International Monetary Fund
1,012,821 followers
May 15, 2026
Dear readers, in today’s edition, we highlight:
- Growth in Africa
- Government Budgets People Can Trust
- The Debt-Inequality Cycle
- Europe and AI
- Stablecoins and Cross-Border Payments
GROWTH IN AFRICA
Africa Can Be the Next Growth Story
“Africa is not just another region,” IMF Managing Director Kristalina Georgieva told leaders at the Africa Forward Summit in Nairobi.
“It is where the world will acquire its next growth engine.” With a young population and an estimated $4 trillion in underused domestic assets, the continent sits on the right side of the world’s demographic and growth divide. Now is the time to unlock this potential.
This starts by creating the conditions for private sector‑led growth. This requires credible macroeconomic policies, coupled with determined efforts to cut red tape and fight corruption. Closing even half the gap with emerging markets in regulation and governance could raise sub-Saharan Africa’s output by up to 20 percent within a decade. Trade integration can add further gains: full implementation of the African Continental Free Trade Area, including cutting tariff and nontariff barriers, could lift income per person by more than 10 percent.
And Africa must deal decisively with the burden of debt. Restructure or reprofile when debt is unsustainable; avoid non-productive borrowing; and shift the balance from debt to equity as much and as quickly as possible. For this, it is paramount to develop deeper, more diversified capital markets.
To match these ambitions, the IMF has sharply increased concessional lending for African members from about $8 billion before the pandemic to $36 billion today. Georgieva said this support, alongside efforts to improve the international debt architecture, aims to help African countries turn their potential into lasting prosperity.
GOVERNMENT BUDGETS
Credible Budgets Matter More Than Ever in Africa
Budgets people can trust are essential for growth, stability, and public confidence.
New IMF research, covering 39 sub‑Saharan African countries between 2021 and 2024, shows that fiscal deficits on average overshot budget targets by about 1.3 percent of GDP. In most cases, revenues fell short and current spending exceeded budgeted ceilings. The study finds that overly optimistic revenue forecasts, persistent overspending on wages and other current expenditures, and systematic under‑execution of capital spending have turned this “credibility gap” into a structural feature of public finances, not just the result of bad luck or one‑off shocks.
The composition of these misses matters. When revenues fall short or donor grants arrive late, governments usually cut investment first, not salaries or transfers. Capital spending on roads, schools, health care, and other infrastructure has become the main adjustment variable, even though the region faces large development and infrastructure gaps. The study also shows that when tax and other domestic revenues surprise on the upside, many countries raise day‑to‑day spending instead of saving more or reducing deficits.
Narrowing the gap between plans and results is critical. Countries with stronger fiscal institutions—including fiscal rules, independent fiscal councils, and higher public financial‑management scores—have smaller and less volatile deviations. The IMF paper calls for more realistic revenue forecasting, stronger expenditure controls, better cash‑flow planning, and reforms to protect capital investment and reinforce transparency and accountability throughout the budget cycle.
F&D MAGAZINE
The Debt-Inequality Cycle
During the Great Depression, Federal Reserve Chairman Marriner Eccles warned that excessive saving by the rich was draining demand and deepening the downturn. “To protect them from the results of their own folly,” he told the Senate in 1933, “we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit.”
Atif Mian argues in the March issue of F&D that today’s global economy faces a similar dynamic. When a rising share of income accrues to top earners, their excess saving creates a “saving glut” that weakens demand and forces economies to rely increasingly on debt‑financed spending to keep growth going. Before 2008, private credit expansion—especially household borrowing—filled the gap; after the financial crisis, public debt took over as governments ran larger, ongoing deficits to keep economies away from the zero lower bound and avoid recessions.
Mian calls this pattern “indebted demand”: growth propped up by ever‑rising debt because underlying spending power is too weak. “We often frame inequality in moral terms, but the macro lesson is starker,” he writes. “When too much income pools at the top, demand weakens, deficits persist, and dependence on debt weakens us all.”
HIGHLIGHTS FROM THE SPRING MEETINGS
Europe Can Still Win the AI Race
Artificial intelligence is diffusing faster than any major technology in history, but Europe risks capturing only a modest growth boost without reforms.
IMF economists Florian Misch and Carlo Pizzinelli show that productivity growth has slowed sharply, with GDP per capita now rising only about 1 percent a year after roughly 2 percent in earlier decades. Their analysis suggests that under current policies, AI adoption would raise productivity in Europe by only around 1 percent cumulatively over five years—still more than comparable estimates for the United States, but not enough to close the gap.
The gains would also vary widely across countries. Higher‑income, service‑heavy economies like Norway could see particularly large boosts—up to around 5 percent in optimistic scenarios—because they have more white‑collar jobs exposed to AI and higher wages that make automation attractive. Lower‑income economies such as Romania would likely see smaller gains, just under 2 percent even in favorable scenarios, so AI could temporarily widen productivity gaps within Europe.
Technology alone will not deliver the growth Europe needs. Fragmented services markets, limited access to finance for innovation, rigid labor markets, and restrictive or fragmented regulation can all choke off the productivity payoff from AI. Deepening the EU single market for services and improving access to capital will be essential. So, too, will be supporting worker mobility and skills and designing adaptive, innovation‑friendly regulation to help Europe capture a larger AI dividend.
HIGHLIGHTS FROM THE SPRING MEETINGS
Stablecoins Could Disrupt Payments Like Remittances
Stablecoins may move from the fringe to the mainstream of payments, according to IMF analysis that looks at how investors react when real money is on the line. Clearer rules on stablecoins could increase their use and raise competition in payments. After the United States Congress passed a law regulating stablecoins, stocks of major payment firms such as Visa and Western Union fell by about 1 percent over five hours, wiping out roughly $22 billion in market value.
The impact hit hardest where payments already cost more. Firms that focus on cross‑border transfers, including remittances, saw larger declines than firms that run large payment networks. Alexander Copestake and his co‑authors then scale the initial market reaction to reflect a full move from no stablecoin law to a clear legal framework. In that scenario, the implied hit reaches about 18 percent, or nearly $300 billion in market value—similar in scale to past regulatory shocks such as U.S. debit‑card fee caps.
The findings suggest that stablecoins could first gain ground where payments run slow and cost more, especially across borders. Investors also expect firms with strong networks or early crypto experience to weather the shift better than others. Given this evidence that markets see stablecoins as a lasting part of the payments landscape, governments need to prepare for the changes to come and design regulation to manage risks while supporting fair competition.
