Political Shifts & African Debt: A 2025 Fiscal View

Africa Fiscal Policy: Unrest Shapes Economic Futures

By Darius Spearman (africanelements)

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Across the continent, 2025 is shaping up to be a year where politics and money collide head-on. Political shake-ups, ranging from elections and coalition governments to protests and military actions, are significantly altering how African nations manage their finances. We’re seeing governments caught between trying to keep people happy with popular policies and adhering to strict budget rules often demanded by international lenders, such as the International Monetary Fund (IMF). This balancing act is unfolding as young people increasingly protest, armies intervene, and many feel disillusioned by the older generation of leaders. Consequently, what’s suitable for political survival today often clashes with what’s needed for a stable economic future tomorrow (Political upheaval Is redrawing Africa’s fiscal landscape). For the diaspora watching the motherland, these shifts raise concerns about long-term progress and stability.

Countries like Ghana are rolling back taxes linked to IMF deals, while South Africa’s new coalition government is watering down planned budget measures. Elsewhere, uncertainty over leadership in Cameroon and heavy election spending in Gabon are putting a massive strain on public money. Yet, Côte d’Ivoire offers a glimmer of hope, demonstrating how effective debt management can create breathing room. This complex picture shows a continent at a fiscal crossroads, where political choices made now will echo for generations (Political upheaval Is redrawing Africa’s fiscal landscape; Debt and Austerity – The IMF’s Legacy of Structural Violence in the Global South; Sub-Saharan Africa: Key themes to watch in 2025).

Ghana’s Gamble: Tax Cuts vs. IMF Stability (Africa fiscal policy)

In Ghana, the political winds have shifted fiscal policy dramatically. President Mahama’s government has decided to scrap taxes previously implemented under an agreement with the IMF. This move includes removing a 1% tax on mobile money transfers and VAT on vehicle insurance, a decision expected to cost the government $430 million each year. Political upheaval is redrawing Africa’s fiscal landscape. While potentially popular with voters in the short term, this reversal puts Ghana’s financial stability at risk and creates tension with the IMF. Such populist demands, prioritizing immediate public approval over long-term fiscal health, can often backfire, leading to wider deficits and economic instability (Economic Consequences of Populist Demands).

Adding to the economic strain are opposition protests questioning the integrity of recent elections (Top 10 African Nations with the most significant political unrest in 2025). This political instability compounds the financial challenges. Experts warn that without significant structural reforms, Ghana’s debt-to-GDP ratio – a key measure comparing national debt to economic output – is projected to climb above 70% (Africa’s 2025 Economic Outlook). Generally, ratios exceeding 77% are seen as a danger zone, potentially slowing growth and increasing borrowing costs (Debt-to-GDP Ratio: Formula and What It Can Tell You). Therefore, Ghana’s path represents a significant gamble, balancing immediate political pressures against IMF conditions and future economic health.

South Africa’s Coalition Crunch (Political unrest, economic impact)

South Africa is navigating a new political landscape with its Government of National Unity (GNU), a coalition formed by multiple parties after elections failed to produce an outright winner. While intended to foster cooperation, the GNU is showing signs of diluting necessary fiscal discipline. A key example is the compromise on a planned Value Added Tax (VAT) increase; pressure from coalition partners forced the government to reduce the hike from 2% to just 1% (Political upheaval Is redrawing Africa’s fiscal landscape). Such compromises, common in GNU setups, can strain government revenue and make tough budget decisions harder (GNU: A new era for SA).

This fiscal loosening comes at a challenging time. Debt servicing costs are already consuming a massive 22% of government revenue in the 2025/26 fiscal year (Navigating Fiscal Challenges in Sub-Saharan Africa). Projections put the country’s debt-to-GDP ratio at 76.2% for 2025, dangerously close to the 77% threshold often linked to economic slowdowns (Political upheaval Is redrawing Africa’s fiscal landscape; Debt-to-GDP Ratio: Formula and What It Can Tell You). Interestingly, despite these underlying strains, Africa’s largest stock exchange, the Johannesburg Stock Exchange (JSE), has reached record highs. However, this optimism hasn’t fully translated to the domestic debt markets, which remain under pressure (Sub-Saharan Africa: Key themes to watch in 2025). The coalition’s balancing act, consequently, highlights the complex trade-offs between political unity and fiscal prudence.

Leadership Limbo & Financial Strain (African debt crisis)

Political uncertainty is casting a long shadow over Cameroon’s finances. President Paul Biya, potentially seeking re-election in 2025 at the age of 92, creates an unstable environment for economic reforms (Political upheaval Is redrawing Africa’s fiscal landscape). This leadership question looms as the country faces an expiring deadline for its IMF program. The program mandates a significant fiscal surplus requirement of $151 million, demanding tight control over spending and revenue (Political upheaval Is redrawing Africa’s fiscal landscape; Cameroon – International Monetary Fund (IMF)).

Investor confidence appears shaky amid this uncertainty. A government bond issuance in November 2024 aimed to raise $22 million but fell dramatically short, achieving less than 30% of its target (Political upheaval Is redrawing Africa’s fiscal landscape). Bond issuance failures signal low market appetite for a country’s debt, often due to perceived political or economic risk. Furthermore, increased military spending is reportedly squeezing out funds for social protection programs, potentially impacting the most vulnerable citizens (Sub-Saharan Africa: Key themes to watch in 2025). Meanwhile, in Gabon, the aftermath of a coup has led to different, but equally concerning, fiscal pressures. Election-related promises fueled a massive 67% hike in infrastructure spending, pushing the national debt past a worrying 80% of GDP (Political upheaval Is redrawing Africa’s fiscal landscape). While a $605 million Eurobond refinancing deal orchestrated via a Moroccan bank helped ease immediate default fears by restructuring foreign debt (Political upheaval Is redrawing Africa’s fiscal landscape; Morocco’s Attijariwafa Bank buys back $290 million of Gabon’s external debt), other financial relationships frayed. The World Bank suspended funding due to $27 million in arrears, highlighting the precariousness of Gabon’s situation (Political upheaval Is redrawing Africa’s fiscal landscape). Both cases powerfully illustrate how political instability directly undermines financial health.

Finding Resilience: Côte d’Ivoire’s Strategy (IMF programs Africa)

Amidst the fiscal challenges faced by some neighbors, Côte d’Ivoire stands out for its proactive approach to managing its finances. The country has demonstrated fiscal resilience, notably through strategic debt management. A significant achievement was a $420 million debt swap executed in 2025 (Political upheaval Is redrawing Africa’s fiscal landscape). This maneuver involved exchanging existing debt for new terms, resulting in substantial savings estimated at $350 million over five years. Debt swaps like these can free up resources, which Côte d’Ivoire reportedly plans to use for funding schools and creating more fiscal space (Debt-for-Development Swaps, a Restructuring Tool for Development).

This strategic financial move aligns with the country’s broader goal of fiscal consolidation. Côte d’Ivoire successfully reduced its fiscal deficit – the gap between government spending and revenue – from 4.5% of GDP in 2024 down to a projected 3% in 2025 (Political upheaval Is redrawing Africa’s fiscal landscape). Furthermore, studies suggest that strong institutional quality, like that seen in Côte d’Ivoire, plays a crucial role across Sub-Saharan Africa. Good governance and effective institutions can help reduce fiscal deficits by an average of 1.8% in the region (Fiscal deficit in sub-saharan Africa: A new intuition from the …). Thus, Côte d’Ivoire’s success offers a valuable lesson on combining smart financial tactics with strong governance.

Sahel Spending & Wider Pressures (Military spending Sahel)

Beyond individual country stories, broader regional trends are also shaping Africa’s fiscal landscape in 2025. In the Sahel region, ongoing instability and conflict have led military regimes to dedicate substantial portions of their national budgets to security. On average, these governments allocate between 15% and 20% of their budgets to defense and security (Sub-Saharan Africa: Key themes to watch in 2025). Such high military spending inevitably crowds out investment in other critical areas like health, education, and infrastructure, potentially hindering long-term development and impacting the lives of ordinary citizens.

Compounding these challenges are external pressures. Climate change is taking a tangible toll, with climate-related disasters estimated to reduce Africa’s overall GDP growth by 0.5% annually (Africa’s 2025 Economic Outlook). This hinders economic progress and strains government resources needed for recovery and adaptation. Additionally, the structure of African debt adds another layer of complexity. A significant portion of interest payments – around 40% for Sub-Saharan Africa – now goes to non-Paris Club creditors (Africa’s 2025 Economic Outlook). These creditors, often including countries like China and private lenders, operate outside the traditional framework of the Paris Club, which coordinates debt relief among major Western governments (Frequently asked questions – Club de Paris). Consequently, negotiating debt restructuring can become more complicated and less transparent when dealing with multiple non-Paris Club lenders.

The Balancing Act: Stability vs. Survival

The situations across Africa in 2025 clearly show how political changes directly influence government budgets and debt levels. Whether it’s Ghana’s tax cuts aimed at pleasing voters (Political upheaval Is redrawing Africa’s fiscal landscape) or South Africa’s coalition compromises (Political upheaval Is redrawing Africa’s fiscal landscape), short-term political calculations often drive fiscal policy. This frequently creates tension with externally imposed conditions, like IMF austerity programs, which demand spending cuts and tax hikes (Fifty Years of Failure: The IMF, Debt and Austerity in Africa).

These fiscal choices carry heavy social justice implications. Austerity measures, while aimed at stabilizing debt, often hit the poorest hardest by cutting essential services or raising the cost of living through regressive taxes, as seen in Kenya where families struggled with food costs and education fees after IMF-driven policies (Debt and Austerity – The IMF’s Legacy of Structural Violence in the Global South). Conversely, unsustainable populist spending can lead to inflation or future crises that also disproportionately affect vulnerable populations. Therefore, the future stability outlook for many African nations remains precarious. High debt burdens, like South Africa’s, where debt servicing eats up over a fifth of revenue (Political upheaval Is redrawing Africa’s fiscal landscape), combined with political uncertainty, threaten long-term growth and development. While strategic moves, such as Côte d’Ivoire’s debt swap, offer some relief, the fundamental conflict between immediate political needs and long-term economic health continues to define Africa’s complex fiscal landscape.

ABOUT THE AUTHOR

Darius Spearman is a professor of Black Studies at San Diego City College, where he has been teaching since 2007. He is the author of several books, including Between The Color Lines: A History of African Americans on the California Frontier Through 1890. You can visit Darius online at africanelements.org.