Sub-Saharan Africa is set to face deep pressure on external financing as official development assistance (ODA) declines, with the African Finance Corporation (AFC) warning that the region could see aid cuts of up to 28% in the coming years.
The warning was contained in the institution’s latest report, “State of Africa’s Infrastructure Report 2026”.
According to the AFC, these challenges could slow infrastructure delivery and broader economic transformation unless alternative financing strategies are adopted.
What the report is saying
The report shows several major sources of development finance are under pressure, raising concerns over Africa’s ability to fund critical investment needs.
- “ODA, historically a major source of concessional financing, fell from its peak of US$83.8 billion in 2020 to US$73.5 billion in 2023 and is expected to fall by up to 20% from 2025, with sub-Saharan Africa likely to witness cuts of up to 28%,” the report stated.
- “Elevated global interest rates, persistent inflation and geopolitical shocks have raised borrowing costs and intermittently closed market access.”
- African sovereign bond issuances fell sharply from over $29 billion in 2018 to between $4 billion and $6 billion annually from 2022 to 2023.
- Foreign direct investment has remained between $45 billion and $55 billion annually, but flows remain concentrated in North Africa and a few sub-Saharan economies.
The AFC said these trends are tightening financing conditions at a time when investment needs across the continent remain substantial.
More Insights
The institution also pointed to rising borrowing costs and weaker bilateral financing as additional pressures on Africa’s funding outlook.
- The AFC said many sovereigns are facing “pricing pressures and periods of exclusion” in international debt markets.
- “While aggregate flows have stabilised in the US$45‑55 billion range annually, they are heavily skewed toward North Africa and a small number of sub-Saharan economies.”
- Chinese lending, once a major source of infrastructure finance across Africa, has declined significantly in recent years.
- The slowdown in external funding sources has widened the gap between financing needs and available capital.
According to the report, these pressures underscore the vulnerability of relying heavily on external financing channels.
What you should know
The AFC said addressing the growing funding gap will require a rethink of how Africa mobilises and deploys capital for development.
Earlier, Nairametrics reported that Africa’s institutional capital pool grew by 25% to over $2 trillion in 2025, but the continent continues to face challenges in financing critical infrastructure projects.
The development highlights a growing disconnect between rising capital reserves and the continent’s ability to channel funds into productive investments that drive job creation.
- Earlier, the AFC said its newly secured ‘A’ long-term credit rating from S&P Global will lower its borrowing costs and strengthen its ability to expand infrastructure financing across Africa.
