal discipline weakens in pre-election years, with wider gaps between budgets and outcomes, underscoring the importance of credible, rules-based fiscal anchors.

6. 6. What are the main policy lessons—and the constraints policymakers face?

The core lesson is simple, though difficult to implement: budgets must be realistic and enforced. 

Of course, policymakers operate under real constraints. Commodity prices fluctuate, grants get delayed, financing is volatile, and shocks are increasingly frequent. Emergency spending needs and political pressures are hard to avoid. Perfect execution is neither feasible nor expected in the short term.

Instead, the objective should be to prevent fiscal slippages from becoming the norm. Our analysis points to several priorities across sub-Saharan Africa. Revenue forecasts should be grounded in realistic macro-fiscal assumptions, recent outturns, and systematically evaluating forecasts. On the spending side, stronger top-down budgeting with binding aggregate expenditure ceilings can help enforce discipline and prioritization.

Improved commitment, verification, and payment controls are essential to contain spending overruns and prevent accumulation of arrears. Protecting capital spending requires better project appraisal, cash-flow planning, and safeguards during execution. Stronger fiscal institutions—including fiscal rules, independent councils, and fiscal risk frameworks—can provide anchors, complemented by IMF-supported programs where appropriate. Finally, stronger legislative oversight, limits on in-year reallocations during election periods, and better alignment of development partner support with national systems can reduce fragmentation and enhance transparency.