Development bank slams World Bank claim that it worsens Africa’s debt problems
The African Development Bank (AfDB) has rubbished suggestions by World Bank president David Malpass that it and other development banks have a tendency to lend too quickly and in the process add to the continent’s debt crisis.
Public and publicly guaranteed debt levels are high and rising in most African economies, with the median ratio of government debt to GDP climbing more than 56% in 2018, up from 38% 10 years earlier, according to a recent report by the AfDB.
The continent’s total external debt burden reached nearly $500bn (R7.455-trillion), with Eurobonds more than a fifth of that.
Malpass said at a World Bank-IMF debt forum on February 10 that the AfDB is “pushing large amounts of money into Nigeria, SA and others without the strongest programme to sustain it and push it forward”.
He said the AfDB, the Asian Development Bank and official export credit agencies have a tendency to lend too quickly, worsening challenging debt problems in emerging-market countries.
However, according to the 2020 African Economic Outlook by the AfDB, at the end of June 2019 total public debt in Nigeria amounted to $83.9bn, 14.6% higher than the year before. That debt represented 20.1% of GDP, up from 17.5% in 2018. Of the total public debt, domestic public debt amounted to $56.7bn while external public debt was $27.2bn (representing 32.4% of total public debt). SA’s government debt was estimated at 55.6% of GDP in 2019, up from 52.7% in 2018. SA raises most of its funding domestically, with external public debt accounting for only 6.3% of the country’s GDP.
The AfDB says the suggestion that it lends too quickly and is worsening the debt problem is inaccurate and not based on fact.
“We are of the view that the World Bank could have explored other available platforms to discuss debt concerns among multilateral development banks,” the Abidjan, Ivory Coast-based development lender said.
Misleading and inaccurate
“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.”
The AfDB said the statement impugns its integrity, undermines its 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 African Development Bank maintains a very high global standard of transparency. In the 2018 ‘Publish What You Fund’ report, our institution was ranked the fourth most transparent institution, globally.”
The AfDB said it provides a strong governance programme for its regional member countries that focuses on public financial management, better and transparent natural resources management, sustainable and transparent debt management and domestic resource mobilisation.
It also pointed out that the World Bank, with a more substantial balance sheet, has significantly larger operations in Africa. The World Bank’s operations approved for Africa in the 2018 fiscal year amounted to $20.2bn, compared with $10.1bn by the AfDB.
With regard to Nigeria and SA, the World Bank’s outstanding loans for the 2018 fiscal year to both countries stood at $8.3bn and $2.4bn, respectively. In contrast, the outstanding amounts for the AfDB to Nigeria and SA were $2.1bn and $2.0bn, respectively, for the same fiscal year.
“With reference to the countries described as heavily indebted, [the AfDB] recognises and closely monitors the upward debt trend. However, there is no systemic risk of debt distress.”
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.