• The African Development Fund plans its first-ever market borrowing of about $1 billion.

• Donor contributions fell sharply, with the latest replenishment reaching $11 billion versus a $25 billion target.

• The fund is seeking a credit rating ahead of a potential bond issuance within two years.

The African Development Fund (ADF), the concessional lending arm of the African Development Bank Group, is preparing to raise about $1 billion on financial markets. The move would represent a historic first for the fund, which has traditionally relied on contributions from donor states.

Replenished every three years, the ADF provides long-term loans on highly concessional terms to low-income African countries. However, amid tighter international aid flows, rising financing needs, and increasing public debt burdens, the fund is seeking to diversify its sources of funding.

The decision follows the 17th replenishment of the ADF, held in London in December, which mobilized $11 billion, well below the initial target of $25 billion. The absence of a contribution from the United States, one of the fund’s largest historical donors, increased pressure on its financing capacity.

According to officials at the African Development Bank, the ADF has launched a process to obtain a credit rating, a prerequisite for a first bond issuance expected within two years. The funds raised would help maintain concessional lending volumes to the 37 eligible countries, particularly for projects in infrastructure, agriculture, energy, and climate resilience.

This move marks a strategic shift for the ADF. Until now, the fund relied almost exclusively on donor contributions and repayments from past loans. Access to capital markets would align its operating model more closely with other multilateral windows that already use leverage to expand lending capacity, notably the World Bank’s International Development Association (IDA).

At the same time, the African Development Bank has increased reliance on African member countries. For the first time, several African states contributed directly to the ADF, totaling $182.7 million, with initial contributions from Kenya, Zambia, Madagascar, and Côte d’Ivoire.

European countries such as Denmark and Norway also raised their commitments, countering the withdrawal of some traditional donors. The United States announced that it would no longer support the African Development Fund in its 2025 cycle, arguing that the fund places excessive emphasis on climate and social issues at the expense of “economic growth and poverty reduction.”

During the previous cycle in 2022, the administration of former US President Joe Biden pledged $550 million. However, a change of administration in Washington prevented the disbursement of $197 million of that amount.

Since 2022, the fund has strengthened its support for climate adaptation while continuing to back food security and access to energy.

Created in 1972, the African Development Fund has mobilized $45 billion for Africa’s poorest countries, financing projects in irrigation, roads, electricity, and rural development.

This article was initially published in French by Fiacre E. Kakpo

Adapted in English by Ange J.A de BERRY QUENUM