The IMF recently highlighted a 25% cut in aid to Sub-Saharan Africa — largely, but not solely, driven by Trump’s dismantling of USAID. The UK’s own cuts echo a wider trend: aid is being redirected, relabelled under different expenditure lines or simply eliminated as defence spending and domestic social security demands crowd it out. Some of those cuts exposed genuine waste. But the scale is not sustainable — particularly for fragile low-income states where aid accounted for up to 6% of GDP. For them, this is potentially brutal.
Aid remains a fiscal lifeline for millions. It is also in our own interest to help stabilise these economies and their health systems – a simple point not rammed home to our British electorate: the ongoing Ebola outbreak in DRC and migration flows from the Horn of Africa — amidst unresolved conflicts — are a reminder of what happens when that financial lifeline frays. Disease and displacement do not respect borders. The contagion risk to richer countries is real and potentially rapid.
The immediate fiscal fallout
Countries relying on aid to fund healthcare and education face a stark choice: borrow, cut, or collapse basic services. For war-torn or post-conflict states such as South Sudan, there is no good option.
Tax collection is weak because state capacity is weak — and because in too many cases, key extractable sectors like oil have become private ATMs for a ruling kleptocratic elite. That is not a comfortable thing to say in polite development circles. But it is true, and any serious discussion of aid reform has to start there rather than talk around it.
UN agencies — themselves under the Trump-led funding guillotine — are notoriously inefficient conduits for donor co-finance, absorbing a disproportionate share through transaction costs. But they remain one of the few mechanisms capable of getting emergency assistance to the ground quickly in conflict and post-conflict environments. Inefficient is not the same as dispensable.
What might actually help?
- For the most fragile states: dial back budget support and replace it with smaller, genuinely conditioned flows — tied to specific fiscal and governance reforms.
- Earmark funding directly to defined expenditures — teacher salaries, healthcare supply chains — and yes, hold it outside national treasury control if the alternative is state capture. The Cashgate scandal in Malawi, in which ministers and senior civil servants systematically siphoned off external aid, is not an aberration.
- For less fragile states: make funding more conditional and link it explicitly to concessional debt financing, with a harder push for structural public finance reform.
- And someone needs to sort out the herd instinct on the supply side. Development banks — including the European Investment Bank and, more bizarrely, the EBRD, which was established to serve central and eastern Europe — are wading into Africa and competing fiercely for a limited pool of bankable projects. That competition systematically drives down conditionality.
The debt spiral
Sovereigns facing a fiscal gap will borrow. The question is from whom, on what terms, and with what degree of transparency.
China was the lender of first resort for much of the last decade. Faced with a mounting portfolio of non-performing loans across the continent, China is now more cautious.
What is filling the gap is more concerning. The FT has reported on African sovereigns turning to complex structured instruments — currency swaps, interest rate caps, and other financial engineering — to lock in funding or improve repayment profiles.
What would actually help?
First, push for improved transparency and disclosure of sovereign borrowing through the IMF, World Bank, and African Development Bank.
Second, use UK board positions at the major development banks to push for a genuinely coordinated approach — one that brings in the new donor landscape of China, UAE, Saudi Arabia, and India, rather than treating them as rivals. The Common Framework for debt restructuring only works if all significant creditors are inside the tent.
Third, the UK — even while cutting its own aid envelope — should push for coordinated programming with the EU. Coordination with Brussels would cost nothing and eliminate significant duplication of effort on the ground.
Fourth, focus the smaller aid envelopes on the long-term foundations of public financial management: strengthening parliamentary budget and public accounts committees, building external audit capacity in national audit offices, and ratcheting up tax administration.
* Dr Rupinder Singh advises governments and multilateral organisations on public finance, budget support and aid systems — a career spanning 80 countries from the Baltics, Ukraine and the former Soviet Union to Sub-Saharan Africa and Asia. His clients have included the World Bank, EBRD, Asian Development Bank, Agence Française de Développement, OECD, UNDP and European Union.
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6 Comments
“It is also in our own interest to help stabilise these economies and their health systems – a simple point not rammed home to our British electorate:”
Not ‘rammed home’?
I understand that it is challenging to persuade families on relatively low incomes and struggling to make ends meet that they should be handing over some of their money to the government so that it can pay for international aid. That challenge is all the worse when the countries it gives aid to choose to spend billions on their military rather than meet the needs of their own people. But suggesting that a message needs to be ‘rammed home’ to voters is not the tone I would expect.
The capitalist west of course has always recognised that Africa is full of riches, which raises the question of why it is so poor.
Bill Mitchell puts it as follows:
“… the IMF and the World Bank can be seen more as a giant vacuum cleaner designed to suck resource and financial wealth out of the poorer nations …..while Africa is wealthy, its interaction with the world monetary and trade systems, leaves millions of its citizens in extreme poverty…..it is a scandal of massive proportions and should become the target of all progressive governments ….
This will perhaps sound too left wing for some Lib Dems. It is important for the development in Africa that trade should be opened up as far as possible. Many countries in the West are happy to import raw materials from Africa but put barriers in place to prevent them adding value. So for example if countries , like Ghana, grow cocoa beans they can generally sell them tariff free on world markets. But if they use their own beans to make chocolate…..
“Countries relying on aid to fund healthcare and education face a stark choice: borrow, cut, or collapse basic services…there is no good option. Tax collection is weak because state capacity is weak
The IMF often doesn’t give the best advice. Countries should be encouraged to avoid foreign currency borrowing and develop their own taxation systems to enable their own currencies to have a stable value.
https://billmitchell.org/blog/?s=Africa
@Peter Martin “Many countries in the West are happy to import raw materials from Africa but put barriers in place to prevent them adding value. So for example if countries , like Ghana, grow cocoa beans they can generally sell them tariff free on world markets. But if they use their own beans to make chocolate…..”
Not the EU though, which covers much of Africa under the Everything But Arms program, and some of the rest, including Ghana, under other tariff-free access agreements.
Which given the vast majority of LibDems are in favour of rejoining the EU, rather suggests it isn’t “too left-wing” for us 🙂
I do agree that the IMF sometimes, indeed often, gives bad advice to less-wealthy countries though.
@Peter Martin and @ Daniel Walker —thanks for your thoughts. I have sympathy with the Mitchell thesis on IMF conditionality, particularly the structural adjustment excesses of the 1990s. But global trade and finance have moved on considerably, as has the advice coming out of the Washington institutions.
1. The more useful lens now is perhaps under the buzzword “geoeconomics” (international economics to us old-timer economists) — the idea of reversion to great power competition centred on trade, finance and resource control that we last saw in the 19th and early 20th centuries. The numbers tell the story: the US and China each account for around 20% of global GDP, the EU a further 15%. Sub-Saharan Africa represents just 2.9% — or 1.4% excluding South Africa. Under Trump, the US is actively pushing for China-style commercial transactions in Africa, stripped of the fiduciary, governance and human rights checks that development finance has traditionally required. I suspect this mercantilist trend will outlast the Trump presidency.
2. Against that backdrop, consider the demographic and climate trajectory. Africa’s population stands at 19% of the global total today, forecast to reach 25% by 2050 and 40% by 2100. Layer on the impact of climate change across large parts of Sub-Saharan Africa — falling real wages, food, water and health insecurity, heightened internal conflict, religious extremism, and the export of disease and migrants — and you have a dangerous cocktail that will not stay contained within African borders.
Implications:
3. In the current geoeconomics world, the UK cannot match the US or China bilaterally.
4. Until we rejoin the EU, the UK can punch above its weight through more effective coordination with the EU and the multilaterals — reinforcing Daniel’s point on trade access.
5. The EU is already Africa’s largest trading partner, with over 90% of African exports entering duty-free and an FDI stock exceeding €250bn. That is real leverage the UK should be piggybacking on — aligning with existing Economic Partnership Agreements and using the momentum of the EU’s recently concluded deals with South America and India to dangle genuine trade carrots, not just aid conditionality.
6. Again, working with the EU, the UK can use its soft power and influence on governing boards to help bring China and the Gulf states into a more structured lending framework, rather than leaving them outside the tent; that coordination needs to go next.
Daniel Walker 17th Jul ’26 – 11:41am:
Not the EU though, which covers much of Africa under the Everything But Arms program, and some of the rest, including Ghana, under other tariff-free access agreements.
As does the UK-Ghana trade partnership agreement. More widely, the Developing Countries Trading Scheme offers more generous access than the EU. For advocates of trade to enrich developing countries, it’s another argument for being outside the EU.
How does the UK’s DCTS compare to the EU’s GSP?:
https://gemini.google.com/