African governments can barely catch a break.
Just as regional finance ministers were beginning to get over what the International Monetary Fund dubbed “the great funding squeeze” in the aftermath of the Covid-19 pandemic, they’re facing another surge in borrowing costs that’s locked many out of credit markets once again.
Trump’s tariff chaos has had an amplified impact on African sovereign bonds, which suffered as oil and other commodity prices plunged on fears that the trade war would cause a global economic slowdown.
With the continent now facing a double whammy from US tariffs and lower earnings from commodity exports, many governments will have to return for help to the IMF, which is hosting its Spring meetings next week in Washington.
“Given how tight financing conditions are,” said David Omojomolo, Africa economist at Capital Economics Ltd., “it seems inevitable.”
Tariff Chaos Sent African Sovereign Spreads Shooting Higher
Many nations are now priced out of the market
With the world’s finance ministers and central bankers heading to Washington for the meetings, those from the least-developed continent in particular will likely be having serious talks about accessing more funding to cover shortfalls.
Countries already in talks with the IMF for fresh financing, including Kenya and Senegal, may face new urgency to finalize deals, said Aurelie Martin, economist and investment analyst at Ninety One in London.
Read more: African Bonds Dive as Tariff Fears Take Nations Back to 2022
Angola — which already paused plans to tap debt markets earlier this year due to high yields — could go to the IMF under a worst case scenario to help meet a bond repayment near the end of the year, said Kevin Daly, portfolio manage Abrdn Investments Ltd.
The IMF provided more than $60 billion in financing to sub-Saharan Africa in the four years through October. More than half of the Washington-based lender’s 45 regional members had ongoing funding arrangements at the time, according to its last regional economic outlook.
Read more: IMF’s Strains – Money, Geopolitics and Trump
The fund itself has flagged that it’s preparing for fresh assistance to African nations, after years of “very intense engagement.”
“Global shocks and huge funding squeezes have put all manner of pressures on our countries,” IMF Africa Director Abebe Selassie told reporters in Dakar on April 8. “I wouldn’t rule out more countries coming.”
Debt Costs
The pandemic wiped out growth and revenues, then Russia’s invasion of Ukraine sent inflation soaring. Interest rates rocketed as a result, shutting African nations out of debt markets from 2020. Now, the trade-war fallout presents another shock.
Even before the tariff tumult, Africa’s debt costs had surged as governments increasingly turned to commercial borrowing. Average interest payments in 2024 rose to 27% of government revenue from 19% five years earlier, the United Nations Economic Commission for Africa said in a report last month.
The continent as a whole faced a $163 billion debt-servicing bill last year, up 12% from 2023.
In some economies — including Angola, Egypt, Ghana, Nigeria and Uganda — governments spend more on debt servicing than on education and health, according to the report. And these pressures will grow as European donors including the UK cut aid budgets to boost defense spending in response to pressure from the Trump administration, which itself already cut aid drastically.
To be sure, the direct tariff impacts would be relatively small for most African countries, where trade with China is more than three times the value with the US.
What Bloomberg Economics Says…
“Dollar liquidity of African countries is at risk of deteriorating following decisions by the US to cut aid and impose tariffs. This will compel vulnerable countries to seek IMF funding.”
— Yvonne Mhango, Africa economist
The real hit comes from a sharp drop in commodity prices.
“Lower oil prices are already bringing balance of payment and fiscal risks for exporters like Nigeria and Angola,” said Capital Economics’ Omojomolo, pointing to the growing risks of what a trade war means for Chinese economic growth. “We worry what that means for metal exporters like South Africa and Zambia.”
In Angola, where oil makes up 95% of exports, the government faces a $152 million budget hole for every $1 per barrel the oil price averages below $70 this year. Brent briefly dipped below $60 last week
There is some good news. Many African countries that previously sought IMF help are now in better fiscal shape after governments cut budget deficits and built up foreign-exchange reserves to meet conditions set by the Washington-based lender. Ghana and Zambia are examples.
Overwhelmed Defenses
Still, the fallout from the trade war will likely overwhelm these defenses and may encourage more countries to seek help.
“There is a risk that the impact of all of the trade wars and uncertainty can actually be as big in socioeconomic terms as Covid-19 was — and its economic impact,” cautioned Hannah Ryder, chief executive officer at Development Reimagined, an advisory company.
Read more: Kenya Seeks Realistic IMF Deal After Tax Protests, Trump Tariffs
And IMF financing is usually subject to reforms that can be tough to sell to citizens. The fund itself flagged growing regional unrest in its October economic outlook report.
“The challenge for African countries is that it has always been really difficult to get money from the IMF,” Ryder said. “The sacrifices that countries have to make in terms of their policies are usually too onerous. So again, no easy answer.”
— With assistance from Jorgelina Do Rosario and Katarina Hoije