Africa’s development-finance system is expanding rapidly, with new instruments and investors entering markets across the continent. Yet the analytical capacity needed to track risks and price them in real time has not kept pace, allowing risks to build.
CAMBRIDGE—Africa’s development-finance gap is the continent’s biggest challenge, and at its core, it is a design problem. In the absence of the instruments and regulatory pathways needed to channel domestic savings toward productive investment, much of the continent’s capital remains trapped in short-term sovereign debt.
This raises a fundamental question: What would it take to build a development-finance system that can actually finance development?
The answer is intelligence. Integrated, forward-looking macro-financial analysis can identify whether the system is functioning and where risks are building before unexpected shocks bring vulnerabilities to the surface.
Africa currently lacks three key elements of financial intelligence, starting with a clear view of contingent liabilities. This is most evident not in distressed economies, where some form of oversight exists, but in countries that are not subject to close macro-financial monitoring. Ironically, these are often the countries where new financial instruments are spreading most rapidly.
