Sub Saharan Africa: Steady Growth Amid Fiscal Challenges
IMF Blog, November 18, 2025
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Bibliographic details
- Authors: Abebe Aemro Selassie, Amadou Sy
- Published: November 18, 2025
Overview
- Authors: Abebe Aemro Selassie, Amadou Sy
- Date: November 18, 2025
- Central message: The region’s economies are proving resilient amid turbulent external conditions, but rising fiscal, monetary, and external pressures threaten hard-won reforms and future shock response capacity.
Growth projections and performance
- Economic growth is projected to hold steady at 4.1 percent this year, with a modest pickup to 4.4 next year.
- The region includes several of the world’s fastest growing economies: Côte d’Ivoire, Ethiopia, Rwanda, and Uganda.
- Resource-dependent and conflict-affected states show modest gains in income per person—around 1 percent a year on average, and less in the poorest countries.
External environment and commodity dynamics
- Commodity price movements are mixed: oil prices slid since April, while cocoa, coffee, copper, and gold prices are up.
- Countries face high borrowing costs, though lower than earlier this year; Angola, Kenya, Nigeria and the Republic of Congo recently returned to the international bond market.
- Global trade policy and aid landscape deterioration:
- Tariffs on exports to the United States have increased.
- Preferential access under the African Growth and Opportunity Act has expired.
- Tariff-exposed trade is relatively modest for most countries in the region, but trade tensions will transmit through dimmer global growth prospects and volatile commodity prices.
- Foreign aid has dropped sharply, hitting poorer and fragile states hardest and constraining government reprioritization efforts amid capacity limits.
Fiscal and financial vulnerabilities
- Debt service costs are rising fast, squeezing budgets and the space for development spending.
- Fiscal fragility is pronounced, particularly among low-income economies; Twenty countries are now either in or at high risk of debt distress.
- Shift toward domestic borrowing increases banks’ exposure to government debt risk.
- Inflation, though easing overall, still exceeds 10 percent for about a fifth of the region’s economies.
- International reserves have been rebuilt in some countries but remain stretched across much of the region.
Policy priorities — Raising revenue
- Priority: mobilize domestic revenues to create lasting fiscal space amid scarce external financing and heavy debt burdens.
- Lessons from reformers (examples: Ghana, Rwanda, Tanzania):
- Digitize tax systems.
- Pilot reforms.
- Support tax officials.
- Engage citizens.
- Key design and sequencing considerations:
- Attention needed to both tax policy (what and how much to tax) and tax administration (how to collect).
- Public support is critical; limited public support can derail poorly designed levies.
- Pair revenue reform with visibly improved service delivery, tighter spending controls, anti-corruption efforts, and strengthened accountability—otherwise revenue gains may be fleeting.
Policy priorities — Managing debt
- Priority: improve debt management to cut borrowing costs, attract investors, and widen access to funds.
- Practical steps:
- Publish comprehensive debt data.
- Engage openly with creditors.
- Strengthen approval and oversight procedures.
- Use of innovative financing (conditions and examples):
- Blended finance can combine concessional and private funds to channel investment into green energy, health, and infrastructure.
- Debt-for-development swaps—agreements replacing sovereign debt with liabilities that include spending for a specific development goal—have been tested in Côte d’Ivoire.
- Scaling up such initiatives requires credible regulation, transparent data, and simplified procedures.
Implications and forward look
- The region’s resilience is encouraging but vulnerabilities will continue to test economies.
- Raising revenue and improving debt management are the two broad priorities to foster resilience and accelerate growth.
- Effective implementation hinges on credible institutions, transparency, public engagement, and sequencing of reforms.
This blog is based on the October 2025 Regional Economic Outlook for sub-Saharan Africa, “Holding Steady,” prepared by Cleary Haines, Athene Laws, Maurizio Leonardi, Nikola Spatafora, and Felix Vardy under the guidance of Montfort Mlachila, Amadou Sy and Antonio David. For more, listen to the podcast with IMF Economist Athene Laws.