Kenya and Tanzania are among Africa’s largest recipients of aid money from rich countries and international organisations, reflecting their reliance on donor funds to finance government expenses.
In 2022, ten African countries, including Kenya, Tanzania, Uganda, and the Democratic Republic of Congo (DRC), received almost half of the official development assistance to the continent, a new report by the Mo Ibrahim Foundation shows. These countries, received between $2 billion and $8 billion in Official Development Assistance (ODA) from rich countries to finance their local government budgets, a reflection of heavy reliance on grants even as the donations begin to dwindle with changing priorities for the donors.
“Between 2013 and 2022, Africa received the largest amount of ODA of any world region in every year other than 2018. However, the total ODA received by Africa fell from $86.4 billion in 2020 to $81.4 [billion] in 2022,” says the report published this week.
Other than the four countries in the region, Egypt, Ethiopia, Nigeria, Mozambique, Morocco and Niger are also among the top recipients of the assistance funds, with the total ODA received in 2022 by the 10 countries amounting to $37.8 billion, or 46.4 percent of all aid money coming to the continent.
In the region, DRC received $3.4 billion in ODA, Kenya $3.3 billion, Tanzania $3 billion, and Uganda $2.4 billion.
The amount is close to just about the same money the countries seek to raise from additional taxes this year, amidst renewed fiscal consolidation measures aimed at taming soaring debt levels.
Curiously, these are also some of the richest countries on the continent, cumulatively accounting for about 45 percent of the continent’s Gross Domestic Product (GDP), based on World Bank’s latest data.
Indeed, ODA is a crucial source of finance for all African countries, but most of it comes with conditions that have to be met and at times leads to unpopular decisions by governments.
For instance, donations and concessional loans from the International Monetary Fund (IMF) – which, alongside the World Bank, is the largest source of ODA for Africa – come with conditions on economic reforms that often lead to fiscal consolidation and efforts to boost tax revenues that most times receive a backlash.
Other top donors, including the United States and the European Union, have conditions relating to political pluralism, market-based economy and sometimes migration conditionality, especially with the EU, the report reveals.
The tough conditions that come with the donations appear to be limiting their absorption, as between 10 percent and 70 percent of the aid money is not consumed by African countries and is sent back to the donors.
“Many countries encounter difficulties in effectively absorbing ODA funds, due to various political and administrative shortcomings in managing investment projects,” the report said.
“According to the OECD in 2022, ODA donor countries actually held on to 14.4 percent of aid, worth over $193 billion, that was intended to be distributed but was not delivered, and around $30 billion was funnelled back to the accounts of donor countries as a result of mislabelling what counts as aid,” the report says.
Besides the tough conditions that often come with these ODAs, another reason they might not be good for Africa is their impact on the continent’s economies.
According to the African Development Bank: “Official development assistance has not met the challenge of getting African economies out of debt, and several countries have contracted the aid curse.”
The continental lender said in its recently published Africa Economic Outlook report: “ODA appears to be positively and significantly associated with the increase in budget deficits and public debt.”