As the world grapples with economic volatility, climate challenges, and shifting geopolitical dynamics, Africa finds itself at a pivotal moment in global financial reform.
Recent milestones, like the African Union’s inclusion in the G20 and the addition of a third seat for sub-Saharan Africa on the International Monetary Fund (IMF) executive board, signify progress toward a more inclusive global financial architecture.
Yet, for Africa—a continent of remarkable natural wealth, youthful human capital, and untapped renewable energy potential—the path to meaningful reform is complex and packed with unfulfilled promises.
Achieving sustainable development and climate resilience in Africa demands unprecedented levels of financial commitment. Despite contributing the least to global emissions, the continent bears a disproportionate burden of climate impact, requiring an estimated $2.7 trillion by 2030 to meet its climate goals.
However, systemic imbalances continue to limit African nations’ access to necessary funding.
Africa’s growing voice on the global stage suggests progress toward a more inclusive international financial system, one that might finally reflect the needs of developing nations. But amid these symbolic victories, fundamental questions persist: Is the system truly shifting to support Africa’s needs?
Africa’s importance extends beyond mere representation. With a population projected to reach 2.4 billion by 2050, the continent has a rapidly expanding human capital base that can drive future global growth.
It hosts some of the world’s fastest-growing economies and contains about 25 percent of global biodiversity and 30 percent of the world’s mineral resources—many of which are crucial for a green transition.
Moreover, Africa has significant renewable energy potential, particularly in solar, wind, hydropower, and geothermal, with solar potential being the highest in the world.
The continent also presents unique investment opportunities in green infrastructure and technology due to its relatively low legacy high-emission infrastructure and the lowest frequency of completed infrastructure projects in the global landscape.
Despite these strengths, Africa faces substantial financial challenges. According to the African Development Bank, (AfDB) to close its climate financing gap by 2030, the continent needs to mobilise about $213.4 billion annually from the private sector to supplement constrained public resources.
Yet, private climate finance flows to Africa are alarmingly low. In 2019-20, the continent received only $4.2 billion in private climate finance—just 14 percent of total climate finance flows, which amounted to $29.5 billion.
To implement its climate commitments as stated in its latest Nationally Determined Contributions (NDCs), Africa needs $242.4 billion annually, totalling an estimated $2.7 trillion over 2020-30.
One of the clearest signs of the problem is the IMF’s unchanged quota system, which determines a country’s share of the institution’s resources. Currently, African Union (AU) member states collectively hold just 5.2 percent of IMF quotas, limiting their access to vital financing.
Despite calls for reform, the latest IMF meetings directed the fund only to propose a new quota formula by 2025. Additionally, efforts by the V20—a coalition of vulnerable nations that includes 28 African countries—to gain formal recognition for their finance ministers within the IMF’s governance structure remain stalled.
This lack of action underscores the gap between global rhetoric and the structural reform that Africa urgently needs.
On climate finance, a crucial lifeline for many African nations, progress has been mixed. There has been some advancement, particularly with the recognition of “loss and damage” as a third pillar of climate action, and pledges amounting to $700 million for this fund.
However, disbursements are not expected until 2025, creating a time lag that leaves vulnerable communities without immediate support.
Commitments to double adaptation finance by 2025 also remain largely unmet, with Africa receiving only 20 percent of global adaptation funding. Worse, much of this funding is in the form of loans, adding to Africa’s debt burden rather than offering sustainable relief. Some innovative tools, like debt-for-climate swaps, have the potential to reduce Africa’s debt while supporting environmental projects.
However, only a handful of African countries—Mozambique, Seychelles, and Gabon—have successfully accessed these tools, leaving most nations without the benefits they could bring. At recent climate negotiations, African representatives pushed for the New Collective Quantified Goal on climate finance to reflect the continent’s true adaptation needs.
Despite these efforts, discussions at the June 2024 Bonn Climate Change Conference saw little progress, casting doubt on global support for Africa’s climate agenda.
Compounding the climate finance challenge, Official Development Assistance (ODA)—a critical funding source that makes up 10 percent of Africa’s financial resources—has been steadily declining.
Although the UN set a target for developed countries to allocate 0.7 percent of their Gross National Income to ODA, this target remains largely unmet.
Reforms to multilateral development banks are intended to help bridge this gap, but progress is uneven, with more than half of the proposed reforms lagging in implementation. As a result, many African countries continue to face high borrowing costs and remain mired in debt.
Real reform is necessary to address the deep-rooted financial inequities that constrain African nations and stifle progress. Sustainable development, economic growth, and climate action are critical for Africa, and achieving them requires firm commitments to green growth and climate resilience.
African leaders must continue pushing for a global financial system that moves beyond representation and delivers tangible, lasting support to address their climate, debt, and development challenges.
Only through meaningful, structural changes can Africa’s potential be fully realised in a fairer and more equitable world.
African leaders have made it clear they need substantial commitments to support sustainable development and economic resilience.
At the recent International Development Association (IDA) Summit, 19 African heads of state called for a replenishment of $120 billion, though major donors and World Bank management appear to be settling for $105 billion—a figure that barely meets the continent’s escalating needs.
The G20 Common Framework for Debt Treatment also remains under review, leaving borrowing terms and debt sustainability issues unresolved. Temporary debt suspension clauses may offer limited relief, but without structural changes, Africa risks another cycle of debt crises.
Another area of growing importance is the global push for fairer taxation. In August 2024, the UN Ad Hoc Committee made progress by agreeing on terms for a UN Framework Convention on International Tax Cooperation. This treaty could be transformative in addressing tax avoidance and evasion, which cost African economies billions annually.
However, other critical global standards, like international climate taxes, are still in development and are scheduled to be finalized at COP30.
Efforts to implement climate-related trade measures have similarly stalled, and transparency in climate finance remains a major concern. Without clear distinctions between climate finance, development finance, and aid, funds risk being misallocated, hindering effective climate action. African countries need transparent, targeted funding to drive impactful change.
About the Africa Future Policies Hub
The African Future Policies Hub is a Pan-African policy support hub dedicated to supporting African ambitions in the green and digital economy spaces with a focus on Global Financial Architecture, Climate Finance, and Policy.
The writer is a Senior Policy Lead (Public Finance), African Future Policies Hub. +254728202055 Email: [email protected]
