Major Sub-Saharan African economies will continue recovery despite Iran war

By Rafiq Raji

Major African economies are recovering from policy-induced troubles, ranging from a debt binge, money printing, high inflation, to political instability and structurally constraining institutionalism. South Africa is slowly letting go of some of its socialist entrenchments, reining in debt, and reforming state-owned enterprises. Nigeria is cleaning up its fiscal balances, finally adding previously opaquely printed money liabilities on to its books, slowing the inflation that it caused, stabilising its currency, and enacting tax reform laws. Kenya, which suffered destabilising mass protests over higher taxation, is dealing with debt sustainability challenges. Ghana and Zambia, which defaulted on their external debt, are concluding their respective International Monetary Fund (IMF) programmes amid tedious debt restructurings. A prolonged Middle Eastern war, after the US and Israel attacked Iran in late February 2026, will weigh on price stability and international trade, although a simultaneous commodities boom will support resource-rich African economies, and the conflict is not expected to broadly affect the medium-term economic growth prospects of the region.  

South Africa – Lower inflation target and tighter fiscal rules add to reforms progress

Price stability and reforms-induced economic growth amid a commodities boom are expected for South Africa over the medium term, although debt sustainability will be a recurring constraint, even as the authorities are making palpable fiscal consolidation efforts.^[1],[2] Structural impediments, which require difficult and politically costly institutional reforms, will continue to weigh on progress, with limited prospects of significant improvements over the short to medium term. Real GDP growth of 2-3% over the medium term reflect these constraints. The South African central bank continues to stay above the fray, lately adopting a lower inflation rate target band of 2-4% despite initial resistance by the fiscal authorities, which preferred the erstwhile 3-6% target range, as it was relatively expansionary.^[3],[4] The South African Reserve Bank argues greater price stability, which the new 3% inflation target enables, ultimately benefits the fiscal authorities and broader economy since it will lower inflation expectations, support a relatively stable rand, and continue to make South Africa’s public debt attractive.^[5] To enable sharper monetary policy transmission, the SARB wants commercial banks to use the policy rate to price loans, replacing the prime lending rate, with implementation set for 2027.^[6] A commodities boom will enable the authorities to avoid raising taxes in 2026. Historically high public debt levels (above 70% of GDP) have peaked, and the authorities have signalled a commitment to debt sustainability. In this respect, the authorities are working on a rules-based fiscal policy framework for legislation before end-2026.^[7] State-owned enterprises, which have long been a drag on public finances and the broader economy, are being restructured, with a rising trend of liberalisation beginning to ease longstanding sectoral inefficiencies.^[8] Independent power producers, which now constitute a fifth of electricity generation, have been a major factor behind reduced loadshedding for instance.^[9] US and Israeli armed hostilities with Iran since late February 2026 will boost minerals exports, although the global inflationary effects of the war will weigh on the South African economy in tandem.  

Kenya – Debt sustainability in focus

High debt servicing costs remain a persistent fiscal constraint, especially as Kenyan authorities have procrastinated over whether to seek IMF financing, which will probably be conditional on restructuring the government’s external debt. Youth-led protests in mid-2024 against proposed financial legislation for tax increases on food and essential items is forcing the authorities to seek alternative ways to find additional revenue for pressing expenditure, especially debt servicing.^[10],[11] The Kenyan government, which started talks with the IMF on a potential programme in February 2026, has been exploring creative ways to avoid defaulting on its external debt, as it strenuously tries to avoid a debt restructuring under the aegis of the G20 Common Framework.^[12],[13] Kenya issued two Eurobonds in 2025 for refinancing purposes (with additional ones likely for upcoming maturities), and has secured concessions to pay back its Chinese debt (originally in dollars) in yuan.^{[14],[15],[16]} Kenya ceded significant concessions in a subsequent duty-free trade deal with China in January 2026.^[17] The effort has reduced perceptions of default risk, with Moody’s upgrading Kenya’s credit rating in January 2026.^[18] While trying to rein in debt servicing costs, Kenyan authorities continue to borrow externally, lately an almost US$1bn short-term loan for roads that it plans to refinance with longer-term borrowing as well as US$2.25bn in Eurobonds in February 2026 to buy back previous issues due to mature in 2028 and 2032.^[19],[20]

Zambia – Conclusion of debt restructuring, 2026 general elections, copper expansion

As Zambia nears the completion of its external debt restructuring and conclusion of its US$1.7bn IMF extended credit facility programme, political activities ahead of the general elections in August 2026 will be in focus, with a new IMF programme expected in its aftermath.^{[21],[22],[23]} Hakainde Hichilema, the incumbent president, is expected to secure re-election with relative ease, on the back of lawfare against the main opposition Patriotic Front (PF) party and a controversial constitutional reform, which all but guarantee his victory at the polls.^[24],[25] Mr Hichilema will justifiably point to an improving economy as one of the reasons he deserves a second chance, as inflation slows, growth picks up, amid rising foreign investor interest in Zambia’s attractive risk-adjusted returns (market depth is a constraint). The authorities increased foreign portfolio investment limits to 23% in January 2026, from 5% previously, with non-resident market participants accounting for almost half of bond purchases in the immediate aftermath.^[26] Copper output grew 8% in 2025 to 890,346  tonnes, with the authorities aiming for production to rise to at least 1m tonnes in 2026, although their medium-term ambition of 3m tonnes appears overly optimistic.^[27] For sure, there will be significant growth in copper production, as ongoing incremental foreign investment in output expansion will progressively add to output. The risk that the state might ask for higher stakes in copper mines in the aftermath remains significant, after the authorities shelved plans to do so earlier in late 2025.^[28]

Ghana – Conclusion of debt restructuring and expansionary policies

Ghana will exit its US$3bn IMF extended credit facility programme before mid-2026, when it is also expected to fully conclude its external debt restructuring, which is in its final stages. There are concerns about potential policy deterioration in the aftermath of the IMF programme.^[29] Liquidity challenges have forced the authorities to make changes to how cocoa purchases are financed.^[30] Hitherto, the Ghana Cocoa Board (Cocobod) acquired an annual syndicated loan, typically about US$1bn, to buy and pool cocoa from farmers at fixed prices. Lower cocoa prices, a poor harvest in the 2023-24 season (which underwhelmed by almost half of what was originally projected), amid exchange rate volatility and Ghana’s own debt sustainability challenges made this model unsustainable. Instead, the authorities plan to issue domestic bonds to fund cocoa purchases amid worries about potentially crowding out the private sector and cannibalism of existing treasury financing requirements, as the domestic markets are not yet deep enough to accommodate both Cocobod’s financing needs and those of the fiscal authorities at one and the same time.^[31] There is a potential upside: at least half of all cocoa beans produced will be processed locally from the 2026-27 season.^[32] By contrast, gold has been enjoying a bull run, with the authorities already looking to acquire more for the fiscus from the gains.^[33] In this respect, the authorities have instituted a sliding 5-12% mining royalty regime to replace the previous fixed flat rate system.^[34] The authorities are also pushing for gold produced to be refined locally, with some of the gold purchased by the Ghana Gold Board (GoldBod) from the artisanal and small-scale mining sector already being refined by the Gold Coast Refinery since early 2026.^[35],[36]

Nigeria – Economic expansion after macroeconomic stabilisation, tax reforms

With the economy stabilising, the authorities will be aiming for growth over the medium term, although their US$1trn GDP goal will take longer to achieve. Political activities ahead of the 2027 general elections in January have started in earnest. The deployment of US troops in February 2026 (after US airstrikes in late December 2025) to help the authorities in its fight against Islamist terrorism (which hitherto overwhelmed the government’s efforts) will be a key factor in the presidential poll, with Bola Tinubu, the incumbent, set to face a strong opposition, amid a more than significant risk of military coup attempts by mostly northern Muslim military and civilian actors who desire a shift of power to the north from the south.^{[37],[38],[39]} Mr Tinubu, a southern Muslim, whose ruling All Progressives Congress (APC) party has control of the federal parliament, signed into law an amended electoral legislation in February 2026 that may allow him wield the powers of incumbency to his advantage. A capital markets boom is expected in 2026, as the 650,000 barrels per day Dangote crude oil refinery plans to list on the Nigerian Stock Exchange (NSE), with the government also planning to list state-owned oil company NNPC Limited, as well as sell key government assets.^[40] While international oil companies have been selling off onshore assets to domestic operators, they have been increasing investment in deep offshore fields, in part due to targeted fiscal incentives by the government.^[41] The economy will sustainably grow by at least 4% on average over the medium term.^[42]

 

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