## 2. Aid Cuts in Sub-Saharan Africa: This Time Is Different ## Source details **Canonical URL:** [2. Aid Cuts in Sub-Saharan Africa: This Time Is Different](https://www.imf.org/-/media/files/publications/reo/afr/2026/april/english/ch2.pdf) ## Other formats - [Markdown version](/-/media/files/publications/reo/afr/2026/april/english/ch2.pdf.md) - [Structured JSON version](/-/media/files/publications/reo/afr/2026/april/english/ch2.pdf.json) --- ### A Shock Like No Other - The contraction of aid that began in 2025—starting with an estimated 16–28 percent cut in bilateral aid—is larger, more synchronized across countries, and predominantly donor driven rather than recipient-side driven. - Many traditional shock absorbers (multilateral development partners and NGOs) are themselves facing cuts; years of successive shocks have left countries with limited fiscal space to adjust. - Low-income countries (LICs) and fragile and conflict-affected states (FCS) are the most exposed and face the most binding constraints in their response. - The impact is magnified by how integral aid had become to budgets, financial flows, and service provision prior to 2025. ### Aid Has Been a Critical Resource for Many - Official development assistance (ODA) comprised nearly 3 percent of regional GDP in 2024—more than twice the share of the Middle East and Central Asia. - Aid intensity by income group (as fraction of GDP): - LICs 6.4 percent - FCS 6.0 percent - Emerging market economies 0.4 percent - At the extreme, aid represents 36 percent of GDP in South Sudan (largely financing humanitarian needs). - Sectoral allocation: - More than half of aid to the region went to health, education, and basic humanitarian assistance. - 19 percent provided as budget support, with the vast majority delivered as non-budgetary support implemented through local and international NGOs. - Aid is a major external financing source: larger than foreign direct investment (FDI) at the regional level and substantially larger for LICs; aid is similar in scale to migrant remittances. ### Flows Have Shifted Toward Multilateral Lending and Concessional Loans in the Past Fifteen Years - Grants share of ODA: 97 percent in 2010 fell to 68 percent in 2024; concessional loans rose from 3 percent to 32 percent over the same period. - Traditional DAC donors’ share declined from 68 percent in 2010 to 42 percent in 2024; multilateral agencies now account for the majority of aid flows. - Non-DAC contributions reported in OECD data grew to $1.06 billion, or 1.9 percent of total aid, in 2024 (reporting limitations imply undercounting). - China’s grant-based aid to sub-Saharan Africa (AidData): peaked at $1.2 billion in 2018, declined to $633 million by 2022; Chinese concessional lending peaked in 2018 and has declined since, with overall Chinese lending to Africa turning net negative as repayments exceed new loans. ### 2025 Marked a Sharp Break, Particularly for Vulnerable Countries - Closure of USAID, substantial US development budget reductions announced January 2025, and cuts reported from other major donors signaled a sea change. - OECD donor survey: African bilateral aid budgets decreased by 16–28 percent in 2025 relative to 2024 levels—potentially cutting between $4 and $7 billion. - Largest dollar losses could hit Ethiopia, Democratic Republic of the Congo, and Nigeria (between $240 and $780 million each). - South Sudan and Central African Republic could lose aid exceeding the equivalent of 10 percent of their government revenue, with humanitarian aid most affected. - Humanitarian aid flows to sub-Saharan Africa dropped by 42 percent in 2025 relative to 2024 (UNOCHA FTS). - Projected funding reductions for major UN agencies relative to 2023–24: - World Food Programme 34 percent less - United Nations Children’s Fund 27 percent less - World Health Organization 39 percent less - United Nations Office for the Coordination of Humanitarian Affairs estimates less than half of people in need of humanitarian assistance can be reached with available resources in 2026. - An estimated 3 million children in sub-Saharan Africa may be pushed out of school by 2026; 75 million children globally may miss routine vaccinations in the next five years. ### Countries in the Region Have Faced Sizable Cuts in the Past... - Since 1960, 149 recorded ODA episodes in sub-Saharan Africa, with ~55 percent classified as collapses; average aid reduction about 40 percent (but typically isolated to individual countries). - Fiscal balance excluding grants deteriorated on average by 2.6 percent of GDP after five years following past aid collapses. - Decomposition: deterioration driven by declining non-grant revenues and limited reduction in expenditures—spending commitments continued after aid was cut while revenues fell. - Past drivers of aid shocks include countries becoming wealthier (e.g., Angola, Equatorial Guinea), domestic developments (e.g., Eritrea), completion of large projects (e.g., Cabo Verde), and external donor budget shifts. - Typical country adjustments after past cuts: revenue mobilization, stronger public financial management, and spending reprioritization. ### ...But This Shock Is Different - Distinguishing features: - Scale and breadth: a large majority of traditional development partners are cutting or reprioritizing funding; almost all recipient countries are affected. - Speed, simultaneity, and unexpected nature: funds often withdrawn mid-project with minimal warning. - Elevated uncertainty: severe lack of information on extent, timing, and specific program impacts of the cuts. - Limited alternatives: multilateral organizations and NGOs—historical stabilizers—are themselves capacity-constrained by cuts and cannot fully offset bilateral reductions. - Conclusion: past episodes are a limited guide; the current shock’s donor-driven, synchronized, and rapid nature makes it distinct. ### The Macroeconomic Impact Will Be Most Significant for the Region’s Most Vulnerable - Many countries receive little aid and will experience limited effects, but a sizable number—primarily LICs and FCS—face significant impacts and have the least capacity to cope. - Among the 15 countries most reliant on ODA in the region, 73 percent are (text truncated in source). ### Survey findings and constraints facing policymakers - IMF country-team surveys (28 of 45 teams responding, November 2025) highlight pervasive uncertainty and capacity limits in responding to aid cuts. - Key policy constraints (from Figure 2.7): - Capacity constraints: 77% - High debt risk*: 46% - Negative macroeconomic impact: 31% - High uncertainty: 33% - External imbalances**: 42% - Limited fiscal space: 49% - *“High debt risk” reflects the share of countries with a debt risk status high or in distress from IMF countries debt sustainability analysis. - **“External imbalances” reflects the share of sub-Saharan African countries with either reserves in months of imports less than 3 months or a current account deficit exceeding 10 percent of GDP from World Economic Outlook database. - Capacity constraints cited include: collecting information on affected off-budget programs, assuming service-delivery roles previously carried out by development partners, and implementing alternative social support mechanisms. - One in seven countries reported no formal plans to mitigate or replace lost aid, effectively letting programs and services lapse, with high short-term humanitarian costs and long-term risks to human capital, growth, migration pressures, fragility, and social cohesion. ### Planned policy responses and fiscal trade-offs - Planned policy actions (from Figure 2.7): - Reprioritize expenditure: 42% - Increase borrowing: 31% - Financing gaps remain (no clear replacement): 38% - Do nothing: 23% - Cut investment: 23% - Revenue mobilization: 15% - Of countries with estimates on covering lost ODA: - Approximately 30 percent of lost ODA budgets will be covered through spending reprioritization. - Another 30 percent is estimated as no longer needed. - The remaining 40 percent currently remains unfunded. - One-third of countries plan to increase borrowing to partially offset lost aid; many expect to rely more heavily on domestic debt markets, raising debt–sustainability and sovereign-bank nexus vulnerabilities. - About one-quarter of countries plan to cover some of the shortfall with domestic revenue mobilization. - Example: Nigeria—received over $440 million from USAID’s health funding in 2024—has increased domestic health spending by $200 million (ODI 2026). - Example: Ethiopia introduced a temporary tax on public and private workers, with proceeds channeled to a new Disaster Risk Response Fund (ODI 2026). ### Macroeconomic simulation: partial-equilibrium results for a 25 percent bilateral ODA cut - Results depend critically on policy responses; impacts differ between emerging market economies and poorer countries. - For a low-income country that replaces half of lost ODA through the domestic budget (domestic replacement assumed to be 50 percent less import-intensive than donor funding): - Fiscal deficit: projected to widen by about 1 percent of GDP - GDP growth: falls by roughly 0.7 percentage point - Balance of payments (BOP): deteriorates by 1.6 percent of GDP - Replacing none of the aid programs would result in: - No direct fiscal deterioration - A larger growth shock - Significantly worse humanitarian outcomes - Preexisting tight fiscal environment (six-year sequence of shocks) has increased debt burdens and eroded fiscal space; one-third of country teams identified limited fiscal space as a critical constraint, severely restricting policy options. - Aid cuts will deliver the largest macroeconomic blow to LICs and FCS, producing steeper growth headwinds, worsened humanitarian conditions, and sharper fiscal pressures. ### Policy priorities and recommendations - Priority 1 — Official development assistance policy: protecting, prioritizing, and coordinating aid to maximize impact - Protect high-impact aid that measurably improves development outcomes. - Prioritize the poorest LICs and FCS and preserve essential humanitarian assistance. - Strengthen coordination at recipient, development-partner, and international levels to reduce fragmentation, duplication, and cost increases. - Enhance predictability and alignment with national development plans (example: Democratic Republic of the Congo strengthening Plateforme de Gestion de l’Aide et des Investissements (PGAI) for aid tracking). - Priority 2 — Broaden the financing toolkit, including blended finance - Blended finance can de-risk and crowd in private investment through guarantees, insurance, first loss capital, and other mechanisms. - Eyraud and others (2021) estimate including the private sector could raise up to 3 percent of regional GDP in additional finance. - Recent examples: Rwanda’s 2023 sustainability-linked bond supported by a World Bank escrow account; a joint Africa–Europe initiative using guarantees to mobilize private capital for energy and local enterprises. - Clean energy and climate-related investments account for about two-thirds of global blended finance flows. - Barriers: global volumes small relative to aid, most transactions flow to emerging markets rather than LICs, high transaction costs, fragmentation, weak coordination, and transparency gaps; blended finance is more costly than grants and can add to debt service burdens. - Priority 3 — Mobilize domestic and regional resources and strengthen policy design and service-delivery capacity - Aid cuts reinforce the criticality of domestic revenue mobilization: the median country in sub-Saharan Africa collects 13.8 percent of GDP in taxes. - Improving tax administration and policy reforms requires strengthening technical capacity and building public support and trust. - Aid-dependent FCS face urgent revenue needs but contend with high informality, weaker private sectors, governance constraints, and limited economic registries; tailored technical, institutional, and political solutions are required. - Protect priority social and capital expenditures to avoid long-term scarring to human capital, growth, and prosperity; redirect poorly targeted spending (e.g., energy subsidies) toward sectors previously reliant on aid. - Strengthen public financial management, governance, investment efficiency, medium-term fiscal frameworks, and effective debt management to stabilize public finances and lower borrowing costs. - Invest in domestic institutions and capacity to bring services in-house; leverage capacity development support from international partners and regional peer learning. - The IMF’s Global Public Finance Partnership combines donor funding and IMF expertise to strengthen fiscal and public finance capacity. *Prepared by an IMF team comprising Athene Laws (team lead), Chie Aoyagi, Maurizio Leonardi, and Hamza Mighri, under the guidance of Antonio David and Amadou Sy.* ### 2. Aid Cuts in Sub-Saharan Africa: ### 2. Aid Cuts in Sub-Saharan Africa: ### A Shock Like No Other - The contraction of aid that began in 2025—starting with an estimated 16–28 percent cut in bilateral aid—is larger, more synchronized across countries, and predominantly donor driven rather than recipient-side driven. - Many traditional shock absorbers (multilateral development partners and NGOs) are themselves facing cuts; years of successive shocks have left countries with limited fiscal space to adjust. - Low-income countries (LICs) and fragile and conflict-affected states (FCS) are the most exposed and face the most binding constraints in their response. - The impact is magnified by how integral aid had become to budgets, financial flows, and service provision prior to 2025. ### Aid Has Been a Critical Resource for Many - Official development assistance (ODA) comprised nearly 3 percent of regional GDP in 2024—more than twice the share of the Middle East and Central Asia. - Aid intensity by income group (as fraction of GDP): LICs 6.4 percent; FCS 6.0 percent; emerging market economies 0.4 percent. - At the extreme, aid represents 36 percent of GDP in South Sudan (largely financing humanitarian needs). - Sectoral allocation: more than half of aid to the region went to health, education, and basic humanitarian assistance; 19 percent provided as budget support, with the vast majority delivered as non-budgetary support implemented through local and international NGOs. - Aid is a major external financing source: larger than foreign direct investment (FDI) at the regional level and substantially larger for LICs; aid is similar in scale to migrant remittances. ### Flows Have Shifted Toward Multilateral Lending and Concessional Loans in the Past Fifteen Years - Grants share of ODA: 97 percent in 2010 fell to 68 percent in 2024; concessional loans rose from 3 percent to 32 percent over the same period. - Traditional DAC donors’ share declined from 68 percent in 2010 to 42 percent in 2024; multilateral agencies now account for the majority of aid flows. - Non-DAC contributions reported in OECD data grew to $1.06 billion, or 1.9 percent of total aid, in 2024 (reporting limitations imply undercounting). - China’s grant-based aid to sub-Saharan Africa (AidData): peaked at $1.2 billion in 2018, declined to $633 million by 2022; Chinese concessional lending peaked in 2018 and has declined since, with overall Chinese lending to Africa turning net negative as repayments exceed new loans. ### 2025 Marked a Sharp Break, Particularly for Vulnerable Countries - Closure of USAID, substantial US development budget reductions announced January 2025, and cuts reported from other major donors signaled a sea change. - OECD donor survey: African bilateral aid budgets decreased by 16–28 percent in 2025 relative to 2024 levels—potentially cutting between $4 and $7 billion. - Largest dollar losses could hit Ethiopia, Democratic Republic of the Congo, and Nigeria (between $240 and $780 million each). - South Sudan and Central African Republic could lose aid exceeding the equivalent of 10 percent of their government revenue, with humanitarian aid most affected. - Humanitarian aid flows to sub-Saharan Africa dropped by 42 percent in 2025 relative to 2024 (UNOCHA FTS). - Projected funding reductions for major UN agencies relative to 2023–24: World Food Programme 34 percent less; United Nations Children’s Fund 27 percent less; World Health Organization 39 percent less. - United Nations Office for the Coordination of Humanitarian Affairs estimates less than half of people in need of humanitarian assistance can be reached with available resources in 2026. - An estimated 3 million children in sub-Saharan Africa may be pushed out of school by 2026; 75 million children globally may miss routine vaccinations in the next five years. ### Countries in the Region Have Faced Sizable Cuts in the Past... - Since 1960, 149 recorded ODA episodes in sub-Saharan Africa, with ~55 percent classified as collapses; average aid reduction about 40 percent (but typically isolated to individual countries). - Fiscal balance excluding grants deteriorated on average by 2.6 percent of GDP after five years following past aid collapses. - Decomposition: deterioration driven by declining non-grant revenues and limited reduction in expenditures—spending commitments continued after aid was cut while revenues fell. - Past drivers of aid shocks include countries becoming wealthier (e.g., Angola, Equatorial Guinea), domestic developments (e.g., Eritrea), completion of large projects (e.g., Cabo Verde), and external donor budget shifts. - Typical country adjustments after past cuts: revenue mobilization, stronger public financial management, and spending reprioritization. ### ...But This Shock Is Different - Key distinguishing features: - Scale and breadth: a large majority of traditional development partners are cutting or reprioritizing funding; almost all recipient countries are affected. - Speed, simultaneity, and unexpected nature: funds often withdrawn mid-project with minimal warning. - Elevated uncertainty: severe lack of information on extent, timing, and specific program impacts of the cuts. - Limited alternatives: multilateral organizations and NGOs—historical stabilizers—are themselves capacity-constrained by cuts and cannot fully offset bilateral reductions. - Conclusion: past episodes are a limited guide; the current shock’s donor-driven, synchronized, and rapid nature makes it distinct. ### The Macroeconomic Impact Will Be Most Significant for the Region’s Most Vulnerable - Many countries receive little aid and will experience limited effects, but a sizable number—primarily LICs and FCS—face significant impacts and have the least capacity to cope. - Among the 15 countries most reliant on ODA in the region, 73 percent are (text truncated in source) [note: original content ends here]. *Prepared by an IMF team comprising Athene Laws (team lead), Chie Aoyagi, Maurizio Leonardi, and Hamza Mighri, under the guidance of Antonio David and Amadou Sy.* ### 2. Aid Cuts In Sub-Saharan Africa: This Time Is Different ### 2. Aid Cuts In Sub-Saharan Africa: This Time Is Different ### Survey findings and constraints facing policymakers - IMF country-team surveys (28 of 45 teams responding, November 2025) highlight pervasive uncertainty and capacity limits in responding to aid cuts. - Key policy constraints (from Figure 2.7): - Capacity constraints: 77% - High debt risk*: 46% - Negative macroeconomic impact: 31% - High uncertainty: 33% - External imbalances**: 42% - Limited fiscal space: 49% - *“High debt risk” reflects the share of countries with a debt risk status high or in distress from IMF countries debt sustainability analysis. - **“External imbalances” reflects the share of sub-Saharan African countries with either reserves in months of imports less than 3 months or a current account deficit exceeding 10 percent of GDP from World Economic Outlook database. - Capacity constraints cited include: collecting information on affected off-budget programs, assuming service-delivery roles previously carried out by development partners, and implementing alternative social support mechanisms. - One in seven countries reported no formal plans to mitigate or replace lost aid, effectively letting programs and services lapse, with high short-term humanitarian costs and long-term risks to human capital, growth, migration pressures, fragility, and social cohesion. ### Planned policy responses and fiscal trade-offs - Planned policy actions (from Figure 2.7): - Reprioritize expenditure: 42% - Increase borrowing: 31% - Financing gaps remain (no clear replacement): 38% - Do nothing: 23% - Cut investment: 23% - Revenue mobilization: 15% - Of countries with estimates on covering lost ODA: - Approximately 30 percent of lost ODA budgets will be covered through spending reprioritization. - Another 30 percent is estimated as no longer needed. - The remaining 40 percent currently remains unfunded. - One-third of countries plan to increase borrowing to partially offset lost aid; many expect to rely more heavily on domestic debt markets, raising debt–sustainability and sovereign-bank nexus vulnerabilities. - About one-quarter of countries plan to cover some of the shortfall with domestic revenue mobilization. - Example: Nigeria—received over $440 million from USAID’s health funding in 2024—has increased domestic health spending by $200 million (ODI 2026). - Example: Ethiopia introduced a temporary tax on public and private workers, with proceeds channeled to a new Disaster Risk Response Fund (ODI 2026). ### Macroeconomic simulation: partial-equilibrium results for a 25 percent bilateral ODA cut - Results depend critically on policy responses; impacts differ between emerging market economies and poorer countries. - For a low-income country that replaces half of lost ODA through the domestic budget (domestic replacement assumed to be 50 percent less import-intensive than donor funding): - Fiscal deficit: projected to widen by about 1 percent of GDP - GDP growth: falls by roughly 0.7 percentage point - Balance of payments (BOP): deteriorates by 1.6 percent of GDP - Replacing none of the aid programs would result in: - No direct fiscal deterioration - A larger growth shock - Significantly worse humanitarian outcomes - Preexisting tight fiscal environment (six-year sequence of shocks) has increased debt burdens and eroded fiscal space; one-third of country teams identified limited fiscal space as a critical constraint, severely restricting policy options. - Aid cuts will deliver the largest macroeconomic blow to LICs and FCS, producing steeper growth headwinds, worsened humanitarian conditions, and sharper fiscal pressures. ### Policy priorities and recommendations for recipient countries and the international community - Priority 1 — Official development assistance policy: protecting, prioritizing, and coordinating aid to maximize impact - Protect high-impact aid that measurably improves development outcomes. - Prioritize the poorest LICs and FCS and preserve essential humanitarian assistance. - Strengthen coordination at recipient, development-partner, and international levels to reduce fragmentation, duplication, and cost increases. - Enhance predictability and alignment with national development plans (example: Democratic Republic of the Congo strengthening Plateforme de Gestion de l’Aide et des Investissements (PGAI) for aid tracking). - Priority 2 — Broaden the financing toolkit, including blended finance - Blended finance can de-risk and crowd in private investment through guarantees, insurance, first loss capital, and other mechanisms. - Eyraud and others (2021) estimate including the private sector could raise up to 3 percent of regional GDP in additional finance. - Recent examples: Rwanda’s 2023 sustainability-linked bond supported by a World Bank escrow account; a joint Africa–Europe initiative using guarantees to mobilize private capital for energy and local enterprises. - Clean energy and climate-related investments account for about two-thirds of global blended finance flows. - Barriers: global volumes small relative to aid, most transactions flow to emerging markets rather than LICs, high transaction costs, fragmentation, weak coordination, and transparency gaps; blended finance is more costly than grants and can add to debt service burdens. - Priority 3 — Mobilize domestic and regional resources and strengthen policy design and service-delivery capacity - Aid cuts reinforce the criticality of domestic revenue mobilization: the median country in sub-Saharan Africa collects 13.8 percent of GDP in taxes. - Improving tax administration and policy reforms requires strengthening technical capacity and building public support and trust. - Aid-dependent FCS face urgent revenue needs but contend with high informality, weaker private sectors, governance constraints, and limited economic registries; tailored technical, institutional, and political solutions are required. - Protect priority social and capital expenditures to avoid long-term scarring to human capital, growth, and prosperity; redirect poorly targeted spending (e.g., energy subsidies) toward sectors previously reliant on aid. - Strengthen public financial management, governance, investment efficiency, medium-term fiscal frameworks, and effective debt management to stabilize public finances and lower borrowing costs. - Invest in domestic institutions and capacity to bring services in-house; leverage capacity development support from international partners and regional peer learning. - The IMF’s Global Public Finance Partnership combines donor funding and IMF expertise to strengthen fiscal and public finance capacity. *Source: IMF, Regional Economic Outlook—Sub-Saharan Africa, April 2026, chapter "Aid Cuts In Sub-Saharan Africa: This Time Is Different."* --- _Source: https://www.imf.org/-/media/files/publications/reo/afr/2026/april/english/ch2.pdf_