Sub-Saharan Africa entered 2026 with its strongest economic momentum in over a decade, but a fresh external shock from the Middle East conflict now threatens to erode hard-won gains, the International Monetary Fund (IMF) said Thursday.
Presenting the IMF’s April 2026 Regional Economic Outlook for the region, Africa Department Director Abebe Aemro Selassie said growth accelerated broadly in 2025, supported by improved policies and favourable global conditions.
“Economic activity strengthened across nearly all country groups, with regional growth reaching 4.5 percent — the fastest pace in over a decade,” Selassie said.
He credited the rebound to a mix of external tailwinds and domestic reforms, including exchange rate adjustments, subsidy reductions and tighter monetary policy frameworks in several countries.
Major economies such as Ethiopia and Nigeria were cited as examples of reform-driven recovery, benefiting from macroeconomic adjustments that helped stabilize their economies.
The improvements were reflected in stronger fiscal positions, declining inflation and upgrades to sovereign credit ratings in some countries. Median inflation fell to 3.4 percent at the end of 2025, down from 4.8 percent a year earlier, while fiscal deficits narrowed and public debt levels declined.
“In short, 2025 was a year of hard-won stabilization gains,” Selassie said, noting that policymakers across the region deserved credit for maintaining reform momentum despite difficult conditions.
However, the IMF warned that the outlook has become more uncertain in 2026 due to the fallout from the Middle East conflict, which has triggered a surge in global energy and commodity prices.
Oil, gas and fertilizer costs have risen sharply, while shipping disruptions and tighter global financial conditions are adding pressure on already vulnerable economies.
The IMF has revised down its regional growth forecast for 2026 to 4.3 percent, about 0.3 percentage points lower than earlier projections. Inflation is also expected to edge higher, with median rates projected to reach around 5 percent by year-end.
The impact of the shock is expected to vary widely across countries.
Oil-exporting nations may benefit from higher revenues but remain exposed to price volatility and the risk of overspending during boom periods. In contrast, oil-importing countries — particularly fragile and low-income states — face worsening trade balances, rising living costs and limited fiscal space.
“The human consequences are almost certain to be severe,” Selassie warned.
He added that the latest shock comes on top of a sharp and unprecedented decline in official development assistance, compounding pressures on the region’s most vulnerable economies.
In a dedicated chapter titled “Aid Cuts in Sub-Saharan Africa,” the IMF said the current reduction in aid appears structural rather than cyclical, unlike past episodes where funding eventually rebounded.
The cuts are hitting hardest in fragile and low-income countries that rely heavily on external support to finance essential services such as healthcare and food assistance.
Against this backdrop, the IMF urged policymakers to prioritize macroeconomic stability while protecting vulnerable populations.
In the near term, countries should keep inflation expectations anchored and provide targeted, time-bound support to those most affected by rising costs, Selassie said.
Fiscal policy, he added, must strike a balance between credibility and flexibility. Oil exporters should treat windfall revenues as temporary and rebuild buffers, while oil importers should safeguard critical social and development spending and step up domestic revenue mobilisation.
Over the medium term, accelerating structural reforms will be key to sustaining growth, the IMF said. These include improving governance, strengthening the business environment and deepening financial markets to support private sector-led expansion.
Selassie also highlighted the importance of regional integration, particularly through the African Continental Free Trade Area, as a way to boost resilience and unlock new economic opportunities.
Looking further ahead, he pointed to productivity gains driven by technology, including the responsible use of artificial intelligence in sectors such as agriculture, healthcare and public services.
However, he cautioned that realizing these benefits will require significant investment in electricity supply, digital infrastructure and skills development.
“Sub-Saharan Africa has weathered crisis after crisis in recent years but has continued to reform and demonstrate resilience,” Selassie said.
“The gains achieved are worth defending, and the policy choices made now will determine how well they are preserved.”
He added that the IMF stands ready to support countries through financing, policy advice and capacity development as they navigate the evolving challenges.
