The fallout from the US and Israeli war with Iran threatens to spur inflation across Africa, halting a wave of interest rate cuts and undermining continent-wide economic recoveries.
Nine African central banks have lowered borrowing costs in recent weeks — including DR Congo, Kenya, and Nigeria — with policymakers citing slower inflation after years of price rises driven by the COVID-19 pandemic and Russia’s war in Ukraine. But higher oil prices because of the Middle East conflict could reverse that.
African financial markets have been hit by foreign investors selling off assets as they flee perceived risk and retreat to the dollar, weakening local currencies.
“Borrowing and raising capital just got harder,” Charlie Robertson, author of The Time Travelling Economist, told Semafor. He said it was unlikely that African markets would bounce back to pre-war levels before April. “There will be a little more caution and distrust of any ceasefire,” he said. African economies “simply do not have the buffers for another prolonged global shock,” cautioned Tighisti Amare, Africa program director at Chatham House think tank in London.
