For more than a decade, fiscal deficits across Sub-Saharan Africa have been widening. Governments have consistently spent more than they collect, often justifying the gap with promises that larger budgets would drive growth and lift millions out of poverty. The record tells a different story.
According to IMF data, thirty-six of the world’s fifty poorest countries in 2025 are in Sub-Saharan Africa. India, the world’s fourth-largest economy, a position Nigeria holds within Africa, ranks 50th. The lesson is clear: size does not equal shared prosperity.
Growth without welfare
Despite a rebound in output after the pandemic, the region still hosts most of the world’s poorest countries. The IMF projects Sub-Saharan Africa’s growth to edge up to 3.8 percent in 2025, but that pace is neither broad-based nor strong enough to shift living standards.
Weak state balance sheets lie at the heart of the problem. Across the region, tax revenues average 15–17 percent of GDP. Adding non-tax income such as fees, state-owned enterprise profits, and grants, the ratio rises to about 20 percent–22 percent still well below the 25 percent–30 percent common in other emerging markets.
Debt service is climbing. External principal repayments are estimated at $62 billion in 2025, equal to 2.2 percent of regional GDP, more than double a decade ago. In low-income countries, large fiscal deficits often coincide with wide current-account gaps, the “twin deficits” that weaken currencies and push up the cost of imports, cutting into household incomes.
Nigeria’s one step forward
Nigeria offers a mixed picture. Recent reforms; fuel-subsidy removal, exchange-rate changes, and new revenue measures lifted federation revenues in 2024 and narrowed the consolidated fiscal deficit. The World Bank estimates the deficit fell from 5.4 percent of GDP in 2023 to about 3.0 percent in 2024, with revenues rising to 11.5 percent of GDP. But high inflation eroded much of the gain.
Even so, the IMF’s 2025 baseline projects the deficit widening again to 4.7 percent of GDP, as oil receipts soften and non-oil revenues remain modest. The structural gap persists.
The poverty arithmetic is stark. Nigeria’s real GDP per capita declined on average between 2014 and 2023, while the number of people living in poverty grew. The World Bank estimates roughly 47 percent of Nigerians were poor in 2024—about 45 million more than in 2018/2019. Reforms narrowed the deficit but have yet to improve household welfare on a broad scale.
Other economies: deficits without relief
Ghana illustrates how fiscal excess can spiral into crisis. After years of borrowing to fund wages and subsidies, debt rose above 85 percent of GDP by 2022. Inflation exceeded 50 percent, crushing real incomes. A $3 billion IMF program and domestic debt restructuring followed, yet debt service still consumes most revenues, leaving little room for poverty reduction.
Kenya has run deficits above 6 percent of GDP for years, much of it on infrastructure. Public debt now exceeds 70 percent of GDP, while one in three citizens still lives in poverty. Critics argue that high-profile roads and railways benefit urban elites far more than rural households.
South Africa’s deficits, near 5 percent of GDP, are driven by wages, transfers, and rising debt service. Unemployment remains stuck at 32 percent, the world’s highest, while poverty and inequality deepen as interest costs crowd out social spending.
Ethiopia’s earlier growth boom, financed by public investment and borrowing, faltered under conflict and inflation. The country entered debt restructuring talks just as humanitarian needs surged. The gains proved temporary.
Zambia defaulted in 2020 after debt-fueled projects pushed liabilities above 100 percent of GDP. Nearly 60 percent of citizens remain in poverty today. Infrastructure splurges left little lasting transformation.
A region caught in a cycle
The region’s growth has become decoupled from poverty reduction because deficits often finance consumption and generalized subsidies rather than productivity-enhancing investment.
With narrow tax bases and widespread informality, many governments rely on expensive domestic borrowing or monetary financing, stoking inflation and undermining trust in policy. Several African economies still face double-digit inflation, with the poorest most exposed.
Size without prosperityThe global comparison underscores the point. India, despite its scale, remains among the 50 poorest countries by income per head. Nigeria holds a similar “big player” role within Africa but faces far deeper poverty. Economic scale without inclusive growth and redistribution does not translate into welfare gains.
Making deficits work for people
Experts argue that Africa’s deficits must shift from short-term fixes to real investments in people and productivity. Three steps stand out:
Spend smarter. Channel money into power, ports, and digital rails instead of costly subsidies. Nigeria’s fuel-subsidy savings, if transparently reinvested, could rebuild public trust.
Raise lasting revenues. With median revenues stuck at 17% of GDP, African governments must widen VAT bases, close loopholes, and enforce compliance to fund basic services without crushing growth.
Protect the vulnerable. Redirect subsidy savings into large-scale cash transfers. Multilateral support is in place, but delivery must be scaled up to shield households from food insecurity and inflation shocks.
Deficits are not a cure-all. With weak revenues, high interest costs, and shallow markets, borrowing that doesn’t raise productivity only deepens poverty. The path forward is disciplined: credible medium-term fiscal frameworks, higher-quality public investment, and protection systems that make reform bearable.
Otherwise, Africa will remain locked in a familiar loop: bigger budgets, weaker currencies, and households still left behind.
