KEY POINTS
- The IMF projects Sub-Saharan Africa’s economy will grow by 4.5 per cent in both 2026 and 2027.
- The 2026 forecast is 0.2 percentage points higher than the Fund’s April projection.
- Median inflation is expected to rise from 3.4 per cent in 2025 to 4.3 per cent in 2026 and 5 per cent in 2027.
- The Fund warns that rising energy costs, expensive borrowing and declining foreign aid could worsen economic pressures.
- The IMF urges governments to protect vulnerable households, maintain economic stability and pursue reforms to boost productivity and investment.
MAIN STORY
The International Monetary Fund (IMF) has projected that Sub-Saharan Africa’s economy will grow by 4.5 per cent in both 2026 and 2027, despite the ongoing conflict in the Middle East and a challenging global economic environment.
Zeine Zeidane, Director of the IMF’s African Department, disclosed the projections during a news briefing on the October Regional Economic Outlook Update for Sub-Saharan Africa in Bangkok, Thailand, on Thursday.
The 2026 growth forecast represents an upward revision of 0.2 percentage points from the IMF’s April projection. Zeidane attributed the improved outlook to the region’s economic resilience, reforms implemented before the latest global disruptions and businesses’ ability to adjust to changing conditions.
However, he warned that the regional growth forecast concealed significant differences among economies. Commodity exporters are benefiting from higher oil, copper and gold prices, while countries with less reliance on natural resources are experiencing slower growth and widening external deficits.
Rising fuel and transportation costs, alongside the prospect of more expensive fertiliser, could further increase living costs and threaten food security across the region. The IMF projects median inflation to rise from 3.4 per cent in 2025 to 4.3 per cent in 2026 and five per cent in 2027.
Zeidane said reforms undertaken before the current shock had helped strengthen the region’s capacity to withstand external pressures. These included subsidy and exchange rate reforms in Ethiopia and Nigeria, as well as structural reforms in South Africa.
He also cited the rerouting of global energy supplies, the use of existing inventories and adjustments to business sourcing and logistics as factors that had helped cushion the effects of international disruptions.
Despite these buffers, governments face constraints in responding to additional economic shocks. Earlier fiscal adjustments had helped reduce budget deficits and debt ratios, but limited fiscal space continues to restrict the resources available for new interventions.
Interest payments account for about 12 per cent of government revenue in a typical country in the region, according to Zeidane. The burden leaves governments with fewer resources for essential public services and investment.
Although some countries have retained access to international capital markets, borrowing costs remain high. Zeidane also warned that greater reliance on domestic banks to finance government spending could reduce credit available to businesses and households while increasing banks’ exposure to government debt.
The region’s financing challenges are compounded by declining bilateral aid. The IMF official said assistance to Sub-Saharan Africa was expected to fall by another 12 per cent in 2026, following a sharp reduction in 2025.
He warned that renewed disruptions to energy supplies, a sharp increase in global risk aversion or a strong El Niño weather event could intensify economic pressures. Conflict and insecurity also continue to weigh on economic activity in parts of the region.
Against this backdrop, Zeidane said the balance of risks remained firmly tilted to the downside, despite the region’s demonstrated ability to adapt to difficult conditions.
He urged policymakers to protect vulnerable households, preserve economic stability and implement reforms that could support sustainable long-term growth.
On social protection, he advised governments against broad fuel-price relief measures, arguing that they were expensive and poorly targeted. Instead, he recommended targeted assistance, including school feeding programmes and geographically focused support, particularly in countries with weak social protection delivery systems.
Where temporary fuel-price relief is necessary, he said it should be transparently funded, capped and time-bound to prevent additional pressure on public finances.
For commodity-exporting countries, Zeidane recommended saving most windfall revenues, including by repaying expensive debt. He also said monetary tightening might be necessary in many economies to prevent temporary price increases from becoming persistent inflation.
Beyond immediate stabilisation measures, the IMF called for continued reforms to improve electricity supply, expand digital connectivity, strengthen workforce skills and create a more predictable business environment capable of attracting private investment and generating jobs.
Zeidane also advocated stronger regional trade and electricity integration to expand markets and reduce dependence on imported fuel.
He said these reforms were particularly important because Sub-Saharan Africa continued to face a substantial productivity gap compared with other emerging and developing economies. Closing even part of that gap, he added, could create significant opportunities for stronger and more inclusive growth.
The IMF reaffirmed its commitment to supporting countries across the region through financial assistance, policy advice and capacity development tailored to their individual circumstances.
THE ISSUES
The IMF’s growth forecast suggests that Sub-Saharan Africa’s economy could continue expanding despite external shocks. However, higher projected inflation, rising energy and transport costs, and expensive borrowing could weaken the benefits of that growth for households and businesses.
Governments also face a difficult balancing act. Broad subsidies and price relief could offer immediate support but strain public finances, while tighter monetary policy could help contain inflation but also affect borrowing conditions.
Declining foreign aid adds to these pressures, increasing the importance of domestic revenue mobilisation, efficient public spending and reforms that encourage private investment and productivity growth.
WHAT’S BEING SAID
- “Although some countries have maintained access to international markets, borrowing costs remain high, while increased reliance on domestic banks for government financing can reduce credit available to businesses and households. Such borrowing can also increase the banking system’s exposure to government debt. – ”Zeine Zeidane, Director of the IMF’s African Department
- “This leaves the region with little room to absorb another shock. Renewed disruption to energy supplies, a sharp increase in global risk aversion, or a strong El Nino can all intensify pressures. Conflict and insecurity remain an additional drag in parts of the region. – ”Zeine Zeidane, Director of the IMF’s African Department
- “The region’s experience of difficult reforms and rapid adaptation offered grounds for confidence. Protecting vulnerable populations, preserving macroeconomic stability and sustaining productive investment are, however, essential to converting resilience into lasting prosperity. – ”Zeine Zeidane, Director of the IMF’s African Department
WHAT’S NEXT
Governments across Sub-Saharan Africa will need to balance measures to cushion households against rising living costs with efforts to preserve fiscal and monetary stability. The region’s ability to manage further external shocks will also depend on energy security, financing conditions, social protection systems and the pace of structural reforms.
BOTTOM LINE
The IMF expects Sub-Saharan Africa to grow by 4.5 per cent in 2026 and 2027, but rising inflation, high borrowing costs and declining foreign aid threaten to undermine that outlook. The Fund is urging governments to protect vulnerable households while pursuing reforms that can strengthen productivity, attract investment and make growth more inclusive.
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