Background and Rationale
Africa’s low-income countries (LICs), particularly those eligible for African Development Fund (ADF) assistance (Annex I), are at a critical point in their development trajectory. While they recorded average GDP growth of 4.7 percent in 2024 (above Africa’s average of 3.3 percent) per capita income remains low at $1,218. Extreme poverty persists, especially in transition states such as Burundi and South Sudan, where it exceeds 70 percent of the population. Despite recent improvements in macroeconomic stability and some reform momentum, the LICs are facing challenges due to an uncertain global environment, trade fragmentation, climate change shocks, and structural financing constraints that threaten the delivery on the African Development Bank’s (AfDB) Ten-Year Strategy (2024-2033), Sustainable Development Goals (SDGs), and the African Union’s Agenda 2063.
The "Mind the Gap: Unlocking Inclusive Growth in Africa’s Low-Income Countries" report, by the AfDB and the United Nations Economic Commission for Africa (ECA), provides compelling evidence that financing gaps, together with policy and governance deficits, are among the most limiting factors to structural transformation. The report presents a robust illustration of the financing gap facing LICs in Africa, highlighting annual financing needs at $495.6 billion per year (percent of GDP), with a financing gap of $402.2 billion (13.7 percent of GDP). ADF countries alone account for about 56 percent ($ 276.4 billion) of this gap, reflecting weak tax bases (averaging only 15.6 percent of GDP versus 22.3 percent in non-ADF countries), illicit financial flows of $90 billion annually, and limited access to affordable finance at scale.
These funding shortfalls translate into inadequate infrastructure, unreliable energy, limited digital connectivity, lack of climate resilience, and underfunded education systems. Many ADF countries, particularly the transition states, confront multiple crises, including climate vulnerability, political instability, unsustainable debt burdens, and limited tax bases, all of which render them reliant on concessional financing. However, concessional resources, particularly Official Development Assistance (ODA have experienced significant cuts and constrained access.
Among structural challenges, a major concern is youth unemployment and underemployment. With over 60 percent of the population under 25, the region faces a large and growing labor force. Each year, 8–11 million young Africans enter the labor market, but only around 3 million formal jobs are created, leaving millions without sustainable employment. This mismatch fuels informality, migration pressures, and vulnerability. At the same time, youth represent an untapped opportunity: with investments in education, vocational skills, entrepreneurship, and digital innovation, Africa’s demographic profile could thus become a key driver of transformation.
Other structural constraints also remain acute. Malnutrition and poor health outcomes persist, with stunting above 30 percent in many LICs. Rural electrification rates remain below 50 percent, and often under 20 percent in transition states. Education systems struggle with low completion rates, averaging just 64 percent in primary schools compared to 84 percent in non-ADF countries. Conflicts, climate shocks, and debt distress add layers of fragility and risk.
Without bold, innovative, and coordinated financing solutions, Africa’s LICs risk being trapped in cycles of underinvestment, vulnerability, and stagnation. Yet, opportunities are also significant: youthful populations, abundant resources, growing digital innovation, and regional market integration can all support high, inclusive, resilient growth if adequate financing is mobilized and key structural barriers are overcome. Expanding concessional resources, leveraging remittances and diaspora bonds, scaling blended finance and public-private partnerships, and advancing global financial architecture reforms are thus central to bridging these gaps.
This side event will convene policymakers, development partners, private sector leaders, and civil society to identify actionable solutions that address immediate vulnerabilities while building pathways to long-term structural transformation and inclusive growth.