East Africa and Nigeria economies fare better than expected.

Sub-Saharan African economies including Ethiopia, Nigeria, Uganda and the Democratic Republic of Congo (DRC) are coping with tariffs and international aid cuts better than expected, leading to slightly higher growth than forecast six months ago, according to the International Monetary Fund’s latest outlook on the region.

When the United States shut down thousands of development programs across Africa worth more than USD 15 billion, from humanitarian food aid for refugees to climate change and farming support, and efforts to improve accountable governance and economic growth, the question arose: how would governments fill those gaps. Ethiopia faced a billion-dollar hole in its development budget, while smaller countries such as Malawi suddenly had far less day-to-day support available for primary health care, especially in rural areas.

After the aid blow came the trade shock as the Trump Administration proposed tariffs as high as 50 percent (for Lesotho) on African countries. As negotiations ensued, however, those rates dropped, typically to 15 percent or the 10 percent baseline.

Africa’s “resilience” has come from “a more favorable external environment than anticipated in April: global growth has held up, non-fuel exporters have benefited from still-elevated commodity prices, and the impact of tariffs has been less severe than initially feared,” IMF forecasters concluded as the global lender of last resort and its companion agency, the World Bank, held their annual autumn meetings in Washington.

Ethiopia and Nigeria grow faster

Ethiopia’s gross domestic product or GDP will grow 7.2 percent in 2025 versus an estimated 6.6 percent in April, Nigeria will grow 3.9 percent, almost 1 point higher than expected, and the Democratic Republic of Congo will expand 5.3 percent versus the earlier-forecast 4.7 percent. Uganda’s output will climb 6.4 percent, slightly higher than earlier expectations. Rwanda’s forecast growth held steady over the six months, at 7.1 percent for 2025 and higher in 2026. Overall, the regional economy will expand 4 percent – and about 5 percent when Nigeria and South Africa, slower-growing major economies, are excluded. Forecasts for Kenya at almost 5 percent GDP growth this year, and Tanzania at 6 percent, were unchanged from April 2025.

One outlier: the IMF reduced Senegal’s 2025 forecast growth to 6 percent from 8.4 percent. International credit ratings agencies have cut Senegal’s financial-risk scores on concerns that the country is weighed down with far more debt than earlier known. An audit ordered by President Bassirou Diomaye Faye, a former tax official, found that debt was equivalent to 100 percent of GDP, not the 74 percent claimed by his predecessor’s government. The culprit: “hidden loans” worth billions of dollars. This overdue transparency has sapped the economic uplift from new offshore oil and gas production.

For the region, there’s encouraging news on the inflation front. Consumer inflation across sub-Saharan Africa will drop to 10.9 percent in 2026, the IMF predicted. That’s almost half the 2024 inflation rate. In many African countries, inflation has fallen to single digits.

Aid cuts strain poor nations

The aid cloud hasn’t lifted entirely, especially where some of the most vulnerable Africans are struggling. In the Central African Republic, Niger and South Sudan, potential aid cuts could exceed 10 percent of government revenue, according to IMF calculations based on Organization for Economic Co-operation and Development data.

Per capita economic output in each of these countries is far less than USD 1,000 per year, crimping available domestic fiscal revenue. For impoverished countries, “fiscal fragility is a key vulnerability,” the IMF said. Ethiopia, Liberia and Malawi are close to the 10 percent threshold.

With international financing limited and expensive, governments are turning to domestic borrowing – which comes with its own risks. “Domestic bank holdings of sovereign debt are large and growing faster in sub-Saharan Africa than in the rest of the world,” amounting to one-fifth of regional assets, the IMF cautioned. The World Bank reckons that 23 countries – almost half of the region’s economies – are suffering from or at high risk of “sovereign debt distress.” The concentration of domestic borrowing could threaten the banking industry in some countries, squeeze access to private capital and trigger capital outflows that might pressure currencies, the lender said.

While the IMF was analyzing growth and fiscal balances, the World Bank was looking ahead at one of Africa’s toughest challenges: creating good jobs for a fast-growing population. In the next 25 years, sub-Saharan Africa will add more than 620 million people to its labor force, more than three-quarters of the net increase in all emerging and developing economies. The bank said, “most new labor market entrants find work in low-productivity, informal sectors that offer limited prospects for rapid income growth, reduced poverty, and improved social mobility.” Wage-paying jobs make up only 24 percent of employment and even less if you exclude South Africa.

The wild card in Africa’s trajectory into 2026 is big-power politics and decisions made in Washington, Beijing, Brussels and other political hubs of the global economy as agendas change, sometimes abruptly. The IMF cautioned that geopolitical jolts could shift economic conditions and noted many African countries are coping with big debt loads.  Those concerns mean risks are still “tilted to the downside,” the IMF said.

(Cover photo: President Trump and his top trade negotiator meet West African leaders, July 2025, by Daniel Torok/White House.)