“We are leaving Tangier with great enthusiasm,” said Akinwumi Adesina, president of the African Development Bank (AfDB), on 6 December in his closing speech at the pledging meeting for the 16th replenishment of the African Development Fund (ADF).
A financing vehicle managed by the AfDB, the Fund provides grants and concessional loans for projects in 37 African countries with the most limited financial resources.
During the meeting, donors agreed to replenish the ADF with $8.9bn, 14% more than during the 15th round ending in 2019.
They also approved the creation of a Climate Action Window, which will receive about $400m of the overall allocation.
Finally, donor countries agreed that a thorny issue – changing the ADF’s statutes to allow it to raise funds on the financial markets – should be brought before the board at a later date.
Adesina also welcomed Morocco and Algeria as new contributors to the ADF.
Access to financial markets
The enthusiasm demonstrated by the Nigerian leader cannot, however, hide the considerable gap between Tangier’s decisions and African leaders’ expectations, starting with the head of the AfDB who had increased his number of lobbying activities in recent months.
Adesina had notably obtained the African Union’s endorsement to ask donor countries for “a substantial and transformative 16th ADF replenishment”.
The AfDB president had pressed for replenishment of the ADF to the tune of “$15bn”, to which would be added “$13bn in climate finance”, via the Action Window of the same name.
Given that it has the authority to raise resources on the market, the ADF could leverage its estimated $25bn in equity to mobilise “up to an additional $6bn for each replenishment cycle”, said Adesina.
This plea did not win the support of the fund’s donors, which include mostly G20 countries, led by Japan, Germany, the UK, France and the US.
- Paris is expected to contribute €580m to the ADF replenishment, compared to the UK’s £650m – including £200m for the Climate Action Window.
- The US contributes around $500m to ADF replenishment rounds.
- Many of these wealthy nations prefer to use the International Development Association (IDA, part of the World Bank Group) to channel a considerable amount of their development assistance to African countries.
“The growing overlap between the ADF and IDA in terms of countries, structure and sectors, and the divergence in their funding trajectories is striking. About 70% of IDA funding goes to sub-Saharan Africa and just over half of its [intervention] countries are in the region,” according to the Centre for Global Development.
A common donor pool
By December 2021, IDA’s 20th replenishment had reached $93bn, including “$23.5bn in contributions from 48 high- and middle-income countries, financing raised in the capital markets, as well as repayments on previous credits and the World Bank’s own contributions”.
The same pool of major international donors (foreign countries account for about 40% of the AfDB’s capital) had already been tapped for the pan-African institution’s record capital increase in 2019.
These resources fed into the AfDB’s regular credit portfolio, rather than the soft loans and grants to poor countries financed by the ADF.
African leaders are not the only ones calling for a more ambitious ADF.
Last May, researchers at the Centre for Global Development argued for a three-year, $10bn package that would build on the “comparative advantage and track record of the ADF and the African Development Bank (AfDB) as a whole”.
The analysts pointed out donors’ “insufficient knowledge” of the AfDB Group’s “strong performance in areas such as public-private infrastructure financing, regional integration, performance-based resource allocation and recipient country ownership”.
Although he did not get everything he wanted, the AfDB president welcomed the fact that despite a difficult financial context, ADF donors had nevertheless agreed to reach into their wallets for the cause.
“Despite the challenges you are all facing in your respective countries, you, the plenipotentiaries, have been great ADF ambassadors. You have preserved ADF funding. When cuts had to be made, you advocated for the ADF to be given priority over all other institutions,” he said.
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