AfDB Warns of $39.84 Billion Drop in Africa’s Foreign Funding by 2025 Amid Global Aid Cuts

The African Development Bank (AfDB) has projected a significant drop of $39.84 billion in foreign funding to Africa by 2025, primarily due to reductions in Official Development Assistance (ODA) from key donor countries. According to the AfDB’s African Economic Outlook 2025, 17 major donors, including the U.S. and Germany, are slashing aid budgets, which could lead to a 12% decline in support from these nations and a 7% overall drop in Africa’s total aid inflow. This decline represents a financial shortfall greater than the combined GDP of Comoros, Guinea-Bissau, and São Tomé and Príncipe.

The impact of this aid cut will be most severe for low-income African countries that depend on ODA to support national budgets. The AfDB report warns that without this critical financial backing, many nations may face serious funding constraints. While remittances have served as a more stable source of foreign income, the recent global economic environment has disrupted even these inflows, adding further strain to fragile economies.

Remittance flows to Africa fell by 6.2% in 2023, dropping to $91.1 billion from $97.1 billion in 2022. The decline is attributed mainly to valuation effects caused by a stronger U.S. dollar rather than a sharp reduction in volume. Although remittances are typically more resilient than other financial flows, they are influenced by cyclical global economic trends and structural barriers such as transfer costs and regulatory constraints in source and destination countries.

The report further highlights global aid reduction trends, especially the decreasing role of agencies like the United States Agency for International Development (USAID). Following a spike in aid during the COVID-19 pandemic, ODA to Africa has been steadily falling—by 6% in 2022 and nearly 3% in 2023—despite growing development challenges across the continent.

To address this looming crisis, the AfDB urges African nations to reduce their vulnerability to external shocks by improving domestic economic resilience. Key recommendations include enhancing export capabilities, increasing local value addition, and ensuring stable macroeconomic policies. These measures, the Bank argues, will help offset the volatility caused by fluctuating foreign support and build a stronger foundation for long-term development.

Source: Nairametric