- Africa Faces Mounting Risks Just as Growth Gains Take Hold
Sub-Saharan Africa’s economies entered 2026 with significant momentum. The region had notched its fastest growth rate in 10 years—4.5 percent in 2025—buoyed by reduced macroeconomic imbalances, rising investment levels, and a generally supportive external environment. Countries such as Benin, Côte d’Ivoire, Ethiopia, and Rwanda led the charge, with growth exceeding 6 percent. The median inflation rate fell to about 3.5 percent and public debt levels had started to decline. These gains were hard-won, the fruit of politically difficult but meaningful reforms such as exchange-rate realignments, better spending allocation, and tighter monetary policies.
Progress on the fiscal front has been particularly impressive. The region’s general government primary balance has been steadily improving and is now near balance. By contrast, primary deficits in both advanced economies and other emerging markets remained noticeably wider in 2025 than before the pandemic. Sub-Saharan Africa achieved this consolidation while simultaneously sustaining reasonably decent growth and bringing down inflation, thanks to bold reforms and notwithstanding headwinds from elevated global uncertainty and much reduced concessional financing.
And just as the region has begun to secure these gains, the war in the Middle East has brought a significant new shock that threatens to stall, or even unwind, that progress. It has pushed up global prices for oil, gas, and fertilizer, disrupted trade routes, and tightened financial conditions. These developments are weighing on the region’s outlook.
We expect growth to slow to 4.3 percent this year, some 0.3 percentage points below pre-war forecasts, while inflation is projected to rise. That may sound benign by global standards, but for a region where rapid growth is imperative to create millions of new jobs for the rapidly expanding population, any hit to growth is problematic. Oil importers, many of them low-income or fragile states, face worsening trade balances and rising living costs. Oil exporters may benefit from higher oil prices, but remain exposed to volatility and the temptation of procyclical spending.
And the risks are mounting. A prolonged conflict could further inflate commodity prices, trigger a risk-off episode in global markets, and force abrupt fiscal adjustments in countries with large refinancing needs. In a severe downside scenario, as detailed in the IMF’s latest World Economic Outlook, regional output this year could fall 0.6 percent below pre-war forecasts, with oil importers suffering the most, and inflation could surge by an additional 2.4 percentage points.
The human costs are equally stark. Food insecurity looms large: the region remains acutely vulnerable to food-price shocks, and the war has already driven up fertilizer and shipping costs. A 20 percent rise in international food prices could push more than 20 million people into food insecurity and leave 2 million children under age 5 acutely malnourished. Climate shocks intensify the strain—the recent floods in Mozambique and Madagascar serve as a reminder of the region’s deep vulnerability to weather disruptions.
The unprecedented decline in foreign aid strips away a critical buffer. Unlike past contractions, 2025 marked a sharp structural break in aid flows, with cuts falling hardest on the most fragile states and threatening to unravel essential services—healthcare above all—in countries with no alternative source of finance.
Debt vulnerabilities are also rising. More than one-third of countries are at high risk of, or already in, debt distress. In 21 countries, fiscal deficits exceed the levels that are needed to stabilize debt. Rising interest bills and dwindling concessional finance are inflating debt-service burdens and crowding out essential development spending. In some cases, growing reliance on domestic borrowing has deepened ties between government debt and bank balance sheets, raising the specter of financial instability.
In this fraught environment, policymakers must navigate competing pressures. In the short term, they should anchor inflation expectations, shield the most vulnerable from rising prices, and avoid procyclical fiscal policies. Oil exporters should treat windfalls as fleeting, using them to rebuild buffers and strengthen social safety nets. Oil importers with fiscal space can offer targeted, time-bound support; those without must focus on increasing the efficiency of spending and boosting domestic revenues.
Even as policymakers grapple with the immediate shock, the medium-term reform agenda cannot wait. The premium on accelerating structural reforms—to boost growth and resilience—is now even higher. Improving the business climate, strengthening governance, and reforming state-owned enterprises, especially in energy, transport, and telecommunications, can help attract investment and lift productivity. Deepening regional integration through the African Continental Free Trade Area could bolster supply-chain resilience and expand markets for local producers.
Digital transformation offers promise, but also highlights the region’s infrastructure gaps. Artificial intelligence is already helping farmers boost yields, doctors improve diagnoses, and students master difficult concepts faster. But scaling such innovations will require investing in electricity, internet access, digital skills, and data governance. Today, just 53 percent of the region’s population has access to electricity, and only 38 percent to the internet.
International role
The international community has a role to play, especially when the economic troubles facing many countries stem largely from shocks beyond their control. Predictable financing, technical assistance, and capacity-building support can help countries weather current storms and sustain reform momentum. Aid should be prioritized for low-income and fragile states, where alternative sources of finance are scarce. The IMF is already deeply engaged, with programs in 22 of the region’s 45 countries, and stands ready to scale up support for members facing acute balance-of-payments pressures linked to the war.
The optimism that greeted 2026 was not misplaced: it was earned, through years of difficult but necessary reform. The fallout from the war in the Middle East is now testing that progress, but it does not need to erase it. African policymakers have demonstrated they can deliver under pressure. The choices they make now—whether to hold the line on inflation, protect the vulnerable from the worst of the shock, and resist the temptation to unwind the reforms that got them here—will determine whether these hard-won gains endure. The job of the international community is to support that effort. But the boldness and resolve that the moment demands must come from within the region itself.
