First, do no harm: How the IMF and World Bank Can Help Africa Finance Itself – Businessday NG

An open letter to IMF Managing Director Kristalina Georgieva and World Bank President Ajay Banga

Dear Managing Director Georgieva and President Banga,

The surest way for the Bretton Woods institutions to help Africa is to help it build domestic bond markets that can finance its development from within. Entrenched special interests block that path. Multilateral financing too often preserves the very status quo that keeps it blocked.

The Annual Meetings in Bangkok have once again renewed familiar commitments to African development. Both your institutions have long recognised the need for local-currency financing, as your joint 2021 Guidance Note on Local Currency Bond Markets shows. In Bangkok, Zeine Zeidane, Director of the IMF’s African Department, said Africa “needs to mobilise more capital to grow,” including by better mobilising “the domestic savings in the continent.”

The reality remains stark. As Robin Wigglesworth documents in A Fabulous Debt, the global bond market had grown to at least $188 trillion by mid-2025. Yet, according to the OECD, Africa accounts for only about 1 percent of the world’s sovereign bonds, while generating 3 percent of global GDP. Long-term, domestic-currency patient capital, the capital needed to finance roads, power grids, schools, and hospitals without foreign exchange risk, remains largely out of reach.

A bond market requires price stability, fiscal transparency, honest procurement, and enforceable creditor rights. Rent-seeking blocks precisely those reforms. And financing that arrives whether or not they are in place relieves the very pressure that would compel them.

Price Stability: What Keynes Taught Us

A viable bond market rests on two bedrock conditions: the preservation of purchasing power and secondary market liquidity.

Price stability is the non-negotiable prerequisite.

As Lord Keynes wrote in A Tract on Monetary Reform (1923), inflation “means Injustice to individuals and to classes,—particularly to investors; and is therefore unfavourable to saving.” Debts are settled in depreciated money, and savers are punished. Deflation, in turn, “means Impoverishment to labour and to enterprise” and is “disastrous to employment.” When savers see their purchasing power evaporate, they demand prohibitive risk premia or refuse to lend for the 10, 20, or 30 years that infrastructure requires.

Modern evidence confirms Keynes. In a study of 49 local bond markets, Burger and Warnock found that countries with stable inflation and strong creditor rights have more developed local bond markets and rely less on foreign-currency debt. Your own Guidance Note cites this as a key determinant. Inflation does not merely shrink these markets; it shortens them. Guaranteeing price stability is therefore the primary economic duty of any government seeking domestic financial depth.

Why Rent-Seeking Forecloses a Bond Market

Where public authority is captured for private gain, three things happen, each fatal to a bond market.

• Investors cannot price what they cannot see. IMF research finds that greater fiscal transparency lowers sovereign spreads. The reverse also holds: the World Bank’s June 2026 Global Economic Prospects finds that revelations of hidden debt raise spreads by a cumulative 250 basis points within two months.

• Savings leave the formal system. Diverted public money moves abroad, and so does the money of households that no longer trust their savings are safe. As the IMF’s own governance framework recognises, corrupt countries have lower deposits and less private credit. Savings held abroad, in cash, or in land never reach the pension funds and insurers that would buy long-term government bonds.

• Creditors lose confidence in the law. Where courts and regulators can be bribed, creditor rights are uncertain, and local bond markets remain shallow.

Senegal illustrates this chain in real time. Audits revealed undeclared debt, and within two months its sovereign spread rose from about 530 to about 940 basis points. Shut out of international markets, the Treasury now borrows regionally at yields above 8 percent, with an average residual maturity under two years. That is the opposite of the long yield curve infrastructure requires.

The Barrier: Special Interests and the Multilateral Trap

Durable price stability and fiscal order require structural reforms that entrenched interests resist, because they profit from opacity, regulatory bottlenecks, and rents. As Nicolas van de Walle demonstrated in African Economies and the Politics of Permanent Crisis, African fiscal distress is driven less by state over-expansion than by structural rent-seeking. The IMF’s Executive Board acknowledged in 2023 that reducing corruption is “constrained by limited capacity and vested interests.”

Multilateral assistance has often contributed to this impasse. Because capital is fungible, aid and budget support provide a fiscal cushion that lets authorities postpone essential adjustments. World Bank researchers found, in a study of elite capture of foreign aid, that Bank disbursements to the most aid-dependent countries coincide with sharp increases in offshore deposits, with implied leakage of around 7.5 percent.

Elites enact cosmetic reforms to unlock financing tranches. This is your institutions’ own characterisation. Aid and Reform in Africa, a World Bank study of ten African countries, called conditional lending “a farce in which the government agrees to measures it does not believe in,” fails to carry them out, “and then receives the funding from donors anyway.” Paul Collier recorded that Kenya sold the same agricultural reform to the World Bank four times in fifteen years. The IMF’s Independent Evaluation Office found only about half of structural conditions implemented on time. And the World Bank’s Wapenhans Report diagnosed an “approval culture” as early as 1992.

The governance record bears this out. The World Bank’s Worldwide Governance Indicators, revised in 2025 so that scores from 0 to 100 can be compared over time, include four indicators most closely tied to investment: control of corruption, government effectiveness, regulatory quality, and rule of law. They are not the only drivers of growth, but where officials steal less, services work, rules are predictable, and contracts are enforced, people save and invest more.

Since 1996, Sub-Saharan Africa’s average score on control of corruption has slipped from 38 to 35. Rule of law has not moved. On three of the four indicators, the gap with the world has not narrowed.

Nearly three decades of lending, conditionality, and technical assistance have not purchased better governance.

Yet improvement is possible where there is political will. Mauritius, Botswana, Seychelles, and Cabo Verde have ranked among the region’s top performers every year since 1996, well above the world average. Rwanda has risen from 37th to 5th, more than doubling its score.

Governance is not destiny. It is a choice.

Why Safeguards Must Come Before the Money

Once the money is committed, leverage is lost, and with it the safeguards. Chad’s pioneering 1999 oil-revenue law, a condition of World Bank support for the Chad–Cameroon pipeline, required most oil revenue to go to health, education, rural development, and infrastructure, and set aside 10 percent for future generations. In December 2005, once the oil money was flowing, Chad amended it: the future-generations fund was abolished, and security was added to the priority sectors. By 2008, the Bank acknowledged that the arrangements were not working and withdrew. In Mozambique, more than US$1 billion in undisclosed loans, about 9 percent of GDP by the World Bank’s estimate, surfaced in 2016 during an IMF-supported program. In June 2023, the IMF approved a US$1.8 billion program for Senegal while debt was being misreported, although Senegal’s 2019–2020 PEFA assessment had already scored debt management and fiscal data integrity D or D+ (less than basic performance). The warning was on file. It simply was not a condition of approval.

Senegal’s new US$2.2 billion program makes corrective action a condition of Board approval. But that verification comes after the damage. Managing Director Georgieva, you have called Senegal the test case for debt treatment. It should also become the test case for prevention.

Certification Before Approval

Your Executive Boards should require independent, ex-ante certification before any financing program or capital project is approved. It would confirm that safeguards against rent extraction are operational or, where they are not yet in place, that a time-bound plan of verifiable steps exists, with each disbursement released only as those steps are completed. After Enron and WorldCom, Sarbanes-Oxley made executives personally accountable for certifying internal controls. The same principle should apply to multilateral capital.

Lending to meet urgent humanitarian needs, after natural disasters, pandemics, or conflict, should be exempted so that relief is never delayed. Certification should be performed by a unit independent of the country teams that negotiate each operation. The IMF’s safeguards assessments and the World Bank’s Integrity Vice Presidency already work independently, but neither certifies before the money is approved.

Five Reforms for Domestic Capital Markets

Within that protection, five integrated reforms should be the priority:

1. Independent central banking and competent banking supervision: Central banks legally insulated from fiscal dominance must align the money supply with the needs of the economy. Paul Volcker, in his memoir Keeping At It, put stable prices first among his “three verities,” alongside sound finance and good government. Competent banking supervision must also ensure that banks are well capitalised and hold sufficient liquidity to prevent banking crises that could drag the economy down.

2. A constitutional budget rule: Over a presidential mandate or the economic cycle, day-to-day operating expenditures, including administrative running costs and public sector salaries, must be financed entirely from domestic revenues, not borrowed funds.

Borrowing is reserved for capital investments whose social returns demonstrably exceed their full costs. This is the “golden rule”: the government may borrow to build for the future, but not to pay its day-to-day bills. The rule must be anchored in the Constitution precisely to make it difficult to change. As IMF research on fiscal rules notes, rules enshrined in higher-level legislation are harder to reverse, even with a change of government.

An organic law, just below the Constitution, must define clearly what is a current expense and what is capital expenditure. Otherwise, as the IMF warns in its Manual on Fiscal Transparency, ordinary spending can be relabeled as investment to evade the rule. Is a teacher’s salary a running cost or an investment in human capital? The law must decide.

Strictly defined escape clauses should cover genuine emergencies: disasters, pandemics, or severe economic shocks.

Investment must also be approved on the basis of verifiable analysis showing that its social returns exceed its costs, subject to the subsequent independent audit set out below, so that it is not a formality. The World Bank’s Independent Evaluation Group found in 2010, in its most recent review of the question, that the share of Bank projects justified by cost-benefit analysis fell from 70 percent to 25 percent between the early 1970s and the early 2000s, and that the analysis was usually prepared after the decision had been made.

Projects that pass this test expand the supply side of the economy, support price stability, and generate the growth to repay their debt.

3. Fiscal visibility: A fully operational Government Integrated Financial Management Information System (GIFMIS) and a Treasury Single Account are needed. What cannot be seen cannot be managed.

In Fighting Corruption Is Dangerous, Dr Ngozi Okonjo-Iweala documented how enforcing GIFMIS and the Integrated Personnel and Payroll Information System (IPPIS) in Nigeria eliminated about 65,000 ghost workers and saved about $1.1 billion in fraudulent payroll costs. She also recorded how fragile these initiatives are: they faced resistance from line ministries and military entities seeking special waivers. Real-time visibility must be a prerequisite, not an option.

4. End-to-end electronic procurement: In Reforming the Unreformable, Dr Okonjo-Iweala showed that procurement, long treated as an untouchable patronage machine, is where systemic corruption most ruthlessly bleeds the public purse. A $111 million vaccine tender was awarded to an Abacha front company for vaccines worth merely $22.5 million. Mandatory e-procurement can reform what has long been labelled unreformable.

5. Bond market architecture: Secondary trading, robust creditor rights, benchmark yield curves, and a domestic base of pension funds and insurers, as set out in your own 2021 Guidance Note.

Figure 2 shows how these reforms fit together.

Why I Write to You Both

The Fund holds the levers on price stability, central banks, and fiscal reporting; the Bank, on financial systems, procurement, and projects. Certification by one alone would simply let rent-seeking migrate to the other’s window.

I also ask both institutions to commission an independent audit every five years, with auditors appointed by your Boards and results published in full. It should compare projects’ actual social returns with their costs and appraisals, and technical assistance with what was expected. What is not measured cannot be corrected. Where losses result from failures certification was meant to prevent, the lender should convert at least 10 percent of the outstanding balance into a grant, sharing the loss with citizens. A lender that shares the cost of failure has every incentive to make certification work.

By submitting yourselves to the same transparency and accountability you demand of your borrowers, you will lead by example and set the tone for development outcomes that your external stakeholders recognise as truly impactful.

The Choice Before the Bretton Woods Institutions

The ultimate test of your stewardship is not loan volumes but whether borrowing states graduate from borrowing from your institutions and can instead borrow on their own, from domestic savings and global capital markets, as Zeine Zeidane intimated in Bangkok. Investors will lend in local currency for 10, 20, or 30 years only when they can trust the fiscal accounts, the integrity of public spending, the independence of the central bank, and the stability of purchasing power.

Without ex-ante certification, multilateral funds will continue to cushion rent-seeking elites, fund compromised projects, and saddle Africans with debt that leads to austerity for the most vulnerable.

Doctors are bound by a first principle: “first, do no harm.” When lenders do not guard against diversion, citizens repay debt for money that never reached them. That is not responsible lending.

The five priorities set out here will neutralise rent-seekers and, over time, create deep and liquid domestic bond markets. Combined with a youthful population, a new generation of entrepreneurs, and the African Continental Free Trade Area, which the World Bank’s 2020 study estimates could raise the continent’s real income by 7 percent by 2035, these markets will lead to Africa’s emergence as an engine of economic growth and a major contributor to global prosperity in the emerging new world order.

Aboubakr Kaira Barry, CFA, Managing Director of Results Associates and Chair of the Omou Financial Literacy Centre, Bethesda, Maryland, United States.