Africa urged to plug leakages, mobilise local capital as global funding dries up

The African Development Bank (AfDB) has urged the continent’s economies to urgently seal fiscal leakages and mobilise domestic capital as official development assistance (ODA) and foreign direct investment (FDI) dwindle, warning that Western governments are prioritising internal needs and global capital is becoming prohibitively expensive.

The call comes as African nations, including Kenya, confront fresh macroeconomic pressures from the Middle East conflict, which has sent oil prices soaring by more than 50 per cent since March and weakened 29 African currencies, raising the cost of servicing external debt and importing food, fuel and fertiliser.

Professor Kevin Urama, the bank’s chief economist and vice president, told journalists from a virtual press conference held from Abidjan that with traditional financing flows shrinking, the continent must look inward.

“Africa has the capacity to mobilise $1.43 trillion from various domestic revenue sources and efficiency gains from better public finance management,” he said.

The numbers Africa needs are staggering. An estimated $1.3 trillion to address the Sustainable Development Goals, $184 billion to $221 billion annually for infrastructure financing, and $213.4 billion each year through 2030 for climate financing.

Professor Urama further put the figure for structural transformation at $402.2 billion annually.

This is the paradox, he said, “Africa needs so much to address SDGs, climate change, infrastructure, and development needs. Yet Africa has enough capital to address all these financing needs internally, only by improving the right policies, tackling resource leakages, and addressing institutional and economic governance challenges.”

The bank’s forthcoming annual meetings, to be held from May 25 to 29 in Brazzaville, the Republic of Congo, will be convened under the theme ‘Mobilising Africa’s Development Financing at Scale in a Fragmented World’.

It will be the 61st session of the Boards of Governors of the African Development Bank and the 52nd session of the Board of Governors of the African Development Fund, held jointly.

More than 3,000 participants are expected.

The theme reflects growing concern that geopolitical fragmentation is altering global development financing landscapes.

Urama noted that a policy paper co-authored with the UN Economic Commission for Africa, the African Union Commission and UNDP, launched recently in Washington, DC, has already assessed which African countries are most exposed to the Middle East crisis and what crisis responses are required.

The African Development Bank estimates the continent needs more than $400 billion annually to accelerate structural transformation, yet ODA flows are under mounting pressure amid shifting donor priorities.

For Kenya, ODA is projected to fall from Sh278 billion in the 2024-25 financial year to Sh258.4 billion in 2025-26, an almost Sh20 billion drop, according to the Parliamentary Budget Office.

EU nations prioritising defence spending have led to significant cuts in ODA, with the UK announcing a reduction of its development assistance budget from 0.5 per cent to 0.3 per cent of gross national income from 2027.

FDI flows into Kenya have also slumped. The ratio of FDI inflows to GDP dropped from 4.77 per cent in 2011 to just 0.65 per cent in 2022, according to the Kenya Institute for Public Policy Research and Analysis.

Urama confirmed that the bank is seeking ways to raise fresh capital, leveraging other regional development finance institutions under a new initiative called the New African Financing Architecture for Development (NAFAD).

“The development issue is not just about how much you mobilise, but how you deploy them,” Urama said.

NAFAD is anchored in the principles of collaboration, subsidiarity, complementarity, coordination and risk transformation, he added.

The initiative brings together African development financing institutions to pool balance sheets and stretch every dollar invested on the continent, Urama observed.

The bank has already demonstrated its capacity to respond to global shocks. During the Ukraine war, it deployed a $1.5 billion Emergency Food Production Facility, enabling 13 million farmers across 29 countries to produce 44 million tonnes of food — 116 per cent above target — valued at $17.3 billion, according to the bank.

Chioma Onukogwu, representing the bank’s secretary-general, noted that the Brazzaville meetings will be historic as the first annual meetings for President Dr Sidi Ould Tah since he assumed the role in September 2025.

“The governors’ dialogue will offer the opportunity for governors to share their perspectives on the four cardinal action points that form part of the president’s vision for the bank,” Onukogwu said, adding that a strategic dialogue earlier this month had adopted the Abidjan Consensus and formally named the NAFAD initiative.

Kenya, a shareholder of the African Development Bank, has a direct interest in the outcomes of the Brazzaville meetings.

Nairobi has been a beneficiary of bank financing for infrastructure projects, including road networks and energy initiatives.

The country also participates in the Nigerian Trust Fund, a special trust fund established by the Nigerian government to assist other African nations, which has been extended for another 15 years, Urama noted.

But the pressures are mounting. The Middle East conflict is exacerbating Africa’s vulnerabilities beyond energy and food prices.

The WTO has warned that if the conflict persists, Africa’s services trade growth could be slashed from a projected 3.7 per cent to 1.7 per cent in 2026, citing the Middle East’s role as a major aviation hub connecting Africa to global markets.

The African Union Commission has said the conflict “has serious implications for energy markets, food security, and economic resilience, particularly in Africa where economic pressures remain acute”.

Several countries, including Kenya, have already had their economic outlooks and forecasts adjusted in response to the new shocks emanating from the Middle East.

Looking ahead, the bank is focusing on what Urama called “asserting Africa’s financing agency in global markets” through strategic approaches that include streamlining financial systems, reforming credit rating methodologies, and deploying innovative financing mechanisms such as blended finance, climate finance and digital finance.

The bank’s African Economic Outlook 2026 report, to be launched at the Brazzaville meetings, is expected to provide a detailed country-by-country analysis and policy recommendations.

“Development is a process, not that you press a button and everything changes,” Onukogwu said, adding, “The fact that the management of the bank and the governors with the executive directors are spending five days together having strategic conversations and making decisions is a great outcome in itself.”