The African Development Bank (AfDB) on Thursday refuted the World Bank President, David Malpass comments that the Bank, Asian Development Bank, and the European Bank for Reconstruction and Development contributed to the debt burden of Nigeria and other countries in Africa.
Malpass on Wednesday disclosed that the development banks hide terms of debt from citizens of these countries through non-disclosure of agreement.
He said these international financial institutions were lending too fast, ignoring lending standards and transparency when offering loans to Nigeria, South Africa, Pakistan and other debt-ridden countries.
“It was learnt that the international financial institutions were using loans for infrastructure projects to further burden the countries,” he said.
The World Bank chief said AfDB contributed to the debt problem by pushing billions into Nigeria and South Africa, while Asian Development Bank also ignored the risk by lending to fiscally-challenged Pakistan.
One of the instances was the approval of $1.3 billion, in December, by Asian Development Bank for Pakistan, which included $1 billion for budget support. The bank also approved $300 million for Pakistan to reform its energy sector.
AfDB in his response said it supports countries to negotiate terms of their royalties and taxes to international companies, and terms of their non-concessional loans to some bilateral financiers
The AfDB said, “This statement is inaccurate and not fact based. It impugns the integrity of the AfDB, undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank.
“The very notion goes against the spirit of multilateralism and our collaborative work.
“For the record, the AfDB maintains a very high global standard of transparency. In the 2018 Publish What You Fund report, our institution was ranked the 4th most transparent institution, globally.
“The AfDB provides a strong governance program for our regional member countries that focuses on public financial management, better and transparent natural resources management, sustainable and transparent debt management and domestic resource mobilization.
“We have spearheaded the issuance of local currency financing to several countries to mitigate the impacts of foreign exchange risks, while supporting countries to improve tax collection and tax administration, and leveraging pension funds and sovereign wealth funds to direct more monies into financing development programs, especially infrastructure.
“The AfDB’s Africa Legal Support Facility (ALSF) supports countries to negotiate terms of their royalties and taxes to international companies, and terms of their non-concessional loans to some bilateral financiers. We have been highly successful in doing so.
“These are the facts: The World Bank, with a more substantial balance sheet, has significantly larger operations in Africa than the African Development Bank.
“The World Bank’s operations approved for Africa in the 2018 fiscal year amounted to $20.2 billion, compared to $10.1 billion by the AfDB.
“With regard to Nigeria and South Africa, the World Bank’s outstanding loans for the 2018 fiscal year to both countries stood at $8.3 billion and $2.4 billion, respectively. In contrast, the outstanding amounts for the AfDB Group to Nigeria and South Africa were $2.1 billion and $2.0 billion, respectively, for the same fiscal year.
“With reference to the countries described as “heavily indebted,” our Bank recognizes and closely monitors the upward debt trend. However, there is no systemic risk of debt distress.
“According to the 2020 African Economic Outlook, at the end of June 2019, total public debt in Nigeria amounted to $83.9 billion, 14.6 per cent higher than the year before.
That debt represented 20.1 per cent of GDP, up from 17.5 in 2018.
“Of the total public debt, domestic public debt amounted to $56.7 billion while external public debt was $27.2 billion (representing 32.4 per cent of total public debt). South Africa’s national government debt was estimated at 55.6per cent of GDP in 2019, up from 52.7 per cent in 2018. South Africa raises most of its funding domestically, with external public debt accounting for only 6.3 per cent of the country’s GDP.
“Development Banks continue to play critical roles in development efforts and in the aspirations of developing countries, most especially in Africa.
“Given substantial financing needs on the African continent, the development assistance of the AfDB, the World Bank and other development partners remain vitally important, with increasing calls for such institutions to do even more.
“The lending, policy, and advisory services of these development institutions in their respective regions are often coordinated and provide substantially better value-for-money to developing nations, compared to other sources of financing. As a result of the African Development Bank’s AAA-rated status, we source funding on highly competitive terms and pass on favorable terms to our regional member countries.
“Combined with other measures to ensure funds are used for intended purposes, it helps regional member countries finance debt and development in the most responsible and sustainable way.
“With regard to the need for better lending coordination and the maintenance of high standards of transparency, the AfDB coordinates lending activities, especially its public sector policy-based loans, closely with sister International Financial Institutions (notably the World Bank and the IMF).
“This includes reliance on the IMF and World Bank’s Debt Sustainability Analyses (DSA) to determine the composition of our financial assistance to low-income countries; and joint institutional approaches for addressing debt vulnerabilities in the African Development Fund (ADF) and International Development Association (IDA) countries.
“In addition, country economists of the African Development Bank fully participate in regional and country level IMF Article 4 missions. Contrary to suggestions, these are just a few concrete examples of historic and ongoing coordination between sister Multilateral Development Banks, IFIs, and development partners.
“The AfDB is committed to the development of the African continent. It has a vested interest in closely monitoring debt drivers and trends in African countries as it supports them in their efforts to improve the lives of the people of Africa.
“We are of the view that the World Bank could have explored other available platforms to discuss debt concerns among Multilateral Development Banks.
“The general statement by the President of the World Bank Group insinuating that the African Development Bank contributes to Africa’s debt problem and that it has lower standards of lending is simply put: misleading and inaccurate.”