Budget shortfalls will be substantial in Ghana, Uganda and Nigeria, Fitch Solutions has revealed in an article.

Dubbed “Return To International Capital Markets Belies Persistence Of Fiscal Risks In Sub-Saharan Africa”, the UK-based firm said many governments across the region will remain reliant on domestic and/or external borrowing to plug budget shortfalls in 2025.

This comes amid mixed progress on fiscal consolidation across Sub-Saharan Africa (SSA).

“Elevated debt servicing costs, a symptom of tight external and domestic financial conditions since 2022, will continue to exert upward pressure on government spending, while structural constraints on revenue generation will limit the effectiveness of tax-driven deficit reduction measures”.

Meanwhile, domestic yields remain elevated despite a gradual regional pivot towards monetary easing. 

According to a quarterly Gross Domestic Product-weighted average of SSA 10-year government bonds, yields reached 12.63% in Q2 2024, above the previous peak of 12.62% seen in Q4 2022 following Russia’s invasion of Ukraine and the subsequent rapid tightening of global financial conditions.

The spread with 10-year US Treasuries also widened, reflecting various domestic pressures, including monetary tightening in Nigeria and election-induced volatility in South Africa.

Yields remained high even into quarter four, especially in Nigeria and Kenya, reflecting ongoing monetary tightening and elevated political risks respectively.