Why the African Development Fund matters now more than ever

This week, key development officials from all over the world gathered in London for one of the most consequential “Africa-focused” meetings for the next three years: the 17th replenishment of the African Development Fund (ADF) - the arm of the African Development Bank (AfDB) Group that provides the “cheapest” and “longest” form of finance for development available.

Anyone who has worked in finance ministries or on the continent knows that – aside from the World Bank’s IDA – in volume terms the ADF is the most important multilateral funding channel for Africa’s 22 lowest-income countries.

And in terms of what it does, anyone who has worked in an African infrastructure and planning ministry knows the ADF is even more important than IDA. Since its inception, the Fund has used close to USD 53 billion for almost 3,000 projects across public works sectors and regions. 

As a recent policy brief published by Development Reimagined shows the ADF’s largest allocations have gone towards transport infrastructure (28%), multisector initiatives (27%), and agriculture & rural development (17%), positioning the Fund as a key driver of the continent’s cross-cutting priorities in poverty alleviation, human capital development, and integration.

The result of the meeting was a record replenishment of $11bn – lower than the originally aspired “ambitious” target of US$ 25 billion – but nevertheless a 23% increase on the last replenishment three years ago.

What justified a large replenishment?

The replenishment unfolded against a high-stakes backdrop.

Having faced worsening constraints in accessing development finance - especially as OECD governments began to cut ODA – the relatively higher-income African governments with “market access” turned to issuing Eurobonds and other short-term, expensive loans – and many now face high debt servicing costs, constraining their development potential.

In practice, concessional financing has not consistently functioned as a dependable bridge towards cost-effective non-concessional borrowing.  Where transitions from concessional support have occurred, these transitions have often revealed a lack of affordable alternatives. Instead, it has exposed them to higher-priced and less stable capital sources.

Meanwhile others simply have no options at all – in many ways, their debt is prohibitively limited outside options such as IDA or ADF.

Multilateral debt has also become more expensive. In 2005, concessional finance made up 70% of total multilateral lending to Africa - by 2023, that figure dropped to 45%. 

This is a problem. Non-concessional finance – raised bilaterally or multilaterally – is influenced by exaggerated premiums associated with the "Africa risk", limiting credit ratings, and financial benchmarks that inadequately represent the true potential for investment within the continent.

A recent report by Africa No Filter and Africa Practice estimated that Africa is making an annual loss of USD 4.2 Billion through inflated, interest payments associated with biased media coverage.

However, even US$ 11 billion over three years doesn’t come close to what is necessary. Detailed forecasts for just 13 of the 55 African countries’ show gap in infrastructure spending to meet the SDGs and Agenda 2063 is US $109 – 150 billion annually through 2030^[1].

Meanwhile, the continent’s climate financing gap exceeds USD 100 billion per year, yet African countries only raise less than 3% of global climate finance. 

That said, the replenishment was about more than just filling a financial gap.  It was also about rethinking how African countries and African Financial Institutions (AFIs) finance development, who contributes, how resources are raised, and what tools are best suited to address Africa’s evolving landscape.

The abovementioned uncertainty about usual donor contributions had led the AfDB to focus on three new strategies.

Record ADF replenishment

First, in the run up to the replenishment the AfDB worked hard to attract contributions – grants or long-term cheap loans – to the ADF from non-traditional donors, such as the Gulf countries, China and India who – unlike many OECD donors – already believe that they have a long-term national interest in Africa’s development.  

The result was the first ever contribution to the ADF from two Gulf funds – the Arab Bank for Economic Development in Africa (BADEA) with US$800 million, and the OPEC Fund for International Development with US$2 billion.

Prior to this, a great example of how the AfDB had engaged non-traditional donors was a ten-year, US$2bn worth instrument that ran from 2014 to 2024 called the Africa Growing Together Fund (AGTF). The new model will be exciting to watch.

Second, the AfDB was very successful in driving up African ownership. To date, the AfDB’s regional member countries had only supplied 0.21% of total ADF contributions.

To be clear, the proposition was not to turn away from non-regional donors (who have much larger per capita incomes to justify putting their finance into vehicles such as the ADF) - but rather to better insulate the Fund from the budget cycles of any single donor bloc.

Thus, at the AfDB’s 2025 Annual Meetings in Abidjan where Dr. Sidi Ould Tah was elected as the Bank’s ninth president, discussions underscored the ADF’s role in Agenda 2063. It worked.

Kenya’s initial, early USD 20 million pledge for the new replenishment set an encouraging precedent, and more African governments then stepped up. Overall, 23 African countries contributed a combined US$183 million, a four-fold increase from the last replenishment.

Reliance on markets

Third, and last but not least, the AfDB started to explore a hybrid-financing model – i.e. leveraging equity in capital markets via a market borrowing option.

This was in fact publicized by many as the major means to scale up ADF resources post-replenishment. It is based on a template used by the World Bank’s International Development Association (IDA), which has been leveraging donor contributions at a comparatively consistent ratio of around 1:4 since 2016.

ADF could similarly, in principle, generate substantial resources through a multiplier effect to go beyond the USD 11 billion donation.

To some degree, we support this – since it is about scaling up finance available. However, the AfDB should be careful. “Leveraging” too much could limit the ADF’s ability to truly offer cheap and long-term financing to low-income countries, increasing their exposure to “blended finance” and reliance on expensive private sector financiers.

This would – as the recent G20 Africa Expert Panel report explained – be a huge problem for African countries.

Moreover, there is no reason why development banks such as the AfDB should instead work to borrow from developed country governments at extremely low interest rates and very long maturities – Hannah Wanjie Ryder calls “century bonds” – to leverage grants to an even greater (and cheaper) scale than they can from unruly markets.

The fact is, the ADF is not just a financial tool. It's a development lifeline, a climate resilience builder, a peace enabler, managed by Africans for Africans. It has earned that trust over decades.

This week, non-OECD donors and Africans demonstrated willingness to go beyond rhetorical, nice words about Africa, and showed real commitment to the continent. The rest still need to do better.

Juliet Onyino and Jacques Dury are both Junior Financial & Research Analysts from the Development Finance team at Development Reimagined. Development Reimagined have launched a tracker on ADF contributions, available here.

Disclaimer: The views expressed by the author do not necessarily reflect the opinions, viewpoints and editorial policies of TRT Afrika.

^[1]African Priorities for the G21, (2024, February), Development Reimagined. https://developmentreimagined.com/wp-content/uploads/2024/02/African-Priorities-for-the-G21.pdf