Africa’s credit resilience faces its toughest political test under Trump

After years of battling debt distress, high inflation, and turbulent capital markets, many African economies are showing tentative signs of stabilization. Sovereign default risks, which peaked during the pandemic and the global inflation crisis of 2022-23, have gradually receded. 

Countries like Ghana, Senegal, and Kenya have returned to the international bond markets, albeit cautiously. New administrations have pledged sweeping fiscal reforms.

But as 2025 unfolds, Africa’s hard-won credit resilience is being tested like never before — by both domestic political transitions and a new era of global geopolitics ushered in by US President Donald J. Trump’s return to the White House.

This is according to a new joint white paper by Pangea- Risk and Acre Impact Capital titled The Impact of Political Change on Africa’s Credit Outlook in 2025.

“Volatile US trade and foreign policy under Trump can disrupt Africa’s economic planning and ability to secure US preference. Sudden shifts in tariffs, investment priorities, and trade deals will erode trust, making African governments hesitant to prioritise US partnerships,” says the report.

“The risk of policy reversals between administrations further weakens long-term credibility, complicating Africa’s trade and investment strategies.”

Trump’s revived “America First” foreign policy is upending traditional models of U.S.-Africa engagement, the report finds. Trade and investment incentives, once aimed at bolstering democratic reforms and regional stability, are now increasingly tied to transactional loyalty. 

African nations that align with Washington's evolving strategic interests may gain crucial access to capital and markets. “Enhanced US bilateral ties may improve credit ratings and lower borrowing costs for prioritised countries.” Those that don’t— and, perhaps more worryingly, a drying up of liquidity at a time when every dollar counts. “Excluded countries risk deteriorating credit profiles, higher risk premiums, and reduced access to favourable financing.”

For African leaders grappling with delicate post-election transitions, swelling public expectations, and external funding squeezes, the stakes could hardly be higher. Some 15 African countries will hold general elections this year. 

“Election cycles across Africa exert significant influence on sovereign credit conditions, as political uncertainty and fiscal loosening weigh on investor sentiment,” the report notes. Periods leading up to elections in Africa are often marked by increased sovereign risk, particularly in countries with weak institutional frameworks or histories of contested outcomes. “In such contexts, international creditors and bondholders typically demand higher risk premiums to offset uncertainty, while credit rating agencies may assign negative outlooks or downgrades.”

The combination of domestic political volatility and a shifting U.S. trade posture poses a dual-front challenge as African economies that had just begun to stabilize may find themselves vulnerable once again.

At the heart of the continent’s credit conundrum is an ambitious electoral calendar that is redrawing Africa’s political map.

Last year, elections in South Africa, Ghana, and Senegal brought sweeping changes. In Senegal, Bassirou Diomaye Faye’s shock victory promised a break from entrenched political elites. Ghana, under new leadership, is attempting to rebuild fiscal credibility after a bruising IMF negotiation. South Africa’s ruling African National Congress suffered historic losses, ushering in a fragile coalition government with an uncertain policy agenda.

Ahead, even more turbulence looms. Cameroon, Côte d'Ivoire, Gabon, and Tanzania are all slated for critical ballots this year. In each case, the potential for populist divergence from existing IMF programs, fiscal slippage, or governance crises could spook investors and trigger sovereign downgrades.

In Gabon, for instance, weakened investor sentiment has led to financing challenges, with Gabon securing only a third of its required funding on the regional market in 2024. The World Bank has also suspended funding due to the accumulation of $27 million in arrears in January. Given these challenges, Gabon has pursued alternative means to avert a default on a $605 million Eurobond maturing in June.

In Cameroon, IMF funding is critical as Cameroon’s 2025 budget projects a $2.8 billion financing gap. Without it, the government will rely on regional borrowing and bond issuances.  In November 2024, Cameroon secured less than 30 percent of the $22 million it sought to raise on the regional market. Weak investor appetite, driven by political instability, could further strain Cameroon’s financing options ahead of the election, the paper states.

Already, rating agencies are on high alert. The continent is entering a phase where politics, not economics, will be the dominant driver of Africa’s credit ratings. This means fiscal discipline will be tested by populist pressures, and any sign of fiscal misreporting or governance backsliding could shut countries out of international markets.

For African nations heavily reliant on Eurobond markets to refinance debts — many of which are coming due in 2025 and 2026 — that prospect is alarming.  For countries reliant on US business, reduced export revenues and diminished US-backed investment may “elevate risk premiums and weaken sovereign credit ratings.”

Compounding the political risks is the evolving nature of Africa’s relationship with the United States.

In Trump’s second term, Africa is no longer treated as a multilateral development partner but rather as a stage for strategic competition. Washington's trade and investment offerings are increasingly selective, aimed at rewarding governments that align with U.S. priorities — particularly on issues like security cooperation, critical mineral access, and opposition to Chinese influence.

Already, early signals suggest that countries deemed strategically important — such as Kenya, Nigeria, and Morocco — could benefit from expanded trade opportunities and infrastructure investment deals. Others, particularly those perceived as politically unstable or drifting toward rival powers, face the prospect of reduced engagement.

This selective diplomacy could deepen the credit divide across the continent, the paper warns, favouring "safe" countries while isolating those in political transition.