Africa Loses Billions To Illicit Financial Flows As Climate Finance Falls Short, Experts Warn

Receiving fraction of global climate finance, facing $1 trillion financing gap

Africa’s development ambitions are being undermined by a widening climate-finance gap, mounting debt burdens and tens of billions of dollars lost annually through illicit financial flows, policymakers and economists warned at a continental development forum in Addis Ababa this week.

Speaking at the Africa Development Impact Forum (AFDI), hosted by the United Nations Economic Commission for Africa (ECA), officials and experts said structural weaknesses in the global financial system continue to constrain Africa’s efforts to achieve sustainable development goals, create jobs and build resilience to climate change.

Hanan Morsy, deputy executive secretary of the ECA, said Africa remains marginalized in the international financial architecture despite its vast economic potential. The continent accounts for less than three percent of global trade and faces an estimated annual financing gap of USD 1 trillion to meet the Sustainable Development Goals and respond effectively to climate change, she said.

Morsy noted that public debt levels are rising across the continent, with more than 25 African countries either in debt distress or at high risk of it. As a result, many governments now spend more on debt servicing than on social-sector investments.

She said climate finance should help countries strengthen institutions and create opportunities for future generations rather than deepen existing vulnerabilities.

“Every year, the continent loses huge resources through corruption, illicit financial flows, tax avoidance and other forms of financial leakage,” Morsy said, calling for stronger international tax cooperation and greater regional coordination to curb financial outflows.

Tefera Berihun, an Ethiopian economist, argued that climate finance should not be treated as charity.

“Since the continent is not a significant contributor to global emissions, this is a matter of justice and an investment in a shared and better future,” he said.

Tefera said climate finance for Africa should primarily come through concessional loans and grants, while ensuring African countries play a leading role in policymaking, implementation and innovation.

According to figures presented at the forum, Africa contributes less than four percent of global greenhouse-gas emissions. Yet of the roughly USD 1.9 trillion in climate finance mobilized worldwide in 2023, only about four percent reached Africa, highlighting what participants described as a stark mismatch between need and funding.

Participants also pointed to corruption, wasteful public spending, opaque investments and illicit financial flows as major obstacles to development. A representative from Côte d’Ivoire said substantial resources that could otherwise support productive investment continue to leave the continent through illicit channels.

United Nations and other international reports estimate that Africa loses about USD 88.6 billion annually through illicit financial flows, equivalent to roughly 3.7 percent of the continent’s gross domestic product. The losses exceed the development assistance Africa receives each year and significantly undermine progress toward the Sustainable Development Goals.

Claver Gatete, the ECA’s executive secretary and a United Nations under-secretary-general, said African countries are confronting multiple crises simultaneously, including climate shocks, geopolitical tensions, armed conflicts, debt vulnerabilities, supply-chain disruptions and rapid technological change.

“Official development assistance is declining, and development financing can no longer be assumed available at the scale many countries relied upon in the past,” Gatete said.

He stressed the urgency of creating economic opportunities for Africa’s young population, noting that more than 60 percent of Africans are under the age of 25 and that more than 15 million young people enter the labor market each year.

Despite decades of development strategies, policy frameworks and research, Africa continues to struggle with deep-rooted structural challenges, participants said. They argued that much of the continent’s research output remains disconnected from policymaking, while implementation gaps frequently prevent development initiatives from achieving their intended impact.

Hafsia Leghrissi, a Tunisian researcher, said Africa is bearing the consequences of a climate crisis it did little to create while receiving financing that often comes in the form of loans rather than grants.

She said the burden is compounded by corruption and illicit financial flows, which continue to drain resources that could otherwise strengthen resilience and support sustainable development across the continent.