BUUMBA CHIMBULU
THE African Development Bank (AfDB) has projected that global aid from the world’s 17 largest donors will decline by US$39.84 billion in 2025, driven mainly by reduced contributions from the United States and Germany.
Zambia is among the affected countries, with the US recently announcing a cut of US$50 million in medical aid over concerns of misuse and weak accountability.
In its African Economic Outlook 2025, the AfDB warned that if Africa’s current 18 percent share of aid holds, the continent could lose US$4.2 billion next year, posing a serious funding risk for low-income countries.
The AfDB cautioned that modest increases from Japan, South Korea, and Italy would not be enough to offset these losses.
“If this share holds in 2025, Africa would face a nearly 12 percent drop in aid from the 17 largest DAC donors compared with 2023. This would translate into a seven percent decline in total aid inflows, equivalent to US$4.2 billion, if aid from all other donors remains relatively stable.
To put this into perspective, the projected decline exceeds the combined GDP of Comoros, Guinea Bissau, and São Tomé and Príncipe in 2023.
These developments heighten the risk of a funding squeeze for many of Africa’s low-income countries, which remain heavily dependent on external aid to finance their national budgets.
Aid cuts will especially affect Africa’s low-income countries, where ODA contributes significantly to financing the budget,” the report stated.
The AfDB warned that this trend risks creating a severe funding squeeze for many low-income African countries, which rely heavily on external aid to support their national budgets.
Meanwhile, the bank noted that although external financial flows to Africa rebounded in 2023, persistent global uncertainty and aid cuts threaten to reduce inflows in the short to medium term.
In total, external financial flows – comprising foreign direct investment, portfolio investments, ODA, and remittances – amounted to US$204.6 billion in 2023, roughly seven percent of Africa’s GDP.
The report revealed that while most financial flows declined in 2023 due to global economic challenges, portfolio investments rebounded strongly.
Net portfolio flows reversed from outflows of US$23.1 billion to net inflows of US$322.9 million, reflecting easing global financial conditions and investor adjustments to post-pandemic market realities.
