Fiscal reforms can unlock $1.43trn annual financing for Africa, AfDB says
SOPURUCHI ONWUKA, Editor
Africa could unlock as much as $1.43 trillion in additional annual financing by addressing inefficiencies in resource mobilization and utilization, a development that would exceed the continent’s estimated yearly development financing gap of $1.3 trillion, according to the 2026 African Economic Outlook released by the African Development Bank Group.
The report said improving the efficiency of public spending and strengthening domestic resource mobilization are central to closing Africa’s financing gap. It noted that nearly $469 billion remains untapped annually because of weak tax compliance systems, poor administration, and ineffective policy design across many countries.
According to the report, more than 40 percent of public investment spending in Africa is lost to inefficiencies. Closing this gap alone could free up about $299 billion every year for productive and growth-enhancing investments in infrastructure, industrialization, healthcare, education, and job creation.
The Bank observed that Africa’s financing constraints are deeply rooted in the structure of its financial systems, which remain shallow, fragmented, and poorly integrated. Weak capital markets across the continent continue to limit the mobilization of domestic savings and their allocation to productive investments needed for long-term transformation.
Despite these challenges, African economies recorded stronger growth in 2025 amid mounting global uncertainty and rising geopolitical tensions. Average real GDP growth across the continent strengthened to 4.4 percent in 2025, nearly one percentage point higher than the previous year, making Africa one of the world’s fastest-growing regions.
The report noted that Africa has continued to demonstrate resilience despite escalating trade tensions, worsening climate change impacts, lingering effects of the COVID-19 pandemic, declining foreign aid and foreign direct investment, and rising global and regional conflicts. It added that geopolitical fragmentation and the continuing fallout from the Middle East conflict have further complicated the continent’s development landscape.
However, the Bank warned that resilience alone would not be enough to secure sustainable development. It stressed that deep structural weaknesses continue to slow economic transformation, while vulnerability to external shocks remains high and development financing needs continue to outpace available resources.
Under the theme, “Mobilizing Africa’s Development Financing at Scale in a Fragmented World,” the 2026 African Economic Outlook called for a fundamental shift away from fragmented policy responses toward coordinated strategies capable of unlocking Africa’s fiscal, financial, natural, and human capital resources.
The report emphasized that Africa must raise annual economic growth to at least 7 percent and sustain it over several decades to achieve large-scale job creation and meaningful poverty reduction. To accomplish this, the continent would need to increase annual capital stock growth from the current 3.3 percent to about 8.7 percent by 2030.
In West Africa, growth is projected to remain relatively stable over the medium term. Economic expansion in the subregion is estimated at 4.8 percent in 2025, before easing slightly to 4.7 percent in 2026 and 4.5 percent in 2027. The report attributed the region’s resilience to strong agricultural production, expanding agro-processing value chains, and sustained public investments in energy, logistics, and transportation infrastructure.
Additional support for growth is expected to come from increased mining and hydrocarbon production, as well as stronger private sector investments, particularly in construction and infrastructure development.
The African Development Bank stressed the need for deeper regional integration and stronger financial architecture across the continent. It recommended the development of integrated capital markets, harmonized payment systems, and improved financial regulation to create a more cohesive Pan-African financial ecosystem capable of mobilizing investment at scale.
The report also highlighted emerging opportunities for Africa in critical minerals, climate finance, and global institutional investments. However, it warned that attracting such investments would require credible policy frameworks, stronger institutions, and innovative financial instruments capable of crowding in private capital.
The Bank said Africa’s challenge is no longer only about closing financing gaps, but about transforming its financing systems to mobilize and deploy capital more efficiently while strengthening financial independence and resilience.
President of the African Development Bank Group, Dr. Sidi Ould Tah, said the institution remains committed to supporting Africa’s transformation through affordable development financing, knowledge sharing, and stronger regional coordination.
He said initiatives such as the New African Financial Architecture for Development would help mobilize and deploy Africa’s own financial resources at scale while addressing fragmentation and improving coordination across the continent.
Meanwhile, the report warned that rising global oil and gas prices are increasing inflationary pressures across African economies. Inflation is projected to average 10.4 percent in 2026 before moderating to 8.9 percent in 2027. Although inflation is expected to decline from the 13.7 percent recorded in 2025 due to improved agricultural output and tighter monetary policies, price pressures are still expected to remain elevated in many countries.
The Bank further noted that the external shocks have intensified currency depreciation pressures across the continent. As of March 31, 2026, currencies in 29 African countries had weakened against the U.S. dollar, with 10 of them depreciating by more than two percentage points relative to baseline projections.
