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Trump Cuts May Speed Up Shift in African Development Fund Strategy

Monday, 05 May 2025 13:33
Trump Cuts May Speed Up Shift in African Development Fund Strategy
  • U.S. plans to pull out of the African Development Bank and African Development Fund, cutting $555 million from its contributions.

  • The decision lands just as the Bank prepares a record $25 billion fundraising campaign for 2026–2028.

  • The move could fast-track reforms that would allow the Fund to raise money directly from capital markets.

The United States government has proposed ending its contributions to both the African Development Bank (AfDB) and the African Development Fund (ADF), cutting $555 million from its foreign aid budget. The decision, included in President Trump’s proposed 2026 budget released in early May, is part of a broader plan to slash international aid by $49 billion and redirect spending toward defense and homeland security.

Multilateral programs focused on climate, gender equality, and democratic governance have been labeled "ideological" by the White House. As a result, the ADF—the concessional financing arm of the AfDB—is among those now facing direct consequences.

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The timing could not be worse. The AfDB is preparing to launch its next fundraising cycle—ADF-17—with a target of $25 billion for the 2026–2028 period. That is nearly triple the amount raised in the previous round, ADF-16, where the United States alone contributed $568 million. Washington's withdrawal has naturally sparked concerns among other donors and recipients.

But the situation also marks a turning point. For years, AfDB President Akinwumi Adesina has been pushing for a structural reform that would allow the ADF to access international capital markets. Backed by the AfDB’s AAA credit rating and supported by major donors like Germany, France, Japan, and Canada, the proposal is now gaining traction. If approved, the plan could help the ADF raise up to $27 billion more in funding.

This model is not without precedent. The World Bank’s International Development Association (IDA), the global equivalent of the ADF, was given permission to issue bonds in 2017. That reform allowed IDA to increase its lending power without straying from its development mission. During the 2021 IDA20 fundraising round, donor pledges of $23.5 billion were topped up with $33.5 billion from the markets.

For the ADF to follow this path, it would need a clear political green light from its donor countries. But it has already begun moving in that direction. The Fund has recently introduced partial credit guarantees to help African countries reduce the cost of borrowing. Côte d’Ivoire (with Standard Chartered), Benin, Rwanda (with JPMorgan), and most recently Togo have all used these tools, often in partnership with the AfDB.

ADF beneficiaries need affordable finance more than just grants, Adesina often says. His message has grown more urgent. The AfDB estimates that Africa will need about $402 billion per year through 2030 to meet key development goals, including infrastructure, energy, healthcare, and education. Yet the continent still receives just 3% to 4% of global financial flows, according to international institutions.

Ironically, the U.S. decision may speed up the very reform the Fund has been quietly preparing. It also seems to be energizing regional support. At the AfDB’s annual meetings in Nairobi in May 2024, Kenyan President William Ruto pledged $20 million, urging Africans to “believe first in their own institutions.” Several others followed, including Benin ($2 million), Sudan ($3 million), and commitments from the Gambia, Ghana, Liberia, and Sierra Leone.

Among non-African donors, support has largely held steady. Japan, Germany, France, the United Kingdom, China, and Sweden have all renewed or increased their commitments.

The results of ADF-16 strengthen the case for continuity. In 2023 alone, ADF projects connected 1 million people to clean water and sanitation, extended electricity access to more than 500,000 people, and improved transport for 2.5 million. Over 11 million farmers received improved agricultural inputs, and close to 700,000 jobs are expected to be created—nearly half for women.

In financial terms, $3.2 billion was disbursed under ADF-16 for a total approved project volume of nearly $8 billion. Key operations included regional transport corridors, Sahel resilience programs, and rural electrification projects. More recently, the Fund has placed greater focus on climate action—a priority that no longer aligns with President Trump’s foreign policy agenda.

The loss of U.S. funding will be a blow. But it could also push the African Development Fund toward greater independence and financial innovation, as it seeks to adapt to a changing global landscape.

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Fiacre E. Kakpo

 
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