In a sobering assessment of global development finance, The Great Reversal, produced by ONE Data, reveals how the financial architecture supporting low- and middle-income countries is undergoing a dramatic shift. For African economies still striving to meet the Sustainable Development Goals while building resilience against climate shocks, pandemics and inflation, this shift carries far-reaching implications.
By looking beyond the traditional focus on aid inflows and instead accounting for both money coming in and money flowing out, the analysis presents a more realistic picture of development finance today. It shows not only how much countries receive, but what they ultimately retain after servicing debt. For many African countries, that figure is shrinking, and in some cases turning negative.
Rethinking how development finance is measured
For decades, official development assistance has been the headline indicator of international support. While ODA remains an important measure, it captures only part of the story. It records gross inflows of concessional finance but ignores the growing burden of debt repayments flowing in the opposite direction.
The Great Reversal challenges this narrow lens by integrating debt service outflows into the calculation of development finance. This reframing reveals the true net position of countries within the global financial system. In doing so, it exposes a troubling reality: development finance is no longer providing the same net boost to growth and public investment that it once did.
For many African countries, inflows from donors and lenders are increasingly offset by repayments on past borrowing. In practical terms, this means that while finance may still be arriving on paper, governments are left with far less fiscal room to invest in health, education, infrastructure and climate adaptation.
Africa’s shift from net receiver to net payer
Nowhere is this shift more stark than in Africa’s evolving financial relationship with China. Over the past two decades, Chinese lending played a major role in financing roads, railways, ports and energy projects across the continent. For many governments, it provided an alternative to Western donors and multilaterals, often with fewer policy conditions.
That relationship, however, has entered a new phase. According to the report’s data, between 2010 and 2014 African countries received around $30bn more from China than they paid back in debt service. In the most recent five-year period, from 2020 to 2024, that balance has swung sharply in the opposite direction, resulting in a net outflow of approximately $22bn.
This reversal of more than $50bn is not a statistical curiosity. It marks a structural shift in how development finance affects African economies. Countries that once benefited from large net inflows are now transferring resources outward, limiting their ability to fund public services and respond to economic shocks.
The consequences are significant. Debt service obligations now compete directly with spending on hospitals, schools and infrastructure maintenance. At a time of rising populations and persistent poverty, this pressure is becoming increasingly difficult to manage.
The multilateral pivot
One area of relative stability highlighted by the report is the growing role of multilateral development institutions. Development banks and other multilaterals now account for around 56% of net public finance flows to lower-income countries, a substantial increase compared with a decade ago.
This shift reflects a broader retreat by bilateral donors and a sharp contraction in private capital flows. Multilateral institutions have stepped in to fill part of the gap, providing concessional loans, grants and technical assistance to countries facing mounting fiscal pressures.
For African governments, this has provided a degree of insulation against the steepest declines in external financing. Multilaterals have also played a key role in debt relief initiatives, climate finance and pandemic response efforts.
Yet the report makes clear that this pivot, while welcome, is not sufficient. Overall net flows to low- and middle-income countries have fallen by around 25% when comparing the periods 2010–2014 and 2020–2024. Even with multilaterals stepping up, the total pool of net development finance available to African countries is shrinking.
Why the reversal matters for Africa
The implications of this changing landscape are particularly acute for Africa, where structural vulnerabilities amplify the impact of declining net flows.
First, fiscal space is tightening across the continent. As a growing share of public revenue is allocated to servicing existing debt, governments are left with fewer resources to invest in essential services. Health and education systems, already under strain, face difficult trade-offs just as demand continues to rise.
Second, private long-term external finance has all but collapsed. The report shows that net private flows have fallen from $115bn in the early 2010s to just over $7bn in recent years. This dramatic contraction places even greater pressure on public finance, forcing governments to shoulder investment needs that were once partially met by private capital.
Third, aid retrenchment is looming. Budget pressures in major donor countries, including the United States and parts of Europe, are translating into cuts or stagnation in aid budgets. For African countries that still rely heavily on concessional finance, this trend threatens to deepen existing funding gaps.
Finally, long-standing structural challenges remain unresolved. Infrastructure deficits, limited industrial capacity, trade imbalances and high exposure to climate risks all mean that reduced net finance increases vulnerability to external shocks. Without adequate investment, growth prospects and resilience are both at risk.
Turning pressure into progress
While the findings of The Great Reversal paint a challenging picture, they also point towards areas where African policymakers and their partners can act. The era in which external finance could be relied upon as a steady and expanding source of development funding is clearly over. Adapting to this reality is now essential.
Strengthening domestic resource mobilisation is one priority. Broadening tax bases, improving compliance and tackling illicit financial flows can help governments reduce reliance on external borrowing. Better public financial management can also ensure that limited resources are used more effectively.
Rebalancing debt portfolios is another urgent task. Restructuring high-cost debt and negotiating longer maturities or lower interest rates can ease immediate fiscal pressure. Transparent debt management is critical to restoring confidence among both citizens and investors.
Regional solutions also offer promise. Deeper African capital markets could mobilise domestic and regional savings to finance infrastructure and social investment. Greater regional integration can reduce dependence on external lenders while supporting trade and industrial development.
Finally, South-South cooperation remains an important avenue, provided it is pursued on more equitable terms. Partnerships that prioritise trade, technology transfer and shared value creation, rather than debt accumulation, can support more sustainable growth paths.
Global development finance is in flux. For Africa, understanding this new reality is no longer optional. As net flows decline and obligations rise, the focus must shift towards smarter policy choices, stronger institutions and more balanced partnerships. Only by adapting to the great reversal can the continent safeguard its development ambitions and build a more resilient economic future.