Sub-Saharan African governments are facing growing pressure to balance public debt obligations against spending on healthcare, education and infrastructure, with interest payments exceeding expenditure on health or education in nearly four-fifths of countries across the region, according to the World Bank’s October 2026 Africa Economic Update.
The findings highlight the fiscal constraints confronting governments seeking to expand public services, strengthen productive capacity and improve living standards while managing the cost of existing borrowing. Although regional fiscal deficits are projected to narrow, the report indicates that improvements in headline budget figures are not necessarily translating into substantially greater resources for development.
Interest payments on public debt are projected to remain between 2.9% and 3.2% of gross domestic product (GDP) over the 2023–2026 period. The burden reflects a combination of accumulated debt, financing costs and the terms on which governments borrow, with implications for the resources available to support economic and social priorities.
The World Bank’s assessment forms part of its broader examination of the region’s economic outlook, which projects sub-Saharan Africa’s economic growth will increase from 4.1% in 2025 to 4.3% in 2026. However, the institution has cautioned that stronger aggregate growth alone will not be sufficient to generate enough jobs or substantially reduce extreme poverty.
The report and its regional projections are available through the World Bank’s Africa Economic Update.
Fiscal Consolidation Does Not Automatically Expand Spending Capacity
The World Bank projects that sub-Saharan Africa’s overall fiscal deficit will decline from 5.6% of GDP in 2020 to 3.5% in 2026, before averaging 3.1% in 2027 and 2028.
The primary fiscal deficit, which excludes interest payments, has also narrowed. The report projects that it will fall from 3.1% of GDP in 2020 to 0.5% in 2025, with government fiscal balances expected to approach equilibrium by 2028.
These figures suggest that governments have made progress in bringing revenues and non-interest expenditure into closer alignment. However, the overall fiscal position remains affected by the cost of servicing accumulated debt.
Government revenue is projected to increase by 2.6 percentage points of GDP between 2024 and 2026, compared with a 2.3-percentage-point rise in total expenditure. Only 0.4 percentage points of GDP in the projected expenditure increase is expected to come from non-interest spending.
The distinction matters because improvements in revenue collection can be absorbed by financing costs before governments have the opportunity to expand public services or investment. Fiscal consolidation may therefore strengthen budget indicators without producing a commensurate improvement in the resources available to households and businesses.
Domestic Borrowing Reshapes Debt Risks
The region’s public debt profile has also changed. The median general government gross debt ratio reached 57% of GDP in 2025, compared with 29% in 2012, although it has eased from a peak of 60% in 2023.
Domestic borrowing has become an increasingly important source of financing, accounting for more than half of public debt since 2021, according to the figures cited in the report.
Local capital markets can provide governments with alternatives to external borrowing, support the development of domestic financial institutions and create investment opportunities for local investors. However, domestic financing can also carry relatively high interest rates and shorter maturities, depending on market conditions and the instruments used.
These characteristics may increase refinancing requirements and expose public budgets to changes in domestic interest rates. External borrowing presents a different set of risks, including currency depreciation, shifts in international financing conditions and repayment obligations denominated in foreign currencies.
The implications vary considerably across countries. Governments differ in their revenue-raising capacity, export earnings, currency arrangements, debt composition and access to concessional financing. Regional averages consequently provide a useful indication of shared pressures but cannot fully describe individual countries’ fiscal circumstances.
Development Priorities and Debt Sustainability
The consequences of high debt-servicing costs extend beyond the annual management of government budgets. When interest payments absorb a substantial share of available revenue, governments have less room to increase expenditure on electricity, transport, schools, hospitals and social protection without raising taxes, reducing other spending or obtaining additional financing.
The World Bank warns that crowding out productive expenditure can slow capital accumulation, weaken productivity growth and hinder poverty reduction.
For African economies, the challenge is therefore not simply to reduce borrowing, but to establish financing arrangements that support sustainable investment and generate sufficient economic returns to justify their costs.
Infrastructure investment, for example, can strengthen productivity and expand economic opportunities when projects address genuine constraints and are supported by effective implementation. Equally, expenditure on healthcare and education contributes to the skills, wellbeing and productive capacity on which long-term economic growth depends.
Governments must consequently weigh the immediate benefits of fiscal consolidation against the longer-term costs of underinvestment. The appropriate balance will depend on national circumstances, including the maturity structure of existing debt, the availability of domestic revenue and the economic returns expected from public expenditure.
Potential responses include broadening tax bases, improving revenue administration, strengthening public financial management and extending debt maturities where financing conditions permit. Greater transparency over borrowing terms and stronger coordination between debt management and development planning could also help governments assess the trade-offs involved.
The findings point to a wider question about the relationship between public finance and economic transformation across Africa. Debt sustainability is important, but its assessment also requires attention to whether borrowing supports productive capacity, whether public resources are allocated effectively and whether economic growth generates sufficient revenue to meet future obligations.
For governments across sub-Saharan Africa, the task is to manage debt without undermining the public investment and essential services needed to sustain economic progress. How successfully they navigate that balance will help determine whether improving fiscal indicators translate into more resilient economies and tangible gains in living standards.
