Amid growing concerns over Africa’s economic future, the Economic Commission for Africa (ECA) has called for the strengthening of sub-regional multilateral development banks (MDBs) to boost their ability to mobilize long-term resources and provide affordable financing for African economies.

ECA’s Chief Economist and Deputy Executive Secretary, Hanan Morsy, made this call in a statement published on the commission’s website on Sunday, according to the News Agency of Nigeria (NAN).

Speaking at a high-level panel during the 57th Session of the ECA Conference of African Ministers of Finance, Planning, and Economic Development (COM2025) in Addis Ababa, Ethiopia, Morsy warned that Africa’s economic growth remains constrained by structural barriers. She highlighted that limited access to financing is threatening the continent’s ability to fund critical infrastructure and development projects, emphasizing the urgent need to reinforce Africa’s MDBs.

“Adequately capitalized and efficiently structured MDBs can play a pivotal role in bridging Africa’s financing gap, mobilizing resources, attracting private investments, and supporting regional economic transformation,” Morsy said.

Africa’s Lack of Effective Development Banks, A Major Barrier to AfCFTA

One of the most pressing challenges facing the African Continental Free Trade Area (AfCFTA) is the lack of effective development banks at both the regional and sub-regional levels. Economists have warned that without functional development banks, Africa’s ability to finance its own economic growth will remain severely limited, leaving the continent dependent on external funding. This dependence, experts warn, will allow foreign lenders to exercise significant economic control over African nations, undermining their financial sovereignty and long-term development ambitions.

Unlike other regions that have strong development finance institutions—such as the European Investment Bank (EIB) in Europe or the Asian Infrastructure Investment Bank (AIIB) in Asia—Africa’s regional economic blocs either lack development banks or have ineffective ones.

The Economic Community of West African States (ECOWAS), for instance, does not have a fully operational development bank that can adequately fund infrastructure and industrial projects across the region. The Southern African Development Community (SADC) has the Development Bank of Southern Africa (DBSA), but its reach is limited beyond South Africa, and it lacks the financial firepower to drive large-scale economic development across the region. The East African Development Bank (EADB), which was created to serve the East African Community (EAC), has also struggled with capitalization issues, limiting its ability to provide the much-needed financing for regional economic integration projects.

With AfCFTA aiming to create the world’s largest free trade area by connecting 54 nations and over 1.4 billion people, the absence of strong development banks is a glaring weakness. AfCFTA’s success depends on Africa’s ability to finance critical trade-enabling infrastructure, including roads, railways, and energy projects. However, according to Morsy, without a robust financial architecture led by effective MDBs, these projects remain underfunded.

Due to the weakness or absence of regional development banks, African economies have increasingly relied on external lenders, including multilateral institutions such as the World Bank and International Monetary Fund (IMF), as well as bilateral loans from countries like China, the United States, and European nations. While these external lenders provide much-needed capital, their financing often comes with conditions that limit African nations’ policy autonomy.

Experts have warned that dependence on foreign financing not only exposes Africa to debt vulnerabilities but also risks ceding economic control to non-African nations. Many African countries have already found themselves burdened by unsustainable debt levels, with some struggling to repay loans taken from international lenders. Countries like Zambia and Ghana have been forced into debt restructuring negotiations, with stringent conditions imposed by creditors.

The growing influence of China, which has emerged as Africa’s largest bilateral lender, has also sparked debates about Africa’s financial sovereignty. While Chinese loans have funded major infrastructure projects across the continent, concerns about debt sustainability and transparency in loan agreements have raised questions about whether these financial arrangements truly serve Africa’s long-term interests.

Panelists at the ECA conference emphasized that without strengthening Africa’s own financial institutions, the continent will remain vulnerable to external economic pressures, limiting its ability to pursue independent and sustainable development strategies.

Strengthening Africa’s Financial Institutions: The Key to Economic Independence

To address these challenges, panelists at the ECA conference explored strategies to empower MDBs, enhance resource mobilization, and scale up investment in trade and infrastructure, particularly under AfCFTA.

Admassu Tadesse, President and CEO of the Trade and Development Bank, stressed the need for increased investment in trade-enabling infrastructure. He pointed out that inadequate logistics and transportation networks continue to stifle Africa’s trade potential, and without strong development banks to finance these projects, intra-African trade will remain limited.

Fatima Elsheikh, Secretary-General of the Arab Bank for Economic Development in Africa (BADEA), identified several constraints that have limited the effectiveness of African MDBs. She noted that many of these banks are overly reliant on contributions from low-income shareholders, have limited callable capital, and face high borrowing costs, making it difficult for them to provide affordable financing for development projects.

Experts note that a well-funded African Development Bank (AfDB), coupled with strong regional development banks, could serve as a powerful engine for financing critical projects without reliance on foreign lenders.

Reforming the Global Financial System to Support Africa’s Development Banks

Beyond strengthening Africa’s own financial institutions, the conference also addressed the need for reforms in the global financial system to provide better support for African MDBs. Experts suggested reallocating Special Drawing Rights (SDRs) from the IMF to regional development banks, allowing them to expand concessional lending and finance long-term development initiatives.

There were also calls for MDBs to align their strategies with Africa’s long-term development goals, including the African Union’s Agenda 2063 and the United Nations’ 2030 Sustainable Development Goals (SDGs). Panelists stressed that development banks must move beyond short-term project financing and focus on structural reforms that promote economic self-sufficiency.

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