African Shareholders Pledge Resources for the African Development Bank

Feb 12th, 2010 7:15 PM UTC
By Erin Thornton

Today, African governments stepped up to provide more resources for their own development through the African Development Bank. In two weeks, wealthy donor countries like the U.S. will decide if they will follow suit.

The African Development Bank Group (AfDB) is a key player in fueling Africa’s economic transformation. The Group consists of the African Development Bank which provides “hard” lending to qualified countries and the African Development Fund which provides concessional finance to low income countries. The Group is African led—with the majority of its shareholders coming from the continent. And it responds to Africa’s needs- aligning its assistance with country priorities and concentrating its lending on infrastructure, the private sector and governance.

The needs on the continent as we know are great, especially in light of the recent financial crisis. For that reason last year at the April G20 Summit in London, the global community called upon the AfDB to scale up its assistance to African countries urgently so as to counteract the crisis’s impact on the continent. The Bank heeded the call but now faces a need for new resources two years sooner than originally anticipated.

A general capital increase (GCI) for the African Development Bank is critically important for two reasons. Unlike the regular envelope of resources allocated through its replenishments, the capital increase can be used to fund middle-income countries which can often be regional engines of growth and it’s also critical because private sector entities in any country—low or middle income—can draw upon these resources for critical financing. In fact, more than half of the private sector operations done by the AfDB last year were in low income countries.

Today, African shareholders met and agreed that they would support a 200% general capital increase. This means that all of the African shareholders—including the low income countries—feel that this tool is important enough to put their own resources forward and support an increase. Next up is for the donor nations to do the same—to see that a general capital increase for the Bank is a critical tool for all of Africa and to support African countries in their effort to finance it. Western donors see this as a 2012 issue but Africa sees it differently. Hopefully the leadership shown today will spark action amongst western capitals as well.

TAGS: African Development Bank, Policy News