The African Development Bank (AfDB) has described as
“inaccurate and not fact-based” reports accredited to World Bank
President David Malpass that some Multilateral Development Banks,
including the AfDB, have a tendency to lend too quickly and, in the
process, add to the continent’s debt problems.
The AfDB, which frowned at the statement linked to Mr Malpass, said:
“We are of the view that the World Bank could have explored other
available platforms to discuss debt concerns among Multilateral
Development Banks.”
It further stated that “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”.
In a press statement, the AfDB said: “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”.
It explained that the African Development Bank maintains a very high
global standard of transparency, adding that 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 programme
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 programmes, especially
infrastructure.
It stated that 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, stressing the “we
have been highly successful in doing so”.
Giving more details, it said: “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.”
The AfDB said development banks continue to play critical roles in
development efforts and in the aspirations of developing countries, most
especially in Africa, and that 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 favourable 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.”
In several news reports, World Bank President David Malpass was
recently quoted as saying some Multilateral Development Banks, including
the African Development Bank, have a tendency to lend too quickly and,
in the process, add to the continent’s debt problems.
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