War-induced Shocks Threaten Africa’s Hard-won Economic Gains – IMF

The International Monetary Fund (IMF) has warned that Sub-Saharan Africa’s economic recovery is facing a fresh and potentially destabilising test, as global shocks linked to the Middle East conflict threaten to erode years of hard-won reforms.

In a recent blog post, IMF African Department Director Abebe Aemro Selassie said the region entered 2026 on a strong footing, recording its fastest growth in a decade at 4.5 per cent in 2025.

The expansion was supported by improved macroeconomic management, rising investment, and a relatively favourable external environment.

Countries such as Benin, Côte d’Ivoire, Ethiopia, and Rwanda led the growth surge, each posting output above 6 per cent. Inflation moderated significantly across the region, falling to a median of about 3.5 per cent, while public debt levels began to ease following years of fiscal strain.

Selassie noted that these gains were the result of “politically difficult but meaningful reforms,” including exchange rate adjustments, tighter monetary policies, and improved public spending efficiency.

Fiscal consolidation has also been notable, with the region’s primary balance approaching equilibrium, in contrast to wider deficits in advanced and other emerging economies.

However, the IMF cautioned that the ongoing conflict in the Middle East has introduced a major external shock. Rising global prices for oil, gas, and fertiliser, coupled with disrupted trade routes and tighter financial conditions, are now weighing heavily on Africa’s economic outlook.

Growth across Sub-Saharan Africa is projected to slow to 4.3 per cent in 2026, about 0.3 percentage points below earlier forecasts. Inflation is also expected to edge higher, adding pressure on households already grappling with elevated living costs.

The impact is uneven. Oil-importing countries—many of them low-income or fragile states—face worsening trade balances and increased cost burdens.

While oil exporters may benefit from higher crude prices, the IMF warned they remain vulnerable to price volatility and the risks of excessive spending during boom periods.

Beyond macroeconomic pressures, the social consequences could be severe. The Fund highlighted rising food insecurity risks, noting that higher fertiliser and shipping costs have already begun to drive up food prices.

A 20 per cent increase in global food prices could push more than 20 million people into food insecurity, with millions of children at risk of acute malnutrition.

Compounding these challenges is a sharp decline in foreign aid flows. According to the IMF, 2025 marked a structural break in concessional financing, with the steepest cuts affecting the most fragile economies. This trend threatens essential services, particularly healthcare, in countries with limited alternative funding sources.

Debt vulnerabilities are also intensifying. More than one-third of countries in the region are either at high risk of debt distress or already experiencing it, while rising interest costs continue to crowd out critical development spending.

Despite the mounting pressures, the IMF urged policymakers to stay the course on reforms. Priorities include anchoring inflation expectations, protecting vulnerable populations through targeted support, and avoiding procyclical fiscal policies.

Looking ahead, Selassie stressed the importance of structural reforms to sustain growth and resilience. Improving governance, enhancing the business environment, and deepening regional trade under the African Continental Free Trade Area were identified as key drivers of long-term stability.

“The optimism that greeted 2026 was earned,” he noted, adding that the policy choices made now will determine whether Africa’s recent economic gains can be preserved in the face of mounting global uncertainty.