AFRICA: AFRICAN governments are being forced into difficult fiscal decisions as a sharp decline in foreign aid threatens funding for health, education and humanitarian programmes across the continent, according to an analysis published by IMF Country Focus.

After decades in which official development assistance served as a critical source of financing, sub-Saharan Africa is confronting a new reality of shrinking donor support.

Bilateral aid to the region is estimated to have fallen by about 26 per cent last year alone, while multilateral institutions are also facing budget pressures that could result in further reductions.

The cuts come at a time when many African countries are already grappling with high debt burdens, limited fiscal space and the lingering effects of multiple global shocks, including the Covid-19 pandemic, food and energy crises and tighter international financial conditions.

The IMF said the decline marks more than a temporary fluctuation.

“This is not a routine fluctuation. It is hitting countries that have limited room to adjust and few alternative sources of financing,” the IMF said in its Regional Economic Outlook for Sub-Saharan Africa.

Aid remains particularly important in the region. In 2024, sub-Saharan Africa recorded the highest aid dependency rate globally, with development assistance averaging about three per cent of gross domestic product. In low-income and fragile states, aid often exceeded six per cent of GDP and, in some cases, accounted for a much larger share.

More than half of the assistance received is directed toward essential services, including healthcare, education and humanitarian support. In many countries, development partners and non-governmental organisations play a direct role in delivering those services.

According to the IMF, reductions in aid financing could undermine health systems and emergency response mechanisms that have been built over many years.

“Effective responses to crises such as the Ebola emergency in the Democratic Republic of the Congo and Uganda, the high and rising needs of people forcibly displaced by conflict, and the ongoing drought in the Horn of Africa rely heavily on the health and humanitarian infrastructure that aid has consistently helped to build,” the report noted.

Unlike previous aid fluctuations, the current decline is occurring simultaneously across many countries and is being driven largely by policy decisions in donor nations rather than developments in recipient economies.

At the same time, traditional safety nets are weakening. Multilateral institutions and aid agencies that often helped cushion previous funding shortfalls are now facing financial constraints of their own.

Although emerging donors, including China and Gulf countries, have expanded their presence across Africa in recent years, the IMF said their contributions are not large enough to compensate for reductions from traditional donors.

Governments are therefore being forced to consider difficult trade-offs.

Survey findings from 28 African countries indicate that some governments are allowing programmes to expire rather than replacing lost aid. Others are redirecting spending from public investment projects, while some are turning to additional borrowing despite rising debt concerns. A number of countries are pursuing domestic revenue mobilisation measures, although the benefits may take years to materialise.

“There are no easy choices,” the IMF said.

The Fund warned that failing to replace lost aid could help contain budget deficits and debt pressures but may also result in long-term damage to human capital development. Conversely, replacing aid through borrowing or higher spending could preserve services and growth but increase fiscal and external vulnerabilities.

To navigate the transition, the IMF recommends three broad priorities.

The first is ensuring that scarce aid resources are directed toward countries and sectors where they generate the greatest impact, particularly low-income and fragile states and critical humanitarian programmes.

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The second is expanding the range of financing instruments available to governments. While grants remain essential, especially in humanitarian settings, the IMF sees greater scope for blended finance structures that use public resources to attract private investment into sectors such as infrastructure, energy and agriculture.

“Blended finance is not a substitute for aid: it is harder to scale, more complex, and can add to debt if poorly designed,” the report cautioned.

The third priority is strengthening domestic institutions and improving governments’ ability to generate revenue, manage public spending and deliver services efficiently. “With aid less predictable, resilience increasingly depends on domestic institutions,” the IMF said.

The Fund believes the changes underway are unlikely to be temporary. Instead, they reflect a broader restructuring of global development finance as donor countries face tighter budgets and shifting political priorities.

“Reliance on external aid will become more uncertain, and domestic policy will matter more,” the report concluded.

For African policymakers, the challenge now is not only managing the immediate funding shortfall but also adapting to a future in which development assistance is less abundant and less predictable than in the past.

The post IMF: Aid cuts force tough choices for Africa first appeared on Daily News.

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