Iran war halts expected lowering of borrowing rates in Africa

• Banks across Africa have halted plans to lower borrowing rates as Iran war intensifies. 
• Strong gold and metal prices have helped stabilize African currencies.
• The World Bank projects general strong economic growth 4.0 percent for Africa in 2026.

 The earlier expected lowering of borrowing rates across Africa’s financial institutions has come to a grinding halt owing to the Iran war.

“The ongoing war on Iran has reversed the previously expected decline in African borrowing rates, creating a “higher-for-longer” interest rate environment across the continent,” Reuters reported over the weekend.

Before the war broke out, the World Bank had projected that; “Global interest rates are expected to shift downward, providing some relief to African economies.”

Ahead of US and Israel attacks on Iran, the World Bank’s Economic Outlook Report for 2026 had forecast, “Many central banks in the region have begun or are expected to continue easing monetary policy as inflation moderates.”

“After the United States and Israel launched strikes on Iran on 28 February, triggering a cascade of retaliatory attacks across the Gulf, the economic toll on Africa is emerging in overlapping waves,” reports Africa Confidential.

Oil prices on the rise due to Iran war

The report cites spiking oil prices as a key reason as prices have already gone up 50 percent above February levels.

Things are expected to get worse; “Industry sources predict to exceed Usd120 per barrel if the effective closure of the Strait of Hormuz, through which a fifth of global petroleum flows, persists,” the report laments.

“Interest rates and borrowing costs for many African sovereigns are expected to ease in 2026,” Moneyweb reported in the wake of the World Bank report.

Generally speaking, there has been very modest increase in the price of goods and services so far and the trend is expected to persist; “Africa’s economic outlook to remain solid in 2026 despite trade uncertainty,” reports UNECA.

The projection is backed by Business Day’s most recent report (17.02.2026) that notes “…as inflationary pressures ease, more (African) economies return to single digit price growth, and currencies stabilise helped in part by record precious metal prices.”

Earlier this week, the Economic Commission for Africa (ECA) launched the United Nations flagship World Economic Situation and Prospects 2026 (WESP 2026) report which highlights ‘a modest improvement in Africa’s growth outlook.’

According to the WESP, the 2026 economic prospectus of Africa is projected to rise to 4.0 percent and inch slightly higher to 4.1 percent in 2027.

“The acceleration reflects greater macroeconomic stability in several large economies, supporting investment and consumer spending,” details the WESP report.

However, a caution was issued at the launch of the report in Addis Ababa by Stephen Karingi, Director, Macroeconomics, Finance and Governance Division at ECA.“

Despite the positive outlook, high debt-servicing costs, limited fiscal space and volatile commodity prices continue to weigh on Africa’s prospects for inclusive and sustainable growth,” he warned.

The report cites analysis of nine countries’ Monetary Policy Committee (MPC) meetings of 2026 and points out that Kenya, Egypt, Angola, Ghana, Mozambique, and Zambia have cut policy rates.

Other countries that have held their MPC meetings like Uganda, South Africa, and Tanzania have not cut their rates remaining cautious of possible global economic upheavals.

“In response to easing inflationary pressures, most central banks in sub-Saharan Africa have begun cutting interest rates,” the World Bank said.

The February 2026 World Bank Africa Pulse report warns that there maybe “…renewed inflation risks tied to global political uncertainty remain.”

It goes on to explain that lower inflation and borrowing costs means that household consumption and SME investments are expected to increase but public spending maybe constrained due to fiscal consolidation.

When you look at individual countries, according to the report, Ghana stands out with the largest inflation rate cut.

“Consumer prices slowed for a 13th consecutive month to a near 30-year low of 3.8 percent in January, down from 5.4 percent in December,” details the report.

Ghana’s exceptional performance is tied to it’s tight fiscal action and backed by record high gold prices.

The report explains that gold prices have helped strengthen the country’s external reserves and muscles up it’s currency against the dollar.

Next is Zambia where inflation dropped to 9.4 percent in January, a three-year low owing to a bumper maize harvest.

Then you have Kenya which has lowered borrowing costs to 8.75 percent as inflation risks are contained.

“Not all central banks have joined the easing wave. Uganda, South Africa, and Tanzania maintained policy rates at 9.75 percent, 6.75 percent and 5.75 percent, respectively,” details the report.

In Nigeria, the National Bureau of Statistics there reported at the start of the week that headline inflation lowered to 15.10 percent in January from 15.15 percent in December.

So, generally speaking, the World Bank says Africa’s reduced inflation, coupled with stronger commodity revenues and backed by stabilising currencies are all creating room for reduced borrowing rates for SMEs.

“For investors and businesses, the shift signals improving financial conditions and the potential revival of credit growth across several of Africa’s biggest economies marking a cautiously optimistic start to 2026,” reads the report.

Elsewhere, “A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” laments United Nations Secretary-General António Guterres.

In his speech during the launch of the United Nations World Economic Situation and Prospects 2026 (WESP 2026) report, which showed Africa’s resilience but spotted global economic uncertainties, the UN Secretary General shared concerns whether the SDGs will be achieved.

“Many developing economies continue to struggle and, as a result, progress towards the Sustainable Development Goals remains distant for much of the world,” he cautioned.

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Africa inflation: AfDB projects 4.2% trade surge in 2026

With most African nations enjoying reduced inflation, the African Development Bank (AfDB) projects a 4.2 percent average surge in trade this year making Africa, “the fastest-growing economy of all the world’s regions.”

Unfortunately, despite this considerable remarkable performance, the benefits of Africa’s economic development end up in the hands of but a few.

“For ordinary Africans, particularly those who continue to struggle with poverty, benefitting from this wealth will require structural economic reforms,” laments the AfDB.

It is a double headed coin for Africa’s poor, on one side, they do not enjoy the benefits of the continent’s economic growth and on the flip side, the poor shoulder the weight of inflation.

“This is particularly true because high inflation, projected to be 10% or more on average continentally in 2026, impacts the poor and middle class the hardest,” AfDB explains.

Africa inflation: A case for Tanzania

Inflation in Tanzania has remained in the single digit category for the past few years despite global economic upheavals, indicating a considerable resilient and stable economy.

According to the Tanzania National Bureau of Statistics (NBS), the annual inflation rate in Tanzania eased to 3.3% in January 2026 from 3.6% in December, marking the lowest reading since late July.

In it’s January 2026 report, NBS reported that, consumer prices inched up slightly by only 0.2 percent, a significant reduction compared to the 0.9 percent gain recorded in December.

NBS commends Tanzania’s general performance citing that the country has withstood global economic challenges with notable resilience.

It highlights the fact that between 2021 and 2026, there have been significant global economic events, including the COVID-19 recovery, the Russia-Ukraine conflict, and worldwide commodity price volatility, yet “Tanzania has navigated these challenges with notable resilience.”

Inflation slowdown in Tanzania can be seen in food and non-alcoholic beverages which increased moderately by 5.7 percent compared to 6.7 percent in December.

The trend can also be found in alcoholic beverages and tobacco that increased by 2.2 percent vs 3.4 percent the previous month.

Similarly, clothing and footwear increased 1.2 percent vs the December 2 percent. Inflation also slowed for household equipment and  maintenance (2.7% vs 3%), as was the case for education services (0.4% vs 2.9%).

However, inflation rose for transport (4.2% vs 4.1%), restaurants and accommodation services (1.1% vs 0.9%), and personal care, social protection, and miscellaneous goods and services (3.2% vs 1.2%).

“Inflation remained unchanged for housing and utilities 2.3 percent,” reports the NBS.

Generally, the NBS report says consumer prices increased by 0.2 percent compared to 0.9 in December.

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