Africa faces rising inflation amid energy and fertilizer price shocks

Rising energy and fertilizer costs are expected to fuel inflation and deepen cost-of-living pressures across sub-Saharan Africa, while high debt-servicing costs and declining aid are leaving governments with limited capacity to cushion households from further economic shocks, the International Monetary Fund warned on Thursday.

Speaking during the launch of the IMF's Regional Economic Outlook update report for sub-Saharan Africa, Zeine Zeidane, director of the IMF's African Department, said median inflation is projected to rise from 3.4 percent in 2025 to 4.3 percent in 2026 and 5 percent in 2027.

"Fuel and transport costs are already higher, while more expensive fertilizer could put further pressure on food prices and security," he said.

The report projected that fertilizer prices will rise by 26 percent this year compared with last year, as supply disruptions increase input costs and threaten future harvests.

Governments have limited room to respond, with interest payments absorbing a median of about 12 percent of government revenue. Meanwhile, bilateral aid to the region is projected to fall by a further 12 percent this year, following a decline of roughly one-quarter in 2025.

"That leaves the region with little room to absorb another shock," Zeidane said, warning that renewed energy supply disruptions, a sharp increase in global risk aversion or a strong El Nino could intensify pressures.

Despite these risks, the IMF raised its 2026 growth forecast for sub-Saharan Africa by 0.2 percentage points from its April projection to 4.5 percent. Growth is expected to remain at 4.5 percent next year, matching the estimated rate for last year.

"Growth has held up despite the war in the Middle East and a difficult global environment," Zeidane said, attributing the region's resilience partly to earlier economic reforms and businesses' ability to adapt to supply disruptions.

To protect households without worsening public finances, the IMF urged governments to prioritize targeted assistance over broad fuel subsidies. Its comparison of 19 African countries found that generalized fuel-price smoothing could cost about 4 percent of gross domestic product, while transfers providing the poorest 40 percent of the population with the same benefit would cost at most 0.5 percent of GDP.

"Broad fuel-price relief is expensive and poorly targeted," Zeidane said, recommending measures such as school feeding programmes and geographically targeted support where social protection systems are weak.

The institution also urged commodity exporters to save most temporary revenue windfalls, including by repaying costly debt, while countries facing higher import bills should maintain fiscal adjustment without undermining essential services and productive investment. Monetary tightening may be needed to prevent temporary price pressures from becoming persistent inflation, the report said.