African nations receive funding from development banks

Capital flows to Africa have decreased significantly due to shifts in funding from Western nations and China. These changes are creating challenges for African governments aiming to implement various programs and projects.

Multilateral development banks are increasingly stepping in to fill the funding gaps.

Rise of Multilateral Development Banks

Analysis by ONE Data, a partnership between Google and the ONE Campaign, indicates a substantial increase in multilateral financing. Financing surged 124% between the periods of 2010-2014 and 2020-2024. These institutions now account for over half of net flows into Africa, a significant change from less than a quarter a decade prior.

Concerns Regarding Reliance on MDBs

The growing reliance on multilateral development banks raises concerns about the perception of an unfair risk premium applied to capital-raising efforts for projects in Africa.

Rating Agency Actions and Implications

Afreximbank recently terminated its relationship with ratings agency Fitch. Separately, S&P Global assigned an A credit rating, with a positive outlook, to the Africa Finance Corporation (AFC). This rating is expected to lower AFC’s cost of securing capital, particularly as funding losses related to decreased Western involvement in multilateralism are being felt across the continent.

Increased Pressure on MDBs

AFC President and CEO Samaila Zubairu noted the growing role of these institutions. As the impact of reduced Western development funding becomes more apparent, pressure on multilateral development banks to deliver results is expected to intensify.