Capital flows into Africa have slowed drastically after some seismic shifts. The most obvious upheaval was Washington’s shuttering of USAID, the impact of which has been compounded by other Western countries slashing their own development budgets. And the continent has seen a sharp contraction in new lending from China in recent years.
With pressure growing on many African governments to deliver everything from health programs to infrastructure projects, who will plug the gaps? The answer increasingly looks like multilateral development banks.
The African Development Bank, World Bank, and New Development Bank were among lenders that stepped in to help governments during the COVID-19 pandemic. And they have largely continued to provide vital support. Analysis by ONE Data — a partner…
Capital flows into Africa have slowed drastically after some seismic shifts. The most obvious upheaval was Washington’s shuttering of USAID, the impact of which has been compounded by other Western countries slashing their own development budgets. And the continent has seen a sharp contraction in new lending from China in recent years.
With pressure growing on many African governments to deliver everything from health programs to infrastructure projects, who will plug the gaps? The answer increasingly looks like multilateral development banks.
The African Development Bank, World Bank, and New Development Bank were among lenders that stepped in to help governments during the COVID-19 pandemic. And they have largely continued to provide vital support. Analysis by ONE Data — a partnership between Google and the ONE Campaign advocacy group — found multilateral financing surged 124% between 2010-2014 and 2020-2024, with these lenders now accounting for more than half of net flows into Africa compared to barely a quarter a decade earlier.
This matters because these institutions will increasingly determine the continent’s economic development, and because a reliance on these lenders only gives credence to the idea that an unfair risk premium is placed on those trying to raise capital for projects in Africa.
The tension is at the heart of the row between Afreximbank and Fitch, which this week saw the continent’s trade bank end its relationship with the ratings agency. It’s also why it was particularly striking that ratings agency S&P this week assigned an A credit rating, with a positive outlook, to the Africa Finance Corporation, which provides financial backing to infrastructure projects across the continent. AFC’s new rating will reduce its cost of securing capital at a time when lost funding, tied to Washington’s withdrawal from multilateralism, is being felt on the continent. It puts the bank, like other MDBs, in an increasingly pivotal position.
“We’re already experiencing that growing role,” Samaila Zubairu, the AFC’s president and CEO, told me. As the full extent of Western development cuts hit home, this will be the year that pressure on MDBs to deliver increases.