Across Africa, the International Monetary Fund (IMF) presents itself as the custodian of macroeconomic stability. Its latest Article IV staff reports on Ethiopia. Malawi, Nigeria, South Africa, and Zambia are written for economies with very different histories and institutions. Yet they converge on a familiar prescription: fiscal consolidation, tighter monetary policy, market-determined exchange rates, subsidy reform, deregulation and ‘private-sector-led growth’. No serious economist can dismiss macroeconomic stability. High inflation destroys wages, foreign-exchange shortages choke production, and out-of-control debt eventually forces adjustment. But stability is a means, not a development strategy. Read together, these five reports expose the central weakness of the Fund’s approach in Africa: it is much clearer about how the state should retreat than about how African economies will acquire the productive capabilities needed to grow, diversify, and create decent jobs.
Article IV consultations are formally surveillance rather than loan agreements, and not every recommendation is a binding condition. But the distinction is less reassuring than it sounds. Zambia and Ethiopia are already under Fund programmes; Malawi’s programme expired without a review; and in Nigeria and South Africa the Fund’s assessment influences credit ratings, investors, and the terms on which governments can borrow. These reports therefore define the boundaries of what international finance considers ‘sound’ policy, even when the Fund supplies no money directly.
The country details are revealing. In Malawi, the Fund calls for urgent stabilisation to move from aid dependence to a private-sector-led economy. It stresses fiscal and monetary tightening, exchange-rate adjustment and the removal of administrative obstacles. Yet Malawi’s private economy consists overwhelmingly of small farmers and informal firms facing expensive credit, unreliable infrastructure and scarce foreign exchange. Calling for the private sector to lead does not conjure into existence firms capable of industrial investment.
In Zambia, fiscal consolidation, fuel-subsidy reform and debt restructuring sit alongside hopes for more mining investment, public-private partnerships and competition. The report itself notes that bank lending rates averaged more than 26 percent in early 2025 and that private credit was below half the sub-Saharan African average. Under those conditions, which Zambian manufacturer can compete with a multinational mining company that raises finance abroad?
The Ethiopia report is more explicit about transitioning from public- to private-sector-led growth. It endorses exchange-rate liberalisation, reduced financial repression, greater foreign investment, and the possible privatisation of commercially oriented state enterprises. But Ethiopia’s previous development model, for all its faults, used public investment and directed credit to build infrastructure and productive capacity. Dismantling those instruments before strong domestic firms and development-finance alternatives exist risks replacing state leadership not with competitive Ethiopian capitalism, but with foreign ownership of the most profitable assets.
For South Africa, the Fund declares that the state-led model has reached its limits and describes private-sector-driven growth as the ‘only viable option’. It recommends greater private participation in electricity and logistics, product-market liberalisation and more flexible labour markets. South Africa has a more developed domestic capitalist class than most African economies. Even there, however, ownership and finance remain highly concentrated, while mass unemployment weakens domestic demand. The issue is not simply state versus market, but which institutions direct investment, towards what sectors and under whose ownership.
In Nigeria, the Fund praises fuel-subsidy removal, an end to monetary financing and foreign-exchange reform for restoring investor confidence. In the same breath, it acknowledges that poverty and food insecurity have risen. Credit is concentrated in oil and gas, with virtually no new lending to small firms and households. This is the contradiction in miniature: improved indicators for international investors are treated as progress even when productive domestic investment and household welfare remain depressed.
Throughout these reports, ‘the private sector’ is presented as a single actor. It is not. Africa has millions of traders, farmers and small firms, but in many countries only a thin domestic class of firms with the capital, technology and organisational capacity to invest at scale. The investor positioned to benefit from privatisation, liberalisation, mining concessions, and public-private partnerships is therefore often the multinational corporation, not an emergent national industrialist. This matters because multinational investment can generate exports while remaining an enclave: importing machinery, expatriating profits, minimising taxes and establishing few links with domestic suppliers. Foreign investment can contribute to development, but only when disciplined by local-content rules, technology-transfer requirements, strategic procurement and institutions that nurture domestic firms. The IMF’s framework treats these industrial-policy tools principally as distortions rather than as mechanisms through which today's rich and industrialising countries built productive capacity.
Even the Fund’s own research identifies an additional constraint. A 2025 IMF working paper estimates that sub-Saharan African sovereigns pay an extra 46 basis points on Eurobond issuance after controlling for credit rating, maturity, currency and global conditions. During global shocks, this ‘African premium’ exceeds 120 basis points. African states are thus urged to withdraw precisely because borrowing is unusually expensive, while weak public investment makes their economies less productive and keeps risk perceptions high. This is a vicious circle, not a route to transformation.
Kevin Gallagher and Njūgūna Ndūng’ū recently argued that the Fund remains caught in an austerity trap: programmes regularly underperform their growth forecasts, underestimate fiscal multipliers and fail to transform the export structures that cause balance-of-payments crises. Their proposed alternative, country-specific, countercyclical programmes centred on growth and redistribution, should inform the Fund’s current review of programme design and conditionality.
Africa does not need indifference to inflation or debt. It needs a different sequencing of adjustment. Protect public investment and universal services; restructure debt earlier and more deeply; tax mineral rents, wealth and illicit financial flows; expand concessional finance; rebuild development banks; and use industrial policy to create domestic firms capable of learning, exporting and employing people. Social-spending floors should be binding, not decorative, and adjustment should be measured against employment, poverty and productive investment as well as fiscal balances.
The relevant choice is not between an inefficient state and an idealised market. It is between an economic settlement that reproduces commodity dependence and foreign corporate dominance, and one that builds African productive power through an industrial policy, a monetary policy, and continental thinking. Until the IMF confronts that choice, its programmes may stabilise balance sheets on behalf of the external creditors while leaving the structures that generate crisis for the people firmly intact. The IMF policy for Africa is to develop underdevelopment.
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This article was produced by Globetrotter. Grieve Chelwa (Senior Fellow, Tricontinental and Associate Professor of Political Economy at the Africa Institute) and Vijay Prashad (Director, Tricontinental) are the authors of the recently published How the International Monetary Fund Stranges Africa (Johannesburg: Inkani Books, 2026). Chelwa is on the Papal Commission on Debt and Development in the Global South
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