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Stefan Nallétamby


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Stefan Nallétamby

  1. 1. 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?
  2. 2. 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
  3. 3. However economic challenges ahead may differ Source: African Economic Outlook 2007
  4. 4. Progress towards reaching the MDGs remains slow Source: African Economic Outlook 2007
  5. 5. While financing needs remain significant Financing MDGs <ul><li>Several independent studies estimate the additional financial needs between USD 50 to 100 BN per annum until 2015 (source: World Development vol. 35, 2007) </li></ul><ul><li>Basic infrastructure financing needs for Africa are close to USD 10 BN per annum (source: Commission for Africa) </li></ul>Need for Increased Development Assistance <ul><li>Multilateral and Bilateral development partners have been sole providers of development assistance on concessional terms. </li></ul><ul><li>In 2006, 42% of total ODA, USD 107 BN, was dedicated to debt forgiveness and emergency aid (source: African Economic Outlook, 2007) </li></ul><ul><li>Multilateral Debt relief for many African countries is now complete. </li></ul><ul><li>Other forms of aid are needed to rise very quickly to compensate for this financing gap. </li></ul>
  6. 6. Non-Traditional lenders are playing an increasing role on the continent More Prominent Bilateral Relationships Private Sector Investments Charitable and Philanthropic Organisations <ul><li>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 </li></ul><ul><li>India: Trade with Africa has also risen sharply to USD 9.14 BN in 2005. </li></ul><ul><li>Korea: Will increase bilateral aid to USD 1 BN by 2010 </li></ul><ul><li>Foreign Direct Investments doubled between 2004 and 2006 to USD 36 BN, driven by South South investments </li></ul><ul><li>Private Equity Funds: Actis Capital, Aureos Capital, Citibank Africa Fund </li></ul><ul><li>International Bond Fund Managers </li></ul><ul><li>Public/Private Equity funds: Pan African Infrastructure Development Fund; Atlantic Coast Regional Fund </li></ul><ul><li>Charitable and Philanthropic foundations donations rose to over $11 BN in 2004 </li></ul><ul><li>GAVI initiative : Has received pledges for USD 3.2 BN (04/07) </li></ul>
  7. 7. This has shed light on the different approaches to financing (1) CONCESSIONAL LENDING <ul><li>Contributes to filling the financing gap </li></ul><ul><li>Cheaper source of financing </li></ul><ul><li>Longer tenors with grace periods </li></ul><ul><li>Promotes international best practices </li></ul><ul><li>Limited in size </li></ul><ul><li>Hindered by political influences </li></ul><ul><li>Loan conditionality </li></ul><ul><li>Slower responsiveness and speed of delivery </li></ul>ADVANTAGES DISADVANTAGES
  8. 8. This has shed light on the different approaches to financing (2) NON - CONCESSIONAL LENDING <ul><li>No or low loan conditionality </li></ul><ul><li>Better flexibility </li></ul><ul><li>Market driven </li></ul><ul><li>Increased speed of delivery </li></ul><ul><li>Greater transparency in pricing </li></ul><ul><li>Costly </li></ul><ul><li>Lumpy </li></ul><ul><li>Selectivity </li></ul><ul><li>Could threaten International best practices </li></ul><ul><li>Risk of leading to unsustainable indebtedness of countries </li></ul>ADVANTAGES DISADVANTAGES
  9. 9. The AfDB looks to reconcile these two approaches Maximizing Strategic Fit Public Private <ul><li>Promotion of Public Private Partnerships (PPPs) as method of financing </li></ul><ul><li>Ensures an appropriate institutional framework is in place </li></ul><ul><li>Provides suitable incentives to both public and private parties involved </li></ul><ul><li>Major role of public institutions: governments, regional organisations and donors, inspires confidence among partners </li></ul>Strategic Fit
  10. 10. … and continues to champion development initiatives across the continent Water Initiatives Post-Conflict Country Facility Investment Climate Facility (ICF) <ul><li>Lead agency on both infrastructure development and financial and economic reforms. </li></ul><ul><li>Over USD 1.2 BN loans and grants approved in 2006. </li></ul><ul><li>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. </li></ul><ul><li>Africa Water Facility (AWF): strengthen Water resource management </li></ul><ul><li>Hosts the Secretariat to the Infrastructure Consortium for Africa: USD 7.7 BLN committed to infrastructure financing in 2006 </li></ul><ul><li>Created by the Bank to assist countries emerging from conflicts in clearing their arrears. Has been instrumental for 5 « pre HIPC » countries. </li></ul><ul><li>Launched at the World Economic Forum 2006, a Public Private Partnership to improve the « business climate » in Africa </li></ul>
  11. 11. In conclusion … <ul><li>Financing needs for development in Africa are significant: new lenders are welcome! </li></ul><ul><li>Neither the Public sector nor the private sector alone can meet all these needs; </li></ul><ul><li>Public - Private Partnerships (PPPs) is one way to enhance the benefits of a collaborative approach to development between the Public and Private sectors; </li></ul><ul><li>Governments, Development Finance Institutions and the Private sector should work together to provide the most adequate funding and institutional framework for a sustainable development. </li></ul>Conclusion
  12. 12. Thank You