By Anita Dennis
African Finance Corporation (AFC) has warned that sub-Saharan Africa could face reductions of up to 28 percent in official development assistance (ODA) in the coming years, raising concerns over external financing pressures across the region.
The recent projection was contained in the AFC’s “State of Africa’s Infrastructure Report 2026,” which highlighted declining concessional funding and tightening global financial conditions as key risks to infrastructure development and economic growth.
According to the report, ODA, a major source of development financing, declined from $83.8 billion in 2020 to $73.5 billion in 2023 and is projected to fall further by up to 20 percent from 2025. Sub-Saharan Africa is expected to experience sharper reductions, with potential cuts of up to 28 percent.
The AFC attributed the trend to elevated global interest rates, persistent inflation, and geopolitical disruptions, which have increased borrowing costs and limited access to international capital markets.
The report noted that African sovereign bond issuances declined significantly from over $29 billion in 2018 to between $4 billion and $6 billion annually between 2022 and 2023. Foreign direct investment (FDI) flows have remained relatively stable at between $45 billion and $55 billion annually, but are concentrated in North Africa and a limited number of sub-Saharan economies.
The institution stated that these developments are tightening financing conditions at a time when infrastructure investment requirements across the continent remain high.
The report also identified rising borrowing costs and reduced bilateral financing as additional constraints. It noted that several African sovereigns are experiencing pricing pressures and intermittent exclusion from international debt markets.
Chinese lending, which has historically supported infrastructure development across Africa, has also declined in recent years, contributing to the widening gap between financing needs and available capital.
The AFC stated that the current financing environment highlights the risks associated with reliance on external funding sources and underscores the need for alternative financing strategies.
The report noted that Africa’s institutional capital pool grew by 25 percent to over $2 trillion in 2025. However, challenges persist in mobilising and deploying this capital toward infrastructure and other productive sectors.
The AFC stated that bridging the financing gap will require reforms to improve capital mobilisation, strengthen domestic investment channels, and enhance the efficiency of capital allocation across the continent.
The institution also referenced its recently secured ‘A’ long-term credit rating from S&P Global, noting that the rating is expected to reduce borrowing costs and support its capacity to expand infrastructure financing activities in Africa.
