6th UNCTAD Debt Management Conference Stefan Nalletamby African Development Bank 19 th November 2007 New Lenders and the Effect on the Markets Concessional Lending – Practice of the Past?
Real GDP Growth 23 countries achieved GDP growth rates of above 5 % 17 countries achieved GDP growth rates between 3% and 5% Terms of Trade Fiscal Balance as a % of GDP Fiscal balance has improved High oil and commodity prices led to continued favourable terms of trade Inflation Recent economic trends in Africa have been favourable Inflationary pressures have remained relatively contained Source: African Economic Outlook 2007
However economic challenges ahead may differ Source: African Economic Outlook 2007
Progress towards reaching the MDGs remains slow Source: African Economic Outlook 2007
While financing needs remain significant Financing MDGs
Several independent studies estimate the additional financial needs between USD 50 to 100 BN per annum until 2015 (source: World Development vol. 35, 2007)
Basic infrastructure financing needs for Africa are close to USD 10 BN per annum (source: Commission for Africa)
Need for Increased Development Assistance
Multilateral and Bilateral development partners have been sole providers of development assistance on concessional terms.
In 2006, 42% of total ODA, USD 107 BN, was dedicated to debt forgiveness and emergency aid (source: African Economic Outlook, 2007)
Multilateral Debt relief for many African countries is now complete.
Other forms of aid are needed to rise very quickly to compensate for this financing gap.
Non-Traditional lenders are playing an increasing role on the continent More Prominent Bilateral Relationships Private Sector Investments Charitable and Philanthropic Organisations
China: Trade with Africa has risen six fold since 2001 to USD 28.6 BN in 2006. Africa still runs a trade surplus with China of USD 2 BN
India: Trade with Africa has also risen sharply to USD 9.14 BN in 2005.
Korea: Will increase bilateral aid to USD 1 BN by 2010
Foreign Direct Investments doubled between 2004 and 2006 to USD 36 BN, driven by South South investments
Private Equity Funds: Actis Capital, Aureos Capital, Citibank Africa Fund
International Bond Fund Managers
Public/Private Equity funds: Pan African Infrastructure Development Fund; Atlantic Coast Regional Fund
Charitable and Philanthropic foundations donations rose to over $11 BN in 2004
GAVI initiative : Has received pledges for USD 3.2 BN (04/07)
This has shed light on the different approaches to financing (1) CONCESSIONAL LENDING
Contributes to filling the financing gap
Cheaper source of financing
Longer tenors with grace periods
Promotes international best practices
Limited in size
Hindered by political influences
Slower responsiveness and speed of delivery
This has shed light on the different approaches to financing (2) NON - CONCESSIONAL LENDING
No or low loan conditionality
Increased speed of delivery
Greater transparency in pricing
Could threaten International best practices
Risk of leading to unsustainable indebtedness of countries
The AfDB looks to reconcile these two approaches Maximizing Strategic Fit Public Private
Promotion of Public Private Partnerships (PPPs) as method of financing
Ensures an appropriate institutional framework is in place
Provides suitable incentives to both public and private parties involved
Major role of public institutions: governments, regional organisations and donors, inspires confidence among partners
… and continues to champion development initiatives across the continent Water Initiatives Post-Conflict Country Facility Investment Climate Facility (ICF)
Lead agency on both infrastructure development and financial and economic reforms.
Over USD 1.2 BN loans and grants approved in 2006.
Rural Water Supply and Sanitation Initiative (RWSSI): A USD 14.2 BLN initiative to provide safe water and basic sanitation to 80% of rural populations by 2015.
Africa Water Facility (AWF): strengthen Water resource management
Hosts the Secretariat to the Infrastructure Consortium for Africa: USD 7.7 BLN committed to infrastructure financing in 2006
Created by the Bank to assist countries emerging from conflicts in clearing their arrears. Has been instrumental for 5 « pre HIPC » countries.
Launched at the World Economic Forum 2006, a Public Private Partnership to improve the « business climate » in Africa
In conclusion …
Financing needs for development in Africa are significant: new lenders are welcome!
Neither the Public sector nor the private sector alone can meet all these needs;
Public - Private Partnerships (PPPs) is one way to enhance the benefits of a collaborative approach to development between the Public and Private sectors;
Governments, Development Finance Institutions and the Private sector should work together to provide the most adequate funding and institutional framework for a sustainable development.