Nairobi, Kenya — A paradox of economic outflow plagues Africa’s low-income nations, where the outflow of money abroad now exceeds the inflow, a trend that poses a significant challenge to their development aspirations.
A new report by the French development think tank Ferdi reveals that 38 such countries are facing an external financing gap of approximately $120 billion by 2026, a gap that is widening as debt repayments outstrip the necessary foreign investment for infrastructure and industrial expansion. This trend, which reverses the traditional capital inflows required for developing countries to grow, has raised alarms among economists and policymakers.
The surge in remittances to Africa, which have increased from about $53 billion to $95 billion between 2010 and 2024, has not been effectively channeled into broad-based economic growth, according to the Ferdi report.
The case of Kenya, often a symbol of stability in East Africa, illustrates this challenge. Despite low inflation and aggressive monetary easing, the country is addressing bridging its infrastructure deficit, which hampers economic progress. Ferdi’s report highlights that Africa, despite hosting significant solar resources and minerals essential for the global energy transition, remains politically and economically underpowered.
This underpowering, combined with the growing external financing gap, poses a major barrier to the continent’s development.
The transformation of remittances into broad — based growth requires a coordinated approach, including leveraging financial technology, migration policy, and the African Continental Free Trade Area (AfCFTA). Despite the challenges, the African Economic Update from the World Bank projects Sub-Saharan Africa’s growth at 4. 1% in 2026, indicating a potential path forward.
However, this growth hinges on efforts to address the external financing gap and improve infrastructure. Questions remain regarding the specific measures proposed or implemented to tackle the $120 billion external financing gap, how remittances are being transformed into broad-based growth, and the policies under consideration to enhance this process.
As Africa navigates these complexities, the future of the continent’s economic development hangs in the balance.
*Additional reporting by ImNews | Sources consulted: 5*
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This original article was produced by the ImNews editorial team
Source: Africa.businessinsider
Source: Ayodeji Adegboyega
