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Infrastructure development is now an integral part of the global sustainable development agenda and is a priority for the national strategies of most developing countries. While Africa’s infrastructure gap is still large, the good news is that its governments have a far wider range of financing options available to support their national strategies than they had 10 years ago. These options include financial resources from emerging donors, sovereign bonds in international financial markets (often floated for the first time ever) and public–private partnership arrangements.

This report analyses how infrastructure finance from external sources has evolved over the past decade in Ethiopia and Kenya. It investigates whether the governments of Ethiopia and Kenya have welcomed a broader set of financing options to the infrastructure sector and managed them effectively, or whether greater fragmentation of external assistance has put pressure on government systems. The analysis focuses on three areas of infrastructure development: road, railway and energy. These are among the priority subsectors for most countries in sub-Saharan Africa and involve the largest number of financiers in the infrastructure sector.

Key findings

1. China is now the largest financier in the infrastructure sector in Ethiopia and Kenya. 
2. Bilateral donors are almost entirely absent in the infrastructure sector. 
3. Insufficient and inadequate financing from multilateral development banks (MDBs) is pushing Ethiopia and Kenya towards more costly private borrowing.
4. There is no formal development policy coordination at the national level: to reduce administration costs the Government of Ethiopia would rather work with one large financier or with a pool of donors.
5. Debt levels are mounting in Ethiopia and Kenya, limiting the space for future borrowing.