Africa faces $59bn debt strain, World Bank warns

Sub-Saharan Africa’s economic recovery is holding steady, but rising debt-servicing pressures, geopolitical shocks, and structural weaknesses are increasingly clouding the region’s medium-term outlook, a new World Bank assessment stated.

The lender said in the report titled “Africa Economic Update 2026” that economic growth in Sub-Saharan Africa is projected to remain at 4.1 per cent in 2026, unchanged from 2025, even as downside risks intensify and earlier recovery momentum weakens. The projection, however, represents a downward revision of 0.3 percentage point from forecasts issued in October 2025.

The bank noted that the region’s growth continues to be supported by domestic demand, particularly private consumption and investment, alongside relatively accommodative monetary policy conditions and improving external factors. A weaker United States dollar has helped ease inflationary pressures in several economies while also boosting household incomes.

However, the financier warned that rising external shocks are eroding the region’s recovery prospects. These include spillovers from escalating geopolitical tensions in the Middle East, heavy debt-service obligations, and deep structural constraints that continue to limit productivity and job creation.

“External debt service pressures are rising sharply despite stabilising stocks. External public debt service-to-revenue is projected to increase from 15.4 per cent in 2024 to about 18.2 per cent in 2025.”

A key concern is the sharp increase in external debt repayments. The report said Sub-Saharan Africa’s external debt service burden is rising significantly. The increase is driven by maturing commercial loans, bond redemptions, and the resumption of payments under previously restructured obligations.

“The region faces a surge in amortisations, with principal repayments jumping from $37bn in 2024 to $59.2bn in 2025 due to maturing commercial bank loans, higher bond redemptions, and the resumption of payments under restructurings.”

The bank projected that annual repayments would remain elevated, stabilising between $47bn and $50bn over the 2026–2028 period, signalling persistent fiscal pressure for many economies already struggling with limited revenue bases.

It warned that debt vulnerabilities remain historically high across the region, with roughly half of Sub-Saharan African countries either at high risk of debt distress or already in distress. Low-income and lower-middle-income economies account for the majority of these cases, underscoring the fragility of the region’s poorest states.

The report further noted that rising global energy prices, driven by disruptions linked to the Middle East conflict, are adding inflationary pressure through higher oil, gas, and fertiliser costs. These shocks, it said, are likely to feed into higher food prices and could force some central banks to tighten monetary policy, particularly in oil-importing countries.

Beyond trade and price effects, it warned of weakening investment flows. It noted that Gulf countries have become major investors in Africa, with greenfield foreign direct investment commitments exceeding $100bn in 2022–2023. However, ongoing geopolitical uncertainty could slow future investment decisions in energy, infrastructure, logistics, and mining.

Remittance flows are also at risk, particularly for highly dependent countries such as The Gambia, Lesotho, Liberia and Comoros, where household incomes rely heavily on overseas workers. A slowdown in global labour demand, especially in sectors such as construction and hospitality, could reduce inflows.

On the fiscal side, the report said many governments have made progress in narrowing primary deficits, with the regional average expected to move close to balance by 2026. However, high interest payments continue to widen overall fiscal deficits, with debt servicing costs in many countries exceeding combined spending on health and education.

Despite gradual fiscal consolidation, the overall budget deficit is expected to remain elevated, while public debt levels stabilise at high but vulnerable thresholds.

The World Bank stressed that while stabilising debt stocks suggest some progress in macroeconomic management, the situation reflects containment rather than resolution of long-standing debt challenges that intensified following the COVID-19 pandemic and subsequent global tightening cycles.

It added that structural transformation remains the key long-term challenge for the region. With more than 620 million people expected to enter the labour force by 2050, the report warned that current growth levels are insufficient to generate adequate employment.

It called for stronger industrial policy, improved infrastructure, skills development, and increased private investment to support job creation in sectors such as agribusiness, manufacturing, tourism, energy, and health.

Without such reforms, the lender cautioned that Sub-Saharan Africa risks remaining trapped in low-productivity employment, limiting poverty reduction and slowing inclusive growth across the region