Middle East Crisis Weakens 29 African Currencies As Debt Service Rises

No fewer than 29 African currencies have depreciated amid rising global uncertainties, worsening the debt burden of countries across the continent and tightening fiscal conditions, a new joint policy brief has revealed.

The report, released by the African Development Bank (AfDB), African Union (AU), United Nations Development Programme (UNDP) and the United Nations Economic Commission for Africa (UNECA), linked the development to the economic fallout from the ongoing Middle East conflict, which has triggered sharp increases in oil prices and heightened macroeconomic pressures.

The report found that currency depreciation has significantly increased the local-currency cost of servicing external debt, while also making imports more expensive and weakening foreign-exchange reserves in affected countries.

The institutions noted that oil prices have surged by about 50 per cent as of March 24, intensifying inflationary risks and compounding existing economic challenges, particularly for countries with high debt service obligations and heavy dependence on fuel and food imports.

They identified countries such as Senegal, Sudan, Cabo Verde, South Sudan, and The Gambia as among the most vulnerable, citing their low reserves and heightened exposure to external shocks. The report warned that the combined impact of exchange rate depreciation and rising import costs could further squeeze public finances and heighten the risk of debt distress.

Beyond the currency pressures, the report projected that Africa’s economic growth could weaken if the Middle East crisis persists, noting that a prolonged conflict could reduce the continent’s GDP growth by at least 0.2 percentage points in 2026.

It added that the situation could trigger a broader cost-of-living crisis, driven by rising food and fuel prices, higher shipping and insurance costs, and tighter financial conditions, with vulnerable households expected to bear the brunt.

While some countries, including Nigeria, may record short-term gains from higher oil prices and shifting trade routes, the report stressed that such benefits remain limited and uneven compared to the wider economic pressures facing the continent.

To mitigate the impact, the institutions called for coordinated policy actions, including stronger domestic revenue mobilisation, improved monetary and exchange rate management, and deeper financial market reforms. They also emphasised the need for innovative financing options to support countries facing growing fiscal constraints.

The report further urged African governments and regional institutions to strengthen economic coordination and accelerate reforms to the continent’s financial architecture, warning that failure to act decisively could undermine recovery efforts and exacerbate existing vulnerabilities.

Chairperson of the African Union Commission, Mahmoud Ali Youssouf, commenting, cautioned that continued escalation of the conflict is worsening global instability, with far-reaching implications for energy markets, food security and economic resilience, particularly across Africa where vulnerabilities remain pronounced.

Also, Executive Secretary of the United Nations Economic Commission for Africa, Claver Gatete, said Africa has been hit by multiple external shocks beyond its control, stressing the need for decisive action to protect vulnerable populations while accelerating long-term structural reforms.

He emphasised the urgency of advancing energy security, food sovereignty and financial self-reliance, noting that recurring crises highlight the need for Africa to mobilise domestic resources and strengthen regional resilience frameworks.

On her part, UN Assistant Secretary-General and Director of the UNDP Regional Bureau for Africa, Ahunna Eziakonwa, said the situation demands strong leadership both within the continent and among its global partners.

She noted that with the right mix of policy choices, financing tools and political commitment, African economies can weather the current shocks and emerge more resilient, self-reliant and better positioned to shape their economic future.