AfDB Regional Governors Call for 200% Capital Increase

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Written by Joachim Arrey

Meeting in Tunis on Friday, February 12, 2010, African Development Bank (AfDB) regional governors unanimously endorsed an AfDB general capital increase proposal.

The endorsement which is contained in a final communiqué issued at the end of the meeting underscores that a “200% increase would allow the Bank to serve client countries and entities within them.” The communiqué also highlights that the governors supported adherence to the Bank’s policy to make net income transfers to the African Development Fund (ADF), taking into account the Bank’s financial position and its overall needs.

They welcomed the increased relevance of Bank activities across “the spectrum of our countries, middle income, low income and fragile states.” They noted the significant growth in sovereign lending, including the increasing proportion of private sector lending to both middle and low income countries.   

Governors’ Comments

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“Our confidence in the Bank Group has increased as it continues to deepen its role as Africa’s leading development finance institution. We view the Bank Group as a lender of choice, a strong relevant Bank which has demonstrated its ability to respond both in times of crisis as well as in normal circumstances. We further appreciate the increasing advocacy of the role of the Bank and, in this regard, its effective African voice in international fora and its convening power exercised to advance the cause of our countries,” the communiqué stressed.   

The endorsement of the proposal for a general capital increase was also based on the need to ensure that resources were available to deal with global warming which has the potential to significantly affect Africa’s development prospects.

Based on this and the confidence Africans have in the AfDB, African leaders such as the Ethiopian Prime Minister, Meles Zenawi, have said that 50% of climate change resources should go to Africa and these funds should be administered by the African Development Bank under a board of trustees. Mr. Zenawi’s call was made in Copenhagen, Denmark, in December 2009 during the climate change summit. Without a capital increase, the communiqué stressed, the Bank would have to limit its lending activities by making substantial adjustments to its lending programme to the detriment of African countries that are yet to fully recover from the effects of the global financial crisis.

The governors called on their partners, the non regional member countries, to join them in the effort to strengthen the Bank’s institutional capacity and support the sixth general capital increase.

Opening the event, the AfDB President, Donald Kaberuka, said the presence of the governors in the meeting was testimony of the importance they attached to the general capital increase. He pointed out that before the crisis; the AfDB had crafted its medium term strategy for 2008-2012 without envisaging a capital increase. The strategy, he said, was predicated upon strong growth the continent had posted.

However, as the crisis struck the continent, the institution was faced with increased demand for resources from its client countries. The AfDB like other Multilateral Development Banks (MDBs) therefore had to play a counter-cyclical role in line with a call by G-20 countries in 2009 in London. A situation that made a capital increase all the more relevant.

Speaking to the governors, Mr. Kaberuka underscored that the continent needed a strong voice and that it was necessary for them to emerge out of the consultations with such a strong voice.   

He stressed that the institution he leads had the expertise and the trust reposed in it had increased. He pointed out that the AfDB was the leading source of funding for regional integration-related projects.  Their support for a general capital increase, he underscored, was a demonstration of ownership and their determination to have a strong first class financial institution.