Donors promise $8.9 billion to the African Development Bank

18 December 2007

AfDB President Donald Kaberuka praises the United Kingdom's “concretization of commitments to double aid to Africa” made at the Gleneagles G-8 summit in 2005. However, Kaberuka’s willingness to credit the UK with “concretizing” its pledges appears overly generous. To date, the UK and the G-8 have fallen well short of the mark in meeting their promises.

Last week, the African Development Bank (AfDB) secured commitments from donors to contribute at least $8.9 billion toward the Bank’s concessional lending window for impoverished countries, the African Development Fund (ADF), during the final meeting of its current replenishment push in London. While the donations fell short of the $10 billion the Bank sought to finance its lending for the period 2008 to 2010, the amount still represents a 52 percent increase over the pledges to the ADF in the previous replenishment round.

Similar to the World Bank’s International Development Association (IDA) lending window, the ADF provides grants and concessional loans to nearly 40 African countries, the bulk of the AfDB’s members. Donor countries contribute new funds to the ADF every three years.

Apart from the small amounts the AfDB realizes from repayment of ADF loans, donor governments are the source of all ADF resources. This dependence gives the donors considerable influence over the way the money is used, and in shaping the policies and strategic directions of the institution. In line with donor priorities, the AfDB has identified four main areas to focus its work: infrastructure, governance, regional integration and fragile states.

The United Kingdom agreed to contribute $863 million toward the replenishment of the ADF. According to an AfDB press release, the UK’s contribution represents a doubling of its commitment during the last ADF replenishment in 2004, and the British Government urged other donor countries to follow suit. Donald Kaberuka, the AfDB’s president, called the move “a concretization of commitments to double aid to Africa” made by donor countries at the Gleneagles Summit of the G-8 in 2005.

Aside from unresolved questions concerning the AfDB’s professed comparative advantage in fragile states and the Bank’s capacity to ensure compliance with environmental and social standards in its infrastructure portfolio, President Kaberuka’s willingness to credit the UK with “concretizing” its pledges to double aid to Africa appears overly generous. To date, the UK and the seven other members of the G-8 have fallen well short of the mark in meeting their Gleneagles promises to Africa, as G-8 aid to the continent actually fell in 2006 for the first time since 1997.

Meanwhile, the highly contentious Economic Partnership Agreements (EPAs) that the European Union (EU) is currently pursuing in Africa threaten to further undermine efforts to alleviate poverty on the continent. The EU has insisted that EPAs be concluded by December 31, when Europe’s current trade agreements in the region expire. While the EU maintains that EPAs will foster economic growth in Africa, critics argue that controversial clauses in these agreements would limit governments’ ability to protect local firms or stipulate certain investment conditions. These “competition clauses” have been omitted to date from negotiations at the World Trade Organization (WTO) after intense resistance by developing countries.

Discussions around EPAs featured prominently at the EU-Africa Summit held in Lisbon, Portugal last weekend, where Senegalese president Abdoulaye Wade publicly rejected the agreements as manifestly unfair and contrary to Senegal’s national interests. To date, the East African Community, five countries in the southern African economic bloc, and most recently Ghana and Cote d’Ivoire, have initialed interim agreements with the EU that will ensure that exports of certain sensitive products to the EU markets are protected from higher tariffs while negotiations on the full EPA continue. Many critics, including government officials, have accused the EU of putting inordinate pressure on African governments to sign the deals.

Press

• Donors pledge $8.9 billion for AfDB loan fund, Reuters, December 12 (Reuters website)
• Record level of support for the African Development Fund, African Development Bank, December 11, 2007 (AfDB website)
• UK gives $863 mln for African development projects, Reuters, November 28, 2007 (Reuters website)
• UK doubles contribution to African Development Fund, African Development Bank, November 27, 2007 (AfDB website)

Additional Resources

• AfDB appeals for $10b to help poor countries by Joseph Myamunyange, East African, October 8, 2007 (East African website)
• AfDB promises increased aid to DR Congo under new fragile states policy, Bank Information Center, September 25, 2007 (BIC website)
• The World is Still Waiting: Broken G8 promises are costing millions of lives, Oxfam International, May 2007 (Oxfam website)
• Africans reject EU trade pacts as deadline looms by Ian Traynor, The Guardian, December 10, 2007 (Guardian website)
• EU is using “bully tactics” to push through EPAs by Aileen Kwa, Inter Press Service, December 15, 2007 (IPS website)
• ADF 11 Replenishment webpage (AfDB website)