The African Development Bank Responds To World Bank’s President on Comment

The African Development Bank Responds To World Bank’s President on Comment

The African Development Bank (AfDB) which I hope empties its vault to help develop Africa rebuts World Bank whose president dropped those unfortunate lines: you have a tendency to lend too quickly and in the process, add to the continent’s debt problems. The World Bank president is wrong and he should be told that: AfDB is not adding to any problem.

Africa needs to incur debts over the next two decades to have any chance of advancement because its tax credits are so small to organically fund developments.  Largely, the problem is not the debt BUT what the politicians do with the borrowed money. World Bank should focus on that second part, helping to ensure there is an improved governance.

We appreciate the World Bank; it wrote a cheque of US $20.2 billion for Africa in 2018. But that is nothing and at that rate, nothing will happen. Dangote raised close to $15 billion only for his empire a few years earlier. Time has come for respect and I expect the World Bank president to show that:AfDB is as important as the World Bank on this mission of developing Africa, and should be respected as it runs its own playbook!

The press release…

ABIDJAN, Ivory Coast, February 13, 2020/ — In several news reports, World Bank President David Malpass was recently quoted as saying some Multilateral Development Banks, including the African Development Bank (https://www.AfDB.org), have a tendency to lend too quickly and in the process, add to the continent’s debt problems.

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This statement is inaccurate and not fact based. It impugns the integrity of the African Development Bank, undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank. The very notion goes against the spirit of multilateralism and our collaborative work.

For the record, the African Development Bank maintains a very high global standard of transparency. In the 2018 Publish What You Fund report, our institution was ranked the 4th most transparent institution, globally.

The African Development Bank provides a strong governance program for our regional member countries that focuses on public financial management, better and transparent natural resources management, sustainable and transparent debt management and domestic resource mobilization. We have spearheaded the issuance of local currency financing to several countries to mitigate the impacts of foreign exchange risks, while supporting countries to improve tax collection and tax administration, and leveraging pension funds and sovereign wealth funds to direct more monies into financing development programs, especially infrastructure.

The African Development Bank’s Africa Legal Support Facility (ALSF) supports countries to negotiate terms of their royalties and taxes to international companies, and terms of their non-concessional loans to some bilateral financiers. We have been highly successful in doing so.

These are the facts:

The World Bank, with a more substantial balance sheet, has significantly larger operations in Africa than the African Development Bank. The World Bank’s operations approved for Africa in the 2018 fiscal year amounted to US $20.2 billion, compared to US $10.1 billion by the African Development Bank.

With regard to Nigeria and South Africa, the World Bank’s outstanding loans for the 2018 fiscal year to both countries stood at US $8.3 billion and US $2.4 billion, respectively. In contrast, the outstanding amounts for the African Development Bank Group to Nigeria and South Africa were US $2.1 billion and US $2.0 billion, respectively, for the same fiscal year.

With reference to the countries described as “heavily indebted,” our Bank recognizes and closely monitors the upward debt trend. However, there is no systemic risk of debt distress.

According to the 2020 African Economic Outlook, at the end of June 2019, total public debt in Nigeria amounted to $83.9 billion, 14.6% higher than the year before. That debt represented 20.1% of GDP, up from 17.5% in 2018. Of the total public debt, domestic public debt amounted to $56.7 billion while external public debt was $27.2 billion (representing 32.4% of total public debt). South Africa’s national government debt was estimated at 55.6% of GDP in 2019, up from 52.7% in 2018. South Africa raises most of its funding domestically, with external public debt accounting for only 6.3% of the country’s GDP.

Development Banks continue to play critical roles in development efforts and in the aspirations of developing countries, most especially in Africa.

Given substantial financing needs on the African continent, the development assistance of the African Development Bank, the World Bank and other development partners remain vitally important, with increasing calls for such institutions to do even more.

The lending, policy, and advisory services of these development institutions in their respective regions are often coordinated and provide substantially better value-for-money to developing nations, compared to other sources of financing. As a result of the African Development Bank’s AAA-rated status, we source funding on highly competitive terms and pass on favorable terms to our regional member countries. Combined with other measures to ensure funds are used for intended purposes, it helps regional member countries finance debt and development in the most responsible and sustainable way.

With regard to the need for better lending coordination and the maintenance of high standards of transparency, the African Development Bank coordinates lending activities, especially its public sector policy-based loans, closely with sister International Financial Institutions (notably the World Bank and the IMF). This includes reliance on the IMF and World Bank’s Debt Sustainability Analyses (DSA) to determine the composition of our financial assistance to low-income countries; and joint institutional approaches for addressing debt vulnerabilities in the African Development Fund (ADF) and International Development Association (IDA) countries.

In addition, country economists of the African Development Bank fully participate in regional and country level IMF Article 4 missions. Contrary to suggestions, these are just a few concrete examples of historic and ongoing coordination between sister Multilateral Development Banks, IFIs, and development partners. The African Development Bank is committed to the development of the African continent. It has a vested interest in closely monitoring debt drivers and trends in African countries as it supports them in their efforts to improve the lives of the people of Africa.

We are of the view that the World Bank could have explored other available platforms to discuss debt concerns among Multilateral Development Banks. The general statement by the President of the World Bank Group insinuating that the African Development Bank contributes to Africa’s debt problem and that it has lower standards of lending is simply put: misleading and inaccurate.

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One thought on “The African Development Bank Responds To World Bank’s President on Comment

  1. We seem to have too many headmasters, practically running our lives, from their well furnished offices around the world. Not helped with the way a continent of over a billion people keeps attending ‘summits’ organised by small countries, just because they are on the other side of the equator.

    The same World Bank that still lends money to China? A case of buying expensive gifts for a rich man, while the small guy keeps going to bed on empty stomach…

    The AfDB in its response did everything possible to sound politically correct, by painstakingly stating the facts of the matter, though it’s not hard to deduce from the response that it’s appalled by the big man’s misguided statement; but as always, who are you to challenge the emperor?

    We need to remind the rest of the world that Africa is a CONTINENT, not a country, and they should stop making it look as if all these piecemeal donations they send here can do wonders; it’s a joke if they think otherwise.

    They want us to wear the toga of ‘developing countries’ for another century? It will not work for them!

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