AfDB president warns of upcoming funding gap

25 Apr 17

The African Development Bank will need more funding soon, its president has warned at an event in Washington DC.

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Akinwumi Adesina, president of the AfDB. Credit: Africa Congress Panel

Akinwumi Adesina, president of the AfDB. Credit: Africa Congress Panel

 

Speaking at the Centre for Global Development, Akinwumi Adesina highlighted that despite the bank’s efforts to utilise innovative financing streams, the need for a capital increase is inevitable.

His warning comes at a time when the world’s biggest aid donor in cash terms, the US, is planning to significantly roll back its spending on overseas development.

In an with the Financial Times, published today, Adesina highlighted the impact such cuts would have, in particular with regards to creating the conditions that breed insecurity and extremism.

“We are doing all possible to stretch our funds and leverage domestic resources,” he said, noting the bank’s work issuing local currency bonds, generating national sources of revenue like tax, investments in the capital markets and leverage of equity resources using guarantees.

The bank is using all available instruments to leverage private resources, he continued, including co-financing, risk exposure exchange and the possibility of lending from the capital markets like the World Bank’s International Development Association.

But he added: “None of these is easy and [all] will involve complex political negotiations and decisions among stakeholders.

“We will continue to look at all these options, but none will be enough to meet the risk capital resources required for achieving the SDGs in Africa through [the bank’s] High 5s. At some point, in the near future, the bank would definitely need a general capital increase.”

The AfDB’s High 5s framework focuses the bank’s resources on five areas: electricity access; food access; industrialisation; integration; and improvements to qualify of life on the continent.

Adesina noted that independent analysis of the High 5s, conducted by the United Nations Development Programme, has shown that if Africa focuses on the five areas it will achieve 90% of the Sustainable Development Goals and 90% of its own development priorities.

The financing gap needed to achieve the High 5s now stands at some $162bn per year – a figure made more immense by the fact that the US and a number of other donor countries are falling short of their aid commitments.

While total aid funding has been on the rise, OECD figures have revealed that far more money than ever before is being spent within donor countries themselves, on refugee costs, while aid to the world’s poorest countries, many of which are in Africa, is falling.

While Adesina’s remarks made clear the importance of having donor countries on board, and despite the continent’s currently gloomy growth prospects, the AfDB president remained sanguine.

“Let’s be optimistic for Africa,” he stated. “I am confident that, with the right scale of financing coupled with political will – the currency of development – Africa’s future will surprise the pessimists.”

  • Emma Rumney

    Emma is a reporter at Otsubo7 International. She also writes for in the UK.

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