Message in a bottle An Africa focused reflection of the 2025 IMF/World Bank Spring Meetings

Published May 9, 2025

The title of this piece, Message in a bottle, is not originally mine. It is borrowed from Nicholas Sparks 1998 publication whose introduction I often reflect on.

“The bottle was dropped overboard on a warm summer evening, a few hours before the rain began to fall. Like that of all bottles left to the whims of the ocean, its course was unpredictable. Winds and currents play large roles in any bottle’s direction; storms and debris may shift its course as well. Occasionally, a fishing net will snag a bottle and carry it a dozen miles in the opposite direction in which it was headed. The result is that two bottles dropped simultaneously into the ocean may end up a continent apart, or even on opposite sides of the globe. There is no way to predict where a bottle might travel, and that is part of the mystery”

The IMF/World Bank Spring Meetings, the annual pilgrimage for global economic punditocracy from Finance Ministers to Central Bankers and top tier policy wonks, is almost always a place of clarity and true North (whether actual or just perceived) as to how to align one’s sails based on the tide of the global economy.

The 2025 Spring Meetings, however, felt much like one huge leap in the dark.

It felt like a dose of Nicholas Sparks Message in a bottle when it says “Like that of all bottles left to the whims of the ocean, its course is unpredictable. Winds and currents play large roles in any bottle’s direction; storms and debris may shift its course as well. Occasionally, a fishing net will snag a bottle and carry it a dozen miles in the opposite direction in which it was headed. The result is that two bottles dropped simultaneously into the ocean may end up a continent apart, or even on opposite sides of the globe. There is no way to predict where a bottle might travel, and that is part of the mystery.”

Two things stood out from a broad perspective.

First, at a time when participants trooped to Washing DC scouting for radar on how to navigate the increasingly choppy waters of escalating tariff tensions, the messaging from the IMF and World Bank was eclipsed by outsized focus on the Trump administration, its commitment to the Bretton Woods led global financial architecture and what that meant from a priorities standpoint.

It was not lost on many that on April 23rd US Treasury Secretary, Scott Bessent, was speaking the Institute of International Finance and he held no punches making some fairly soothing (tongue in cheek) remarks about the reforms needed across the Bretton Woods. Whether by chance or design, April 23rd happened to be just a day before the signature IMF Managing Director’s Press Briefing at the Spring Meetings.

US Treasury Secretary, Scott Bessent, speaking about reforms needed at the IMF and the World Bank

Second, the IMF appeared to be treading the knife’s edge between not calling a recession and marking down its global growth forecasts substantially enough (cumulative downgrade of 80.0 bps to 2.8% in 2025 and 3.0% in 2026) to send a signal on just how much growth prospects are hunkering down in the wake of growing uncertainty.

It was a clear signal that whereas the Fund wished not to shout fire at the theatre and roil the markets, it was also not oblivious of the fact that risks had skewed considerably to the downside.

IMF Managing Director, Kristalina Georgieva, speaking on the 2025 & 2026 global growth forecast

All this flux notwithstanding, a few issues stood out for me at the 2025 Spring Meetings, especially from an African lens so let’s whip through them.

·      It will likely get worse before it gets better

The continent’s budding refinancing bonanza, after the 2022/2023 funding squeeze that shut majority out, is likely to slow-pedal if not screech to a grinding halt entirely. In 2024, under the weight of heavy hard currency maturities the window opened at eight African economies were able to tap into the global debt markets with just about US$13.0 billion worth of issuances while Benin, Côte d’Ivoire, Gabon and Kenya have been able to sustain this momentum and return to market in 2025.

With sovereign spreads for emerging and frontier markets now widening in the wake of escalating tariffs wars, global markets are poised to yet again become beyond reach for the most vulnerable economies as sovereign borrowing costs tick upwards and reignite default fears.

Sovereign spreads for emerging & frontier markets 2019 - 2025

·     Debt at Risk: IMF’s new Rosetta Stone

Historians tell us that some time in mid-1799 as Napoleon Bonaparte’s soldiers, in the course of the French invasion of Egypt, were setting up fortifications they chanced upon a large stone, in the town of Rosetta, with inscriptions in Greek side by side with those in Hieroglyphic and Demotic text, both used in ancient Egypt.

It was the juxtaposition of Greek text (which was understood) with Hieroglyphic and Demotic text (which were not understood) that enabled the soldiers to translate the ancient Egypt languages into content they could understand. It is the reason why we say Rosetta Stone when referring to things that give us a clue, help us decipher.

At the 2025 Spring Meetings, the IMF unveiled its new Rosetta Stone dubbed Debt at Risk which is a metric that in simple terms seeks to answer one question - how high could public debt rise in the event that a severe shock crystallises?

In its debut publication, IMF’s Debt at Risk framework establishes that global public debt could surge to a high of 115.0% of GDP in the event of a severe shock. To put this into perspective, 115.0% of GDP is a level last witnessed during World War II and 20.0 percentage points higher than current projections made.

Peeling beneath the layers of IMF’s Debt at Risk reveals a soft underbelly skewed towards emerging and frontier markets. For advanced economies, the scale of Debt at Risk has declined since the COVID19 pandemic. For emerging and frontier markets, the study by IMF finds that Debt at Risk has actually increased over the last decade.

IMF Fiscal Affairs Department Director, Vitor Gaspar, at the 2025 Spring Meeting Fiscal Monitor launch

·     IMF calls for pre-emptive debt restructuring

With the context of tightening global markets and Debt-at-Risk laid, I found it intriguing that the IMF is now calling for pre-emptive debt restructuring among some distressed economies and has, under the auspices of the Sovereign Debt Roundtable, gone as far as generating a debt restructuring playbook.

IMF MD, Kristalina Georgieva, calling for pre-emptive debt restructuring by some economies in distress

Three things come to mind:

1. Coming at a time when the Common Framework for debt restructuring has been widely criticised for below target yield at a time when global debt distress needs have been elevated, the Debt Restructuring Playbook looks like an effort to lay bare the vast contours and technicalities (from securing a Staff Level Agreement with the Fund to a Memorandum of Understanding with creditors) that sovereigns that have fallen into arrears have to navigate to ink a deal around restructuring
2. While reading the Debt Restructuring Playbook, I think a lot of attention needs to be drawn to the area on how to determine one’s debt restructuring strategy and the available pathways including going the Common Framework Route (i.e, aggregating all G20 & Paris Club creditors having claims on the economy); or the Paris Club+ route (i.e, Paris Club plus additional targeted creditors); or separate negotiations with different creditors. This bit is especially critical because of the growing share of non-Paris Club creditors in the constitution of Global South debt and the complexity this has introduces in the debt restructuring process
3. I would have expected a lot more guidance from the Debt Restructuring Playbook on determination of the crucial Cutoff Date (i.e, the specific date established before which loans must have been contracted to be eligible for restructuring). It surely cannot be enough to say “having early clarity on the cutoff date is critical as new financing provided after it are excluded from restructuring”. Coming at a time when the debate is shifting from one anchored on the need for restructuring to one on whether the scale of restructuring was adequate given the multiplicity of shocks, the playbook falls far short of expectations on the question of the Cutoff Date

Screenshot of the Sovereign Debt Restructuring Playbook focus on the Cutoff Date

Finally, it is likely that the restructuring process will still remain a long drawn out process where debtor economies will be left to muddle through the process with difficulty as creditors wait out one another on the contentious subject of the haircut.

The Debt Restructuring Playbook, while giving the broad contours of the sticky issue of Comparability of Treatment, remains silent on the fact that it remains the live wire in the restructuring process as some creditors view it as George Orwell’s Animal Farm where all animals are equal, but some animals are more equal than others.

The Debt Restructuring Playbook on Comparability of Treatment