Post Views: 75 Contrary to a recent claim by President of the World Bank Group, David Malpass, the African Development Bank (AfDB), on Thursday debunk...
Contrary to a recent claim by President of the World Bank Group, David Malpass, the African Development Bank (AfDB), on Thursday debunked allegations that it is contributing to the continent’s debt overhang by lending too quickly.
In a statement, the AfDB said the allegation by Malpass which also blamed the Asian Development Bank and the European Bank for Reconstruction and Development (READ MORE) is misleading, inaccurate and not fact-based.
Among others, the AfDB said such statement impugns its “integrity, undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank.”
On countries described as “heavily indebted,” the bank said it recognizes and closely monitors the upward debt trend and that 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 $83.9bn, 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 $56.7bn while external public debt was $27.2bn, 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 claim by Malpass, the bank continued, “goes against the spirit of multilateralism and our collaborative work,” insisting that the World Bank could have explored other available platforms to discuss debt concerns among Multilateral Development Banks.
AfDB wondered why such generalised statement by Malpass insinuating that it contributes to Africa’s debt problem, employing lower lending standards, given the World Bank’s more substantial balance sheet, and significantly larger operations in Africa.
For example, it said the World Bank’s operations approved for Africa in the 2018 fiscal year amounted to US$20.2bn, compared to US$10.1bn by the AfDB and that the World Bank’s outstanding loans for the 2018 fiscal year to Nigeria and South Africa, stood at US$8.3bn and US$2.4bn, respectively. During the same fiscal year, he said the AfDB Group’s outstanding amounts to Nigeria and South Africa stood at US$2.1bn and US$2.0bn, respectively.
The AfDB also assured that it maintains a very high global standard of transparency, which is why it was ranked the fourth most transparent institution, globally, with its “strong governance programme for its regional member countries that focus 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.
It said its Africa Legal Support Facility (ALSF) enables 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.
Development banks stressed further, continue to play critical roles in development efforts and in the aspirations of developing countries, most especially in Africa.
Given the substantial financing needs on the African continent, the statement said development assistance, the AfDB, 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.
On the need for better lending coordination and the maintenance of high standards of transparency, the bank said it 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.
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.
In addition, the statement said country economists of the AfDB 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.