IMF urges Africa to rely more on domestic resources for development financing

African countries must increasingly depend on their own resources and institutions to drive development as international aid continues to decline, the International Monetary Fund (IMF) has advised.

The Fund says the era of predictable and abundant foreign assistance is fading, making it essential for governments across Africa to strengthen domestic revenue mobilisation, improve public financial management, and build resilient institutions capable of sustaining growth and delivering essential services.

The call was made in the IMF’s latest report titled “Aid Is Falling Fast. What Can African Countries Do?”, which analysed developments across 28 African countries. The report was authored by economists Chie Aoyagi, Maurizio Leonardi, and Athene Laws, alongside research analyst Hamza Mighri of the IMF’s African Department.

According to the report, official development assistance has long been a major source of financing for many sub-Saharan African economies, but this support is now declining rapidly. It noted that bilateral aid to the region fell sharply in 2025, with preliminary estimates showing a drop of about 26 percent within a single year.

The IMF expressed concern that the trend poses risks, particularly because many African countries already face limited fiscal space and few alternative sources of affordable financing.

“With aid becoming less predictable, resilience increasingly depends on domestic institutions. This means mobilising more revenue, improving spending efficiency, and strengthening policy design and service delivery,” the report stated.

Sub-Saharan Africa remains the most aid-dependent region globally. In 2024, aid accounted for an average of about three percent of GDP across the region, but in low-income and fragile states, the share often exceeded six percent.

More than half of this assistance is directed toward essential sectors such as health, education, and humanitarian support.

The IMF warned that reductions in aid could therefore disrupt critical services and weaken systems that millions of vulnerable people rely on, particularly in areas such as healthcare delivery, education, and emergency response.

It noted that aid-supported programmes have played a key role in addressing crises including disease outbreaks, conflicts, and climate-related disasters such as Ebola and droughts in the Horn of Africa.

The Fund acknowledged that countries face difficult trade-offs in responding to declining aid flows. While borrowing or increasing domestic spending may help maintain essential services, these options could also increase fiscal deficits and debt levels. On the other hand, reducing reliance on aid without replacement funding could stabilise public finances but risk setbacks in human development.

To address these challenges, the IMF urged policymakers to prioritise protecting high-impact aid, expanding access to alternative financing such as blended finance, and strengthening domestic institutions.

It concluded that the decline in aid represents a major shift in Africa’s development financing landscape, requiring countries to adapt to a future where external support is less predictable and domestic policy decisions play a far greater role in shaping development outcomes.