African Development Bank - Prospects

Prospects

The AfDB's financial standing has been restored from the near collapse of 1995, but its operational credibility remains a work-in-progress. A working group convened by the Center for Global Development, an independent Washington think tank, release a report in September 2006 that offered six recommendations for Bank's president and board of directors on broad principles to guide the Bank’s renewal. The report contains six recommendations for management and shareholders as they address the urgent task of reforming Africa’s development bank. Prominent among the recommendations is a strong focus on infrastructure.

AfDB is still a relatively small source of development finance for Africa. According to the most recent figures, the AfDB provides only 6 percent of total development assistance to the continent. Through its International Development Association (IDA), the World Bank annually approves about four times more in low-interest loans and grants to Africa than the AfDB does. The AfDB lacks the financial resources, the staff capacity and the range of staff skills and experience of the World Bank. For example, at the World Bank there are more than four times the number of staff working on any given project than at the AfDB. A number of the AfDB's projects, especially its policy loans, are financed jointly with the World Bank and other donors. The AfDB also relies extensively on World Bank research and analysis. As a larger institution and often the lead financier on joint projects, the World Bank attracts more attention than the AFDB.

While the AFDB’s lending had not expanded significantly in recent years, 2006 figures indicate that things may be changing. Between 2005 and 2006, the AfDB’s lending activities increased by more than 30 percent to $3.4 billion. Over the same period, private sector operations doubled in value. The AFDB has specific mandates from the New Partnership for Africa’s Development (NEPAD) and other international organizations to take the lead amongst financial and development institutions in areas such as infrastructure, regional integration, and banking and financial standards in Africa. These mandates have also increased the AFDB’s profile in the media. The increased international emphasis on Africa’s development needs in recent years (for example, surrounding the 2005 Gleneagles G8 Summit), and on the importance of infrastructure investment in Africa, has highlighted the role of the AfDB.

Some research has indicated that a high percentage of respondents in African countries has a marked preference for additional aid from the African Development Bank, despite the fact its relatively low rating against most of the aid effectiveness criteria found to be important by donor recipients. This suggests that donor recipients in Africa views on the ‘multilateral donor of choice’ are informed by additional aid effectiveness criteria that are not commonly identified or reported against, though exactly what those criteria have not been discussed.

In general, whereas there has been progress at all levels with regard to democracy, growth and restoring the macro-economic balances in Africa over the past fifteen years, half of sub-Saharan Africa lives on under one dollar a day, and AIDS is threatening the social fabric of the continent. The studies conducted by various organizations (including the African Development Bank and the World Bank) show that, with the exception of northern and southern Africa, the United Nations Millennium Development Goals (reducing by half the number of persons living in poverty and without access to potable water by 2015) will in most cases not be attained. Nevertheless, these same studies indicate that the majority of the African countries can make notable progress to these ends.