Financing Kenya’s future amid shrinking foreign aid

According to the Organisation for Economic Co-operation and Development, aid to Africa is expected to decline by nine to 17 percent in 2025 after already declining in 2024. This contraction is happening at a time when Africa faces rising challenges: climate shocks, conflicts, high debt, and a growing population that needs jobs, services, and opportunities.

The new reality

Amid this shift, a powerful new reality is emerging, Africa is increasingly financing its own growth. Between 2010 and 2022, domestic investments across the continent totalled nearly $3.8 trillion, surpassing donor aid ($550 billion) and foreign direct investment ($642 billion) combined.

This speaks to a continent that is steadily building its fiscal muscles.

With abundant natural resources, a population of 1.4 billion, the majority under 35, and rapid expansion of digital technologies, Africa has the foundational ingredients required to power its own economic transformation.

What is needed now is strategic governance, strong institutions, investment in human capital, and a shift toward diversified financing instruments beyond traditional aid.

For many countries, one important step is strengthening macroeconomic stability, especially by improving their sovereign credit ratings. A sovereign credit rating is a score that shows how safe and reliable a country is when it borrows money.

A good credit rating demonstrates that a country manages its finances responsibly, upholds consistent policies, and uses debt prudently.

This builds investor confidence and allows countries to borrow at lower interest rates. Reduced borrowing costs mean less strain on public budgets, freeing up critical resources that can be redirected toward infrastructure, social protection programmes, and economic diversification initiatives.

Countries such as those in Asia and Latin America have climbed from aid dependence to investment destinations through exactly this approach.

Sovereign credit rating initiative

Kenya is working in that direction through the Sovereign Credit Rating Initiative, supported by the government and UNDP. A stronger rating will help Kenya access more affordable financing for major development priorities. This initiative aims to support the Kenyan government by directing resources towards sectors with the greatest potential for impact.

Agriculture and agro-industry remain national strengths, with room to expand value addition and market access. Manufacturing and Micro, Small, and Medium Enterprises (MSMEs) can boost local production, jobs, and competitiveness under the African Continental Free Trade Area (AfCFTA).

Investments in affordable housing and infrastructure will shape more inclusive cities and create labour-intensive opportunities for youth, while the digital and creative economy can power new industries of growth. Education and healthcare continue to strengthen human capital, productivity, and long-term innovation.

At the centre of all this is Kenya’s young population. With 75 percent of Kenyans under 35, the country has an enormous opportunity.

When young people are connected to jobs, skills, entrepreneurship, and innovation, national productivity rises and inequality falls. India’s growth story shows how a youthful population, backed by investments in technology and human capital, can transform an entire economy. Kenya can do the same.

Government development financing

One of the most promising shifts happening across Africa is the rise of Government Development Financing. Instead of relying on donors to drive development, governments commit their own budgets upfront as co-financiers and co-owners of development programmes. This builds national ownership, sustainability, and accountability.

The model has already delivered powerful outcomes across the continent. In Senegal, the Emergency Community Development Programme stands as a flagship example. Implemented by UNDP with an initial $217 million in government funding, the programme expanded access to energy, improved road access, provided water for communities, and supported farmers with post-harvest equipment.

An additional $489 million from the African Development Bank and the Saudi Fund to the programme further strengthened access to energy, water, sanitation, and potable water for millions of rural households.

Gabon’s $200 million partnership with UNDP to accelerate local development is expected to benefit more than 900,000 people with access to water, sanitation, health, and education for marginalised communities.

In Togo, the Community Development Programme, financed at $61 million, delivered water access to 1.3 million people, energy access to 83,500, created 25,000 livelihoods, and expanded essential health and market infrastructure.

Cameroon’s ongoing $59.8 million recovery and reconstruction programme with UNDP has similarly strengthened access to water, energy, education, and livelihoods for rural communities.

The DRC programme (with about $610 million in funding from the government), named “PDL-145T”, has so far provided 631 critical infrastructures, including 334 primary schools, 245 health centers, and 52 administrative buildings in nine provinces. The aim is to improve access to education, health, transportation, and essential administrative services for the populations in 54 territories that UNDP is supporting.

Next generation transformation and acceleration

Kenya is now aligning itself with this continental shift. UNDP and the National Treasury are collaborating on Kenya’s Next Generation Transformation and Acceleration Initiative, which aims to link youth to private-sector employment and entrepreneurship, while accelerating local development in underserved counties through expanded access to basic services and labour-intensive jobs.

This initiative complements Kenya’s sovereign credit rating reforms and positions youth at the heart of the country’s economic transformation.

As aid declines, Kenya and Africa more broadly is entering a new era: one where development is powered more by domestic resources, stronger institutions, and strategic investments than by foreign assistance.

By anchoring financing in national budgets, strengthening creditworthiness, investing in high-potential sectors, and unlocking the power of its young people, Kenya is charting a path toward inclusive growth that is self-driven and future-focused.

Africa has the resources. Africa has the talent. The next step is to mobilise them boldly for a future financed from within and shaped by its own people.