Africa’s economic resilience masks rising inflation threat and fragile buffers, IMF warns

Johannesburg, October 15 - Sub-Saharan Africa's economic growth outlook has improved, but inflation risks loom, according to a revised forecast from the International Monetary Fund (IMF). The fund has raised its 2026 growth projection for the region from 4.3% to 4.5%, attributing the increase to global supply adjustments and domestic reforms. However, the revised outlook reveals a worsening inflation scenario, with median inflation expected to rise from 3.4% in 2025 to 4.3% in 2026 and 5.0% in 2027.

IMF's Zeine Zeidane, director of the African Department, emphasized the need for monetary policy to remain data-dependent, with a focus on bringing inflation under control. He cautioned that monetary tightening may be necessary for most countries, a stronger warning than the April projection of a "difficult balancing act." Interest payments now account for about 12% of government revenue in the region, and the US 10-year Treasury yield has increased from 4% to 5.2% since late February, raising borrowing costs.

Despite some progress in debt restructuring, challenges persist. Ethiopia, Ghana, and Zambia have made strides, but the processes have taken years, and delays in debt restructuring can hinder access to IMF financing, deepen debt distress, and complicate economic adjustments. The Fund has urged for new restructuring playbooks and templates to expedite future cases and improve information-sharing between creditors and debtors.

Another emerging risk is the widening gap between commodity exporters and importers. Oil exporters' current-account surpluses have surged to 4.4% of GDP from 1.6%, while non-resource-intensive economies face widening deficits of 5.8% from 3.4%. This disparity is more pronounced than previously anticipated. Additionally, bilateral aid is projected to decline by 12% in 2026 after dropping roughly a quarter in 2025.

Climate-related risks, such as El Niño, are now considered a significant threat. The climate shock event could disrupt agriculture, exacerbate food security issues, and reduce growth by half a percentage point. Inflation could rise by 2.6 percentage points in 2027, as per IMF simulations. Zeidane stressed that worse outcomes than those outlined in the current outlook cannot be ruled out, and the IMF stands prepared to provide emergency financing across its 18 active country programs.