Large financing needs and rising debt-servicing costs could severely constrain public investment and social spending in Ghana and three other African countries, the World Bank has warned in its October 2026 Africa Economic Update. Kenya, Malawi, and Zambia were named alongside Ghana as the four economies facing the most acute pressures.
The Bretton Woods institution cautioned that weaker-than-expected revenue mobilisation may require additional fiscal adjustment in these countries, even as fiscal consolidation efforts across the region risk dampening growth if accompanied by cuts to infrastructure spending or delays in critical development projects.
Ghana’s Debt Burden in Focus
For Ghana, the warning comes amid a still-fragile recovery from its most severe economic crisis in a generation. The country completed a landmark Eurobond restructuring in October 2024, replacing US5 billion reduction in debt stock and US$4.3 billion in debt service savings during the IMF programme period.
Despite that relief, Ghana still faces US11.8 billion) and level with Nigeria among African sovereigns with the largest Eurobond obligations over that period. Angola faces US3.2 billion, Côte d’Ivoire US2.2 billion.
Ghana’s public debt stock rose to GH¢733.9 billion by the end of July 2026, up from GH¢641.1 billion in December 2025, equivalent to 45.9% of GDP. The fiscal deficit on a cash basis stood at just 0.6% of GDP as of July 2026, well below the GH¢31 billion target for the period, reflecting stronger-than-expected revenue performance. However, the World Bank warns this could deteriorate substantially due to risks to the fiscal outlook.
Recovery Gains at Risk
Ghana’s macroeconomic indicators had shown marked improvement in 2025. GDP grew by 5.8%, inflation fell from 22.9% to 14.6%, and the fiscal deficit narrowed to 2.4% of GDP from 6.3%. The IMF reclassified Ghana from “critical” to “moderate” debt distress in August 2026, ending four years of extreme risk classification. The Fund also approved a final US$371 million disbursement under Ghana’s Extended Credit Facility arrangement, with inflation dropping to 5.3% by June 2026.
But the World Bank’s latest assessment suggests these gains remain vulnerable. The report noted that although inflation has moderated across much of the region, it remains susceptible to exchange rate depreciations, food price shocks, and fiscal slippages, particularly in countries with elevated debt levels and limited policy buffers.
“Persistent inflationary pressures could slow or reverse monetary easing, weighing on credit growth, private investment, and domestic demand,” the World Bank stated. “In this context, preserving central bank independence and avoiding monetary financing of fiscal deficits remain critical to maintaining price stability and anchoring inflation expectations.”
Region’s Growth Outpaces Poverty Reduction
The broader regional picture is one of resilient but insufficient growth. Sub-Saharan Africa’s economy is projected to expand by 4.3% in 2026, up from 4.1% in 2025, supported by robust global trade and sustained external demand. The World Bank raised its forecast by 0.3 percentage points from its April 2026 projection.
However, mounting debt service burdens, limited fiscal space, higher energy and transport costs, and heightened uncertainty continue to weigh on the outlook. Critically, faster growth is not translating into meaningful poverty reduction. Per capita income growth is expected to rise only to 1.8% this year from 1.6% in 2025, while the regional poverty rate is projected at 47.8% in 2026, declining only modestly to 47.1% by 2027.
Reform Fatigue and Political Risks
The World Bank acknowledged that several governments in Sub-Saharan Africa have undertaken politically difficult reforms in recent years, including fuel subsidy removal, exchange rate liberalisation, fiscal consolidation, and efforts to strengthen domestic revenue mobilisation. However, sustaining this momentum may become more challenging ahead of elections or periods of heightened political contestation.
“If difficult policy measures do not generate tangible improvements in economic conditions within a reasonable timeframe, or are perceived as ineffective, public support for reform efforts may weaken substantially,” the report warned. “This can erode not only the momentum behind current initiatives, but also the willingness of governments and citizens to pursue similar reforms in the future.”
Ghana’s Revenue Mobilisation Drive
Ghana has introduced a range of tax policies and administrative measures in its 2026 Budget aimed at deepening domestic resource mobilisation. These include a reduction in the effective VAT rate from 21.9% to 20%, the abolition of the COVID-19 Health Recovery Levy, and reforms to customs and excise administration. The Ghana Revenue Authority is targeting GH¢225 billion in collections for 2026, up from GH¢182 billion in 2025, with further increases to GH¢260 billion in 2027 and GH¢310 billion by 2028.
The government is targeting an increase in non-oil tax revenue from 13.1% of GDP in 2025 to 14.1% of GDP in 2026 through improved compliance and digital tools to track and tax e-commerce activities.
Divergent Paths Among the Four Nations
The four countries identified by the World Bank have taken different routes to address their debt challenges. Kenya, for instance, raised US2 billion Eurobond maturity, but the new borrowing came at a higher interest rate than the original loan. Kenya’s public debt stands at approximately 68% of GDP, with US15.3 billion to the World Bank.
Zambia, which defaulted on its sovereign debt in 2020, has made significant progress since securing an IMF programme and restructuring its external debt under the G20 Common Framework. Public debt is projected to fall from about 133% of GDP in 2023 to around 90.7% by 2025, with growth expected to average about 6.5% over 2026–2027. The World Bank approved US$45 million in new financing in March 2026 to support Zambia’s economic recovery, with the country’s credit rating improving from selective default to triple-C.
Malawi, meanwhile, has been ranked as the African country projected to record the largest fiscal deficit in 2026 after the World Bank revised its budget deficit forecast from 9% to 11.8% of GDP. The country remains in debt distress, with the World Bank noting that Malawi will not enter into any contractual obligations for new external public and publicly guaranteed non-concessional debt between July 2025 and June 2026.
A Region at a Crossroads
The World Bank’s October 2026 update, titled “Building AI-Readiness,” also highlighted the potential of artificial intelligence to accelerate poverty reduction, noting that distributional simulations for Ghana suggest AI gains could lift three times as many people out of poverty if the country makes the transition.
But the report’s central message is one of caution. With 47.8% of the region’s population still expected to live in poverty and per capita income growth barely above population growth, Africa’s economic resilience is being tested by a debt overhang that threatens to crowd out the very investments needed to sustain and broaden prosperity.
