Can Africa Finance Its Own Development?
For decades, African countries have financed development through a combination of taxation, borrowing, foreign aid, foreign direct investment and other domestic financing instruments. As foreign aid declines and becomes less predictable, governments across the continent are increasingly looking inward to finance their own development.
The shift reflects a changing global landscape. In the United States, sweeping cuts to USAID funding have affected health, education and other development programmes across Africa and beyond. In the United Kingdom, the government plans to reduce aid spending from 0.5 per cent to 0.3 per cent of gross national income by 2027 while increasing defence spending.
Beyond those two countries, OECD data show Official Development Assistance (ODA) fell by a record 23.1 per cent in 2025 to USD 174.3 billion. Germany, United States, United Kingdom, Japan and France accounted for 95.7 per cent of the decline, marking the first time the world’s five largest aid donors all reduced assistance in the same year.
What does this mean for Africa’s 1.6 billion people, projected to reach 2.5 billion by 2050? How does the continent provide the schools, hospitals, roads, electricity, clean water and jobs needed for a population growing at that pace?
“First and foremost, it is the responsibility of each country to finance its own development,” says Stephen Karingi, Director of the Macroeconomics, Finance and Governance Division at Economic Commission for Africa (ECA).
He notes that African countries already have many of the tools needed to mobilize domestic resources. The challenge is making better use of them.
While taxation is often considered the cornerstone of domestic resource mobilization (DRM), DRM encompasses much more than taxes. It includes revenues from natural resources, domestic capital markets, pension and savings funds, public-private partnerships, diaspora financing and efforts to curb illicit financial flows.
These domestic financing instruments provide countries with multiple pathways to finance development while reducing reliance on external resources.
Taxation remains the most durable source of public revenue because it is more predictable and less exposed to external shocks than borrowing, foreign aid or commodity windfalls. It also gives countries greater control over how they finance and shape their own development.
Yet expanding the tax base is not without challenges. About 80 per cent of Africa’s workforce operates in the informal economy, making it more difficult for governments to identify taxpayers and collect revenue efficiently.
Technology is making the task easier. Artificial intelligence, big data and digital tools are strengthening tax administration while making public institutions more transparent and accountable.
Mr Karingi points to Egypt, where digitalization has improved revenue mobilization, and Rwanda, where transparent procurement systems have helped reduce leakages in public spending.
He also believes African countries could unlock billions of dollars in additional domestic resources by tackling illicit financial flows.
ECA is helping countries identify and quantify those flows, while supporting African negotiators in discussions on the proposed UN Convention on International Tax Cooperation, particularly on issues relating to illicit financial flows and profit shifting by multinational companies.
For Mr Karingi, financing Africa’s development is a shared responsibility. Citizens have a duty to contribute through taxes, governments have a duty to use public resources responsibly, and both must be prepared to hold each other accountable.
For the latest edition of the Sustainable Africa Series citizens interviewed in Cameroon, the Central African Republic, Kenya, Nigeria, Rwanda, Uganda and Zimbabwe consistently said they were willing to pay taxes, provided governments are transparent about how public money is spent.
“It’s our responsibility to pay taxes if we want development in our country. But if I keep paying taxes and nothing is being done with the money, at some point I’ll feel like withdrawing from paying taxes,” said Danny Zara, a cake vendor in Cameroon.
For Ouassere Divin of the Central African Republic, domestic resource mobilisation is also about national ownership.
“Paying taxes ensures greater autonomy. That’s how we are better able to decide our own priorities. Foreign partners should only provide support. After all, even what they give us has to be repaid in one way or another.”
Whether Africa can finance more of its own development will depend not on a single solution, but on how effectively countries mobilise domestic resources, strengthen public institutions and earn the trust of citizens. The tools already exist. The challenge is putting them to work Airtel Africa Gains 21%, Market Value Surges Near N20trn
