Highlights on economic situation:

Sub-Saharan Africa’s Recovery Holds, but the Risks Are Rising

• Economic growth in Sub-Saharan Africa is projected to remain at 4.1 percent in 2026, unchanged from 2025, but downside risks are increasing. The region’s recovery from successive global shocks is losing steam, with growth projections for 2026 revised downward by 0.3 percentage points from forecasts previously published in the October 2025 edition of Africa’s Pulse.
• Domestic demand continues to underpin growth, supported by private consumption and investment amid accommodative monetary policy and improving external conditions. A weaker U.S. dollar has eased inflationary pressures and increased household incomes across countries in the region. Meanwhile, high prices for precious metals and beverages (coffee and cocoa) boosted revenues in 2025 and are expected to further strengthen fiscal and external positions in resource-rich countries this year.
• Rising geopolitical spillovers from the Middle East, coupled with heavy debt-service burdens and deep-seated structural weaknesses, are eroding growth prospects and stalling job creation. These risks have intensified since February 28, when the conflict in the Middle East rapidly escalated, including direct attacks on energy production facilities and severe disruption to shipping through the Strait of Hormuz. The severity of the conflict’s impact on Sub-Saharan Africa will depend on the duration of hostilities, the scope of the conflict’s regional spillovers, and the level of damage to critical infrastructure. The effects are expected to be transmitted predominantly through four channels: trade, investment, financial markets, and labor.
• The conflict in the Middle East will affect the region primarily through the trade channel, notably via heightened volatility in global energy markets. Prices of Brent crude oil and liquefied natural gas have risen sharply, while fertilizer prices have also increased amid disruption to shipments through the Strait of Hormuz. These developments threaten both current and future planting seasons, potentially exacerbating food insecurity. Disruptions to domestic food production and rising food import costs are likely to translate into higher food prices. Combined with increased fuel costs, these pressures are expected to increase inflation—particularly in oil-importing countries—potentially prompting central banks to tighten monetary policy.
• In recent years, Gulf countries have emerged as significant investors across Africa, with greenfield foreign direct investment commitments in Sub-Saharan Africa exceeding US$100 billion in 2022–23 alone. The ongoing conflict risks slowing down this momentum, as sovereign wealth funds reassess exposure and investment priorities, potentially delaying large-scale projects in energy (including hydrogen, solar, and wind projects), infrastructure (ports, warehouses and data centers), logistics, mining, and agriculture. The conflict has also increased risks to remittance flows, a critical lifeline for many African households—particularly in highly remittance-dependent countries such as the Comoros, The Gambia, Lesotho, and Liberia. A prolonged conflict could further reduce inflows as weaker labor demand, slower hiring, and rising repatriations affect sectors such as hospitality and construction.
• The conflict in the Middle East is evolving into a combined energy and food shock for African countries, at a time when governments are already constrained by rising debt-service obligations, limiting their capacity to respond to the crisis or finance development priorities. At the same time, declining external financing—particularly reduced development assistance—is intensifying pressures, especially for low-income countries. These challenges are unfolding amid heightened global policy uncertainty, escalating trade tensions, and the risk of abrupt tightening of global financial conditions, including higher risk premiums. Together, these external shocks could weaken export performance and further constrain access to financing.
• Sub-Saharan African governments’ responses to the energy price shock have varied according to their fiscal space and reliance on fuel imports. Some countries have cushioned consumers by reducing or repurposing fuel levies and stabilization funds (Kenya and Namibia) or introducing emergency fuel subsidies (Ethiopia), while others with limited fiscal room have raised regulated fuel prices or caps (Ghana, Malawi, Mali, and Tanzania). In countries with little capacity to intervene, fuel prices have surged sharply (Somalia and Zimbabwe). As untargeted fuel subsidies are regressive and difficult to unwind, a more effective response is to scale up targeted and temporary social protection, repurposing subsidy resources to strengthen shock preparedness and response while enabling rapid, scalable support—including short-term measures to improve access to employment, particularly in rural agricultural value chains.

The Widening Inflation Slowdown in Africa Confronts Rising Geopolitical Shock Risks

• Prior to the conflict, inflation was declining across an increasing number of Sub-Saharan African countries, but the pace of disinflation varied widely. The median rate of inflation in the region dropped from 4.4 percent in 2024 to 3.7 percent in 2025. Inflation is projected to rise to 4.8 percent in 2026—driven largely by the anticipated effects of the conflict in the Middle East— before easing to about 3.8 percent over the 2027–28 forecast horizon. Roughly 70 percent of Sub-Saharan African economies (33 of 47) experienced an inflation slowdown in 2025.
• This period of declining inflation was aided by declining global fuel and food prices, improved external balances, stronger and more-stable currencies, and tighter monetary policy. Prior to the current conflict in the Middle East, international food and fuel prices continued trending down in 2025, thanks to positive supply expansion. African currency gains have reflected improved (global and domestic) financial conditions, higher Forex inflows due to market reforms, rising export earnings from favorable commodity prices (particularly metals and minerals and beverages), and a weaker U.S. dollar. The slowdown of inflation in countries such as Angola, Ethiopia, Ghana, and Nigeria has created room for further monetary policy easing. However, upside risks to inflation remain—global uncertainty, higher fuel and food prices well as a stronger dollar stemming from conflict in the Middle East, and domestic fiscal slippage could reignite inflationary pressures and slow, or even reverse, the normalization of monetary policy.

Fiscal Consolidation Advances, but Debt Burdens and Service Pressures Remain High

• Primary fiscal deficits in Sub-Saharan Africa are projected to be near balance by 2026–28, following gradual improvements since 2021. Government efforts to align revenues more closely with primary expenditures continue. The regional primary deficit declined from a peak of 3.2 percent of gross domestic product (GDP) in 2020 to a projected 0.7 percent of GDP in 2025, and a balanced fiscal account is expected in 2026. Between 2024 and 2026, more than 60 percent of the region’s countries are expected to record improvements in their primary balances.
• Despite this progress in balancing revenues and expenditures, the overall deficit remains elevated due to persistently high net interest payments on the public debt. Mounting interest payments exceed public spending on health or education in four out of five African countries. The budget deficit is projected to decline from 5.6 percent in 2020 to 3.5 percent in 2026, and to narrow further to 3.1 percent in 2027–28. Interest payments on public debt are projected to fluctuate between 2.9 and 3.2 percent of GDP over 2023–26.
• Public debt ratios in Sub-Saharan Africa are beginning to stabilize after a decade of rapid accumulation, but vulnerabilities remain high. The region is currently facing an environment characterized by the challenge of managing large existing debt stocks—and reduced disbursements—amid tighter financing conditions, rising repayment pressures, and higher risk of external shocks.
• External debt service pressures are rising sharply despite stabilizing stocks. External public debt service-to-revenue is projected to increase from 15.4 percent in 2024 to about 18.2 percent in 2025. The region faces a surge in amortizations, with principal repayments jumping from US$37 billion in 2024 to US$59.2 billion in 2025 due to maturing commercial bank loans, higher bond redemptions, and the resumption of payments under restructurings. Repayments are projected to stabilize at an elevated amount of US$47 billion to US$50 billion annually over 2026–28.
• Debt vulnerabilities remain historically high, reflecting containment—not resolution—of pressures that began during the COVID-19 pandemic and the subsequent global monetary policy tightening cycle. By the end of 2025, roughly half the countries in the region (25 of 48) were classified as being at high risk of debt distress or already in distress—with low-income and lower-middle-income countries accounting for 22 of the 25 countries. This underscores the limited resilience of the region’s poorest economies