The International Monetary Fund (IMF) has revised down its growth forecast for Sub-Saharan Africa in its latest economic outlook, citing the escalating Middle East conflict involving Iran, the United States, and Israel. The IMF now expects regional growth to slow to 4.3 per cent in 2026, 0.3 percentage point downgrade from its pre-war projection. The region is estimated to have posted a 4.5 per cent growth in 2025, the fastest in a decade, reflecting favorable external factors and good policies. The IMF now cautions that these gains could be reversed. According to the Fund, the conflict is exerting upward pressure on global commodity and shipping costs, with a sharp rise in prices of critical inputs such as fuel, natural gas, and fertilizers. Fuel availability has already tightened in countries such as Ethiopia, Kenya, the Democratic Republic of the Congo, Malawi, Sierra Leone, and Zambia, and has led to pump price increases in Rwanda, Uganda, Mali, Malawi, Nigeria, Gambia, and Zimbabwe. However, the impact across the region is expected to be uneven. Oil-exporting economies could see a temporary boost in revenues from higher global prices, though the IMF cautions that these gains come with heightened exposure to price volatility and the risk of procyclical fiscal policies. In contrast, oil-importing countries, particularly non-resource-rich and fragile states, are likely to face worsening trade balances, rising inflationary pressures, and constrained fiscal space. “The human consequences could be severe,” Abebe Selassie, Director of the African Department at the IMF, highlighting the potential for increased cost of living pressures across vulnerable economies. Ethiopia, Guinea, Rwanda, Uganda, and Benin are forecast to be the region’s fastest growing economies. Ethiopia is projected to grow at 9.2 per cent, Guinea at 8.7 per cent, Uganda at 7.5 per cent, Rwanda at 7.2 per cent, and Benin at 7 per cent. Still, the latest IMF report warns that weaker tourism (as in Rwanda and Seychelles) may further strain external positions in some economies. Financial conditions have also tightened, with higher risk premia and rising sovereign yields, especially among fuel importers On the other hand, in several economies such as Mozambique, Ghana and South Africa, exchange rate pressures are intensifying, weighing on investment decisions. “This latest shock comes on the heels of the dislocation caused by the sharp, unprecedented decline in official development assistance, which is compounding all these pressures,” Selassie said. Impact of prolonged war IMF economists suggest that an intensification of the war in the Middle East would increase oil, fertilizer, and food prices further, weighing down on growth, particularly for oil-importing countries, and push up inflation across the region. On the financial side, several sovereigns face sizable amortizations and hence are planning to rely on market issuance as part of their financing strategy. A sudden tightening of global financial conditions could sharply raise borrowing costs and force abrupt adjustment. “In addition to the deeper direct effects, the longer duration and severity of the shock engender a global slowdown that contributes to reducing regional output by 0.6 percent in 2026 and by 0.4 percent in 2027, relative to the prewar baseline,” the IMF indicated. Although oil exporters would benefit from increased oil prices in this scenario, importing countries would suffer most, with real output decreasing by 1.5 percentage points in 2026 and 2.8 percentage points in 2027. Policy tightening The IMF recommends that policy should focus on addressing the shock in the near term and building resilience over the medium term. “Near-term priorities are to keep inflation expectations well anchored and protect the most vulnerable from higher living costs through targeted, time-bound support.” Oil exporters, it says, should treat windfalls as temporary and rebuild buffers. Oil importers, on the other hand, should protect priority social and development spending while mobilizing domestic revenues, improving spending efficiency, and strengthening public financial management.
