A report by the African Development Bank has raised concerns over the efficiency of public spending in Africa, warning that widespread waste and weak oversight continue to undermine the continent’s development goals.
The 2025 African Economic Outlook (AEO) reveals that “inefficiency in public spending is widespread in Africa and higher than the average for the world and other regions.” It emphasizes that mobilizing more domestic revenue must be matched with better management of public funds.
The report links the inefficiencies to several deep-rooted challenges, including corruption, weak governance, and poor oversight of development projects. It notes that public investments are often plagued by delays, cost overruns, and limited impact, due largely to weak monitoring and evaluation systems.
“Too many projects produce the least development benefit,” the report states, calling for urgent reforms to ensure government spending leads to meaningful results. It adds that “global capital will follow African capital,” reinforcing the idea that the continent must first clean up its own fiscal house to attract more long-term external financing.
To improve outcomes, the Bank proposes a number of strategies. Among them is the need to boost revenue by digitizing tax systems and reducing informality. According to the AEO, Africa could generate up to $469.4 billion more each year, equivalent to 14.4% of GDP, through better enforcement and tax administration.
It also highlights the potential of Africa’s natural resources. By properly accounting for environmental assets such as carbon sequestration, the continent could add $66.1 billion to its GDP. Further gains could come from investing in the blue economy, formalizing informal businesses, and leveraging diaspora remittances.
One standout proposal is the domestic investment of pension funds. The report estimates that channeling just 1% of pension assets from Africa’s six largest economies into local development could yield $1.7 trillion by 2050, helping close Africa’s financing gap.
At the same time, Africa is losing nearly as much as it collects in public revenues. The report warns that “the total leakage of capital from Africa could be as high as $587 billion annually, more than the $578 billion collected in revenues in 2023.”
To reverse the trend, the AEO urges countries to strengthen national development banks and scale up the role of sovereign wealth funds in local investment.
