The African Development Bank is faced with its toughest fundraising experience in decades as it embarks on a spirited campaign to raise $25 billion in funding for concessional lending. At their meeting in London, international donors are faced with the dilemma of whether or not to fill a widening funding gap created by America’s withdrawal from multilateral development institutions. This crossroads will redefine Africa’s development path for decades to come.
Bank faces a large funding deficit despite donor indecision
The donor-pledging conference for the African Development Fund began with warnings of possible funding gaps to low-income African countries. Valerie Dabady, AfDB Head of Resource Mobilisation and Partnerships, confirmed that the fund faces a $560 million gap if Washington does not participate in the current replenishment round. The United States contributed almost 7% of the $8.9 billion raised in the last replenishment round of 2022 and is among the top five contributors, along with Germany, France, Britain, and Japan.
Despite U.S. participation in the London negotiations, there is still a question of whether America will guarantee additional funds. The Trump administration has methodically decreased financial support for the multilateral development institutions for the entire year of 2025, indicating a deeper policy shift away from using classical global cooperation channels. This departure may jeopardize the fund’s ability to sustain its important role in sectors such as infrastructure, electricity access, irrigation, and transport in 37 low-income African countries.
For the first time, African nations are using the direct contribution method
The funding crisis has proved to be a catalyst for an unprecedented change, as African nations have begun contributing to the development fund directly for the first time in its 53-year history. The total amount of funding pledged by Kenya is $20 million, with additional amounts expected from Benin, Ghana, and Sierra Leone, marking a new beginning in the transition towards African ownership of development financing on the continent. This reflects a significant shift in the whole structure of the development fund.
The U.S. administration has already withheld a $197 million allocation that was pledged in the previous allocation cycle, and this immediately poses operational challenges for projects on the ground. Other allocated cuts for multilateral development banks include an $800 million cut to the World Bank’s concessional facility, which further reinforces concerns regarding America’s commitment to international development cooperation under the current leadership.
Critical funding challenges:
- $560 million potential deficit without U.S. participation
- $197 million already withheld from previous commitments
- $800 million reduction in the World Bank’s IDA window
- Increasing debt distress in African borrowing countries
Fund seeks new approaches to financing sustainability
The African Development Fund is now formulating ambitious proposals to mobilize $5 billion seed funds from the financial markets in each funding cycle, which marks a considerable diversification of its traditional model of donor dependency. This market-oriented strategy will help the organization attract contributions from philanthropic institutions while depending less on unpredictable government donations, which have become increasingly unreliable over the years.
Founded in 1972, the fund has achieved disbursements of $45 billion to finance the development of vital infrastructure in low-income African countries in the form of grants and low-interest loans with repayment periods exceeding 20 years. In contrast to the AfDB’s usual lending window, this concessional financing offering is a lifeline for countries with rising debt distress, falling development aid, and limited access to commercial borrowing due to the tightening global capital markets.
The future of Africa’s poorest countries’ access to development financing depends on the success of this London conference. They will either remain within reach of affordable development financing or continue to be marginalized in an increasingly fragmented global financial architecture. This must be achieved through unprecedented coordination and collaboration between traditional and new donor sources.
