IMF/WORLD BANK ANNUAL MEETINGS | ECONOMY
The International Monetary Fund projects sub-Saharan Africa’s economy to grow by 4.5 percent in both 2026 and 2027, upgrading its forecast as economic reforms and business adaptation help the region weather global shocks. However, rising fuel, transport, and food costs, expensive borrowing, declining foreign aid, and limited fiscal buffers threaten to undermine growth, particularly in countries that do not export commodities.
“The region’s resilience is real, and it reflects difficult reforms and remarkable adaptation,” IMF’s Africa Department director, Zeine Zeidane, remarked, commending the region’s policymakers’ hard work during his opening remarks Thursday at the Fund’s Regional Economic Outlook for Sub-Saharan Africa press conference in Bangkok following the release of the report. “But resilience is not immunity,” he cautioned.
The Fund raised its growth forecast for the SSA region by 0.2 percentage points from April, citing the resilience of African economies following reforms to subsidies, exchange rates, and other areas of economic policy. But inflation is expected to climb from a median of 3.4 percent in 2025 to 4.3 percent this year and 5 percent in 2027, as higher fuel and transport costs feed into prices and more expensive fertilizers threaten to push up food costs, adding to pressure on households and governments already struggling with high debt-service costs.
However, this pressure is uneven across the region, the report noted. Higher oil, copper, and gold prices are benefiting some commodity exporters such as Nigeria, the Democratic Republic of Congo, and South Africa, while economies less reliant on natural resources are facing slower growth and widening external deficits.
In responses to questions from Africa Bazaar, an IMF spokesperson said that to address inflation, and other challenges, policymakers would need to prevent current price increases from becoming entrenched while protecting households already struggling with higher living costs.
“Monetary policy should remain data-dependent. For most countries in the region, tightening may be needed to prevent inflation from becoming persistent, particularly where inflation is already above target and price pressures are spreading,” the spokesperson said.
Fiscal policy also has a role, the spokesperson said, but governments should focus on support that reaches those most affected rather than introduce broad measures that strain public finances.
“Fiscal policy should support these efforts through credible adjustment while protecting the most vulnerable through well-targeted, temporary, and funded measures,” the spokesperson said.
The Fund also noted that broad fuel subsidies are an expensive way to protect households. Zeidane stated in remarks that generalized fuel-price smoothing could cost about 4 percent of gross domestic product, while targeted transfers providing the same benefit to the poorest 40 percent of the population would cost at most 0.5 percent of GDP.
“It’s better to support people who need support than supporting product that actually can affect both your fiscal position, but also, for oil importers, for example, the level of import bill that you have,” he underscored.
That piece of advice might prove challenging given many governments on the continent are trying to contain the cost of living while managing debt obligations that leave less money for public services and investment. Interest payments absorb about 12 percent of government revenue in the typical country in the region, according to the IMF spokesperson, while borrowing costs remain elevated.
Although African governments have continued to issue international bonds, falling risk spreads have not necessarily translated into cheaper financing. Benchmark borrowing rates have risen, offsetting some of the gains countries have made in reducing their own borrowing premiums.
“We have seen already in the first nine months is around 12 billions of international issues, Eurobond,” Zeidane said, referring to international bond issuance in the region. He noted that U.S. 10-year Treasury yields had risen by more than 100 basis points over the year, pushing up the underlying cost of borrowing.
“It’s more case by case to look at whether it makes sense to mobilize financing, compared also to the local conditions,” he said.
The cost of borrowing is also central to the discussion over the newly established Africa Credit Rating Agency and whether it can help improve the continent’s financing and investment outlook.
The IMF spokesperson said the agency could give investors access to more African data and expertise, but its ability to reduce borrowing costs would depend on whether investors trust its assessments. “The new Africa Credit Rating Agency could bring more African data, expertise, and context to investors. Whether it helps lower borrowing costs will depend on its independence, technical rigor, and credibility with investors,” the spokesperson told the Africa Bazaar.
The IMF generally do not get involved in the work of credit rating agencies. Zeidane said countries seeking lower borrowing costs should focus on their economic fundamentals, fiscal frameworks and debt transparency, while developing domestic capital markets to broaden their sources of financing.
A deeper local-currency debt market, supported by institutional investors such as pension funds and insurance companies, could give governments more options for raising money and provide benchmarks for businesses seeking credit. But rising government financing needs can also leave banks with less capacity to lend to the private sector.
“The more you have financing needs for government, the more you, the risk of crowding out a private sector is there,” Zeidane said.
The immediate concern for the IMF is whether governments can manage these pressures without sacrificing the progress made in stabilizing their economies.
“The most urgent challenge is protecting vulnerable households from higher living costs without undermining macroeconomic stability. Many countries have very limited fiscal and external buffers with which to absorb another shock,” the spokesperson told Africa Bazaar.
The risks include further disruptions to energy supplies, tighter global financial conditions and severe weather, particularly El Niño, which could add to food-price pressures. Conflict and insecurity remain an additional drag in parts of the region.
‘The priority is therefore to rebuild fiscal and external buffers, while targeting support to those most exposed and preserving essential investment in long-term growth,” the spokesperson said.
The IMF is also urging governments to continue reforms aimed at attracting private investment and creating jobs. Zeidane said better governance, a stronger business environment and greater integration with international markets could make a substantial difference to the region’s growth prospects.
An IMF analysis of the region found that closing half the gap between Africa and other emerging and developing economies in governance, business conditions and international integration could increase the continent’s GDP by more than 20 percent over five to 10 years.
“Capital is not only coming from outside, it will also come from inside, so you can better mobilize the domestic savings in the continent,” Zeidane said.
