African Development Bank Group Annual Meetings

Widening Financing Gap

Africa stands at a critical juncture in its development journey – one marked by a widening financing gap amid a rapidly evolving global geopolitical and economic landscape, in an increasingly fragmented world that has contributed to dwindling development financing for Africa.

On the one hand, it is estimated that Africa requires:

• More than $1.3 trillion annually to achieve the global Sustainable Development Goals (SDGs)
• $184–$221 billion in annual infrastructure financing needs
• $213.4 billion in climate financing gap per annum until 2030
• $402.2 billion every year to fast-track structural transformation

On the other hand, the Bank's African Economic Outlook 2025 report estimates that with the right policies and tackling resource leakages and improving institutional and economic governance, Africa has the capacity to mobilize about $1.43 trillion from various domestic revenue sources, enough to finance its development and achieve the SDGs.

In addition, increased economic and geopolitical fragmentation is fundamentally altering the global development financing landscape, as competing powers redirect resources toward securing their own military, economic, and financial dominance rather than international development cooperation.

Rising tensions

Following the COVID-19 pandemic, which reignited nationalist policies and redefined trade relations, the continued geopolitical tensions, multiple global shocks and divergence in policy responses by competing global powers, have deepened economic and geopolitical fragmentation.

These rising tensions have reduced the overall volume of traditional development financing and trade flows. They have also introduced competing and often contradictory development frameworks as different global actors promote diverging visions of development priorities and approaches.

Consequently, Africa finds itself at a critical juncture marked by the widening financing gap amid a rapidly evolving geopolitical and economic landscape, conflicting priorities and expectations of development partners, and dwindling traditional development finance flows (Official Development Assistance and Foreign Direct Investment), rising debt repayment costs, escalating cost of capital and increased uncertainties in international financial markets.

Opportunities for self-determination

Amid these challenges and uncertainties, there are numerous opportunities for innovation and self-determination for Africa. Based on the findings of the 2025 African Economic Outlook, Africa has the potential to mobilize sufficient resources to finance its own development.

However, weaknesses in the domestic, regional and global financial and trade systems constrain its ability to effectively deploy such resources and leverage its potential for inclusive and resilient growth and sustainable development.

To mobilise capital at scale in the currently fragmented and rapidly changing global environment, Africa needs to use what it has to create the agency to engage productively and assert its financial agency in global markets. It needs to adopt a strategic approach by strengthening its own financial systems (financial institutions, financial markets, credit rating agencies, and associated supervisory and regulatory frameworks) embedded in domestic realities and priorities.

African domestic and regional financial institutions need to strengthen cooperation to leverage their balance sheets and deploy innovative financing models, blended finance, climate finance, and digital finance, and build productive partnerships to complement domestic capital. Africa must deploy smart economic diplomacy by enhancing coordination and maintaining a pragmatic policy stance that engages all partners from the east, west, north, and south and draw lessons from all the development partnerships and maximize the potential benefits aligned with its long-term development objectives.

The youth, a major asset

Africa has the highest population growth rate of about 2.2 percent annually, and its population is projected to increase from 1.5 billion in 2025 to about 2.5 billion by 2050, with a median age of 19 years compared to 34.7 for Asia and 43 for Europe. Africa's youthful population is therefore the biggest asset for the continent and the whole world, making the continent the next frontier for affordable labour supply. In addition, Africa has a large diaspora population that invests back in the continent.

Designing national and regional strategies for education and skills development that include young people will nurture and transform this abundant resource and convert it into a demographic dividend. In addition, establishing mechanisms to promote diaspora financial flows and tapping into their skills offer opportunities to scale up investment and participation in governance in Africa.