Debt Squeeze: Interest Takes About 12% of Revenue in Sub-Saharan Africa as US Yields Hit 5.2%Debt Squeeze: Interest Takes About 12% of Revenue in Sub-Saharan Africa as US Yields Hit 5.2%
Key Highlights
- Interest payments absorb about 12% of government revenue across sub-Saharan Africa, even as the 2026 regional growth forecast was raised to 4.5% from 4.3%.
- US 10-year Treasury yields rose from 4% in late February to 5.2% by the end of September, while median regional inflation is projected at 4.3% in 2026 and 5.0% in 2027.
- Monetary tightening may be needed in most countries, and borrowing costs could keep rising even as deficits in non-resource-intensive economies widen to 5.8% of output from 3.4%.
Interest payments are absorbing about 12% of government revenue across sub-Saharan Africa, the International Monetary Fund (IMF) has said, as a climb in US Treasury yields raises borrowing costs even though the Fund lifted its 2026 regional growth forecast to 4.5% from 4.3% in April.
The warning matters because it ties a better growth outlook to a heavier debt bill. Zeine Zeidane, director of the IMF African Department, said that despite a compression of spreads, "the cost of borrowing could continue to rise", according to a Reuters report carried by CNBC Africa on 15 October.
The US 10-year Treasury yield rose from 4% in late February to 5.2% by the end of September. As Mwenendo earlier reported, US producer prices rose 6.3% in the year to September, lifting bets on a Federal Reserve rate rise.
Inflation and the policy response
The Fund projects median regional inflation of 3.4% in 2025, 4.3% in 2026 and 5.0% in 2027. It says monetary tightening "may be needed" in most countries, a firmer line than the "difficult balancing act" it described in April. Zeidane said monetary policy should focus on bringing inflation to target.
Current-account positions are diverging. Surpluses among oil exporters are rising to 4.4% of GDP from 1.6%, while deficits in non-resource-intensive economies are widening to 5.8% from 3.4%.
Restructuring and the El Nino risk
Ethiopia, Ghana and Zambia have made progress on debt restructuring, but the processes took years. The Fund proposed a new restructuring playbook with template memoranda of understanding and offered its "good offices" to improve information-sharing between creditors and debtors.
It also flagged El Nino as a new risk absent from April's outlook. Simulations by the Fund show it could cut growth by 0.5 percentage points and lift 2027 inflation by 2.6 points. Zeidane warned that "things could get worse than what we have in the outlook".
What it means for Kenya and its neighbours
Kenya's own numbers show the exposure. The Central Bank of Kenya held its rate at 8.75% on 7 October, and its weekly bulletin puts provisional public debt at KSh 13.23T ($102.00B) in July 2026. The Fund is expected to hold Article IV consultations in Nairobi in early December, which are a review and not a new loan.
Neighbours are already reacting to currency pressure. As Mwenendo earlier reported, the Bank of Uganda raised its Central Bank Rate to 12.0% at an emergency meeting on 14 October. The regional figures do not break out Kenya's interest bill, so it is not possible to say how close Kenya sits to the 12% regional average.
In Summary
- Who issued the warning?
- The IMF, through Zeine Zeidane, director of its African Department.
- What did it say?
- Interest payments absorb about 12% of government revenue and borrowing costs could keep rising.
- When was it reported?
- On 15 October 2026, with the regional outlook updated that week.
- Where does it apply?
- Across sub-Saharan Africa, with Kenya's own debt at KSh 13.23T ($102.00B) in July.
- Why are costs rising?
- The US 10-year yield rose from 4% in late February to 5.2% by end-September.
- How might governments respond?
- The IMF says monetary tightening may be needed and proposes a new debt restructuring playbook.