African countries must strengthen domestic revenue collection, improve spending efficiency, and expand alternative sources of financing as foreign aid declines sharply across the region, the International Monetary Fund (IMF) said in a report released on Monday.
The IMF warned that official development assistance, which has long been a major source of funding for many countries in sub-Saharan Africa, is falling rapidly and is unlikely to recover soon as donor countries change their spending priorities.
According to the Fund, bilateral aid to the region is estimated to have fallen by about 26 per cent in 2025 alone, while multilateral institutions are also facing funding pressures and budget cuts.
The IMF said countries in the region have limited room to absorb the shock because many are already grappling with rising debt, weak fiscal positions, and low foreign reserves after years of economic disruptions caused by the COVID-19 pandemic, tighter global financial conditions, and food and energy crises.
“With aid less predictable, resilience increasingly depends on domestic institutions,” the IMF said. “This means mobilising more revenue, improving spending efficiency, and strengthening policy design and service delivery.”
The report noted that sub-Saharan Africa remained the most aid-dependent region in the world in 2024, with aid accounting for an average of three per cent of gross domestic product.
In low-income and fragile states, however, aid often exceeded six per cent of GDP, the IMF stated.
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It said more than half of the aid received by countries in the region is used to fund critical services such as healthcare, education, and humanitarian support, warning that cuts could weaken systems that millions of people depend on and undermine responses to emergencies, displacement crises, and drought.
The Fund said governments are already making difficult choices in response to shrinking aid flows. Some have allowed programmes previously funded by aid to lapse, while others have cut public investment, increased borrowing, or intensified efforts to raise domestic revenues.
“Each option comes with trade-offs,” the IMF said, noting that replacing lost aid can help sustain services and economic growth but may worsen fiscal deficits and debt burdens.
On the other hand, it said failing to replace the funding may protect public finances but could damage long-term development and human capital.
To manage the transition, the IMF identified three key priorities, including directing available aid to countries and sectors where it can have the greatest impact, broadening financing options through instruments such as blended finance, and strengthening domestic institutions to reduce dependence on external support.
The Fund stressed that grant financing would remain essential, particularly for humanitarian needs, but said private capital could play a larger role in sectors such as infrastructure, energy, and agriculture if properly structured.
Describing the current trend as a turning point, the IMF said the shift reflects a broader restructuring of global development finance driven by tighter donor budgets and changing priorities.
“The direction is clear: reliance on external aid will become more uncertain, and domestic policy will matter more,” the report stated.
The IMF added that the immediate challenge for African countries is to manage declining aid flows without reversing decades of progress in human development, while adapting to a future in which development assistance is less abundant and less predictable.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X