Ghana, Nigeria, and Uganda to face rising budget deficits and increased borrowing in 2025

A recent report by UK-based Fitch Solutions highlights that budget deficits will remain a persistent issue for several sub-Saharan African (SSA) countries in 2025, with Ghana, Nigeria, and Uganda being among the most affected. These nations are expected to see substantial shortfalls, compelling them to increase both domestic and foreign borrowing to finance their budgets.

The report, titled Return to

Read full articleInternational Capital Markets Belies Persistence of Fiscal Risks in Sub-Saharan Africa, emphasizes that despite efforts toward fiscal consolidation, budgetary gaps in SSA will persist, particularly in Uganda, Nigeria, and Ghana. It also notes slow progress on fiscal reforms in South Africa and Tanzania.

The quarterly average for SSA 10-year government bonds, weighted by GDP, rose to 12.63% in Q2 2024, surpassing the 12.62% peak from Q4 2022, further straining these economies.

Nigeria’s fiscal challenges are evident as the country seeks a $500 million loan from the World Bank to support its education sector and reduce the number of out-of-school children. Nigeria’s total debt surged by 24.99% in Q1 2024, reaching US$91.46 billion from the previous quarter.

Ghana’s financial woes also continue, with the country securing a $3 billion loan from the International Monetary Fund (IMF) in 2024 to stabilize its economy.

Ghana’s central government debt stood at GH¢742.0 billion ($46.2 billion) by June 2024, or 70.6% of its GDP, marking a 22% increase due to currency devaluation and rising creditor payments.

Uganda’s debt situation is equally concerning, with external debt servicing projected to account for 35% of GDP in 2024/2025. The country’s Finance Minister, Matia Kasaija, noted that Uganda’s public debt reached $24.7 billion by the end of 2023 and is expected to rise to $25.7 billion by June 2024.

Despite the high yields on both domestic and foreign debt, the report highlights that international capital markets are now more accessible to SSA governments, offering a lifeline to these nations as they grapple with fiscal deficits and rising debt burdens. However, the long-term sustainability of this borrowing remains a significant concern for the region.