AfDB must be Capitalised to Cushion African Nations in Times of Economic Crises

Many countries in Africa today are experiencing financial and economic challenges as a result of the corona virus pandemic and the Russian Ukraine War. This is shifting their attention to seeking reprieve from the International Monetary Fund, The World Bank, The Paris Club and other Britton Wood institutions.

So the question being asked is, what is the objective of the Africa Development Bank and why was it created? The Fact is that The Africa Development Banks primary Objective is to assist African countries, individually and collectively – in their efforts to achieve economic development and social progress with the aim of reducing poverty.

Based on these objectives one would ask why all the African countries are running to the International Monetary Fund for economic bailout when the AfDB has been established to support African economies.

The Answer is that AfDB does not have the financial muscles to give the needed support for such African countries that have sunk into debts and financial crises. Assuming the AfDB decides to give every African country USD$3 Billion dollars to keep their economies running, that will amount to US$162 Billion Dollars for the 54 African countries. The questions should also be whether the AfDB has that kind of Money? Even if it has, can it continue to sustain its operations in the long term after issuing this huge sum?

So we have come to a point that we need to capitalize the AfDB. One way we can successfully capitalize the AfDB is for all the 54 African Countries to place their foreign Reserve Accounts with the Bank. Besides countries with Natural resources like Gold Diamond Bauxite Crude oil among others must trade their resources through the AfDB and keep their huge earnings there. Imagine all African Countries with huge oil and Gas, Cocoa, Bauxite and Gold reserves like Algeria, Ghana, Libya, Sudan, South Sudan South Africa, Mozambique, Guinea, Cote D Ivo ire, Egypt among others placing their foreign reserve account with AfDB instead of the current practice with USBC, Bank of America, Bank of England, Bank of China, Bank of Japan, Bank of Singerpore, The Swiss Bank among others .AfDB will then be well capitalized to execute its objectives.

As I write, some 32 African countries like Ghana , Cote D Ivoire, Rwanda , Zambia, Kenya, Tanzania, Sudan Ethiopia, Uganda , Senegal Benin Cameroon Chad, Gabon Mozambique  Congo Brazzaville Equitorial Guinea Niger, Liberia, SierraLeon  Central African Republic , Gambia  Cape Verde, Sao Tome mand Principe, Madagascar  seyChelles, South Sudan  DRC Tunisia Malawi Somalia  and Egypt are knocking the doors of the International Monetary Fund, for financial bailout  when they could be doing it at the AfDB.

The African Development Bank (AfDB) Group is a regional multilateral development finance institution established to contribute to the economic development and social progress of African countries that are the institution’s Regional Member Countries (RMCs). The AfDB was founded following an agreement signed by member states on August 14, 1963, in Khartoum, Sudan, which became effective on September 10, 1964. The AfDB comprises three entities: the African Development Bank (ADB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). As the premier development finance institution on the continent, the AfDB’s mission is to help reduce poverty, improve living conditions for Africans and mobilize resources for the continent’s economic and social development. The AfDB headquarters is officially in Abidjan, Côte d’Ivoire.

AfDB funds are derived from subscriptions by member countries, especially non-regional member countries, borrowings on international markets and loan repayments. Its resources also come from ADF and Nigeria Trust Fund (NTF) capital increases. The role of the ADF is to provide the institution’s regional member countries with resources to boost their productivity and economic growth. Its resources are derived directly from special contributions from states participants, especially non-regional member countries. Similarly, the NTF was established by the Nigerian government in 1976 to help the institution’s most underprivileged member countries and provide 2-4% interest rate loans repayable over 25 years.

The AfDB’s primary objective is to assist African countries – individually and collectively – in their efforts to achieve economic development and social progress. To this end, the institution’s main challenge is to reduce poverty on the continent. Combating poverty is at the heart of the continent’s efforts to attain sustainable economic growth. The Bank therefore seeks to stimulate and mobilize internal and external resources to promote investments as well as provide RMCs with technical and practical assistance. In partnership with various international and development organizations, including the United Nations, the World Bank, and the International Monetary Fund, the AfDB has, since 2000, undertaken to support RMCs in their efforts to attain the Millennium Development Goals (MDGs).

The Bank Group has 81 member countries, comprising 54 regional member countries (RMC) and 27 non-regional member countries (NRMC). The non-regional member countries are primarily from Europe, America and Asia. Initially, only independent African countries could become members of the Bank. However, due to growing demand for investments from African countries and because of the Bank’s limited financial resources, membership was opened to non-regional countries. The admission of non-regional members in 1982 gave the AfDB additional means that enabled it to contribute to the economic and social development of its RMCs through low-interest loans. With a larger membership, the institution was endowed with greater expertise, the credibility of its partners and access to markets in its non-regional member countries. The AfDB enjoys triple A ratings from all the main international rating agencies. However, the AfDB maintains an African character derived from its geography and ownership structure. It exclusively covers Africa. It is also headquartered in Africa, and its president is always African.

It has an authorized capital of US$253.04 billion, subscribed capital of US$207.98 billion, Total Reserve as at 31st December 2021 was US$ 4.41 billion.

By Kwabena Adu Koranteng