AFRITAC III


Overview

  • Reference: P-Z1-K00-029
  • Approval date: 28/07/2010
  • Start date: 28/07/2011
  • Appraisal Date: 05/01/2010
  • Status: ApprovedAPVD
  • Implementing Agency: IMF - INTERNATIONAL MONETARY FUND
  • Location: Multinational

Description

The purpose of this memorandum is to request the Board of Governors' approval to authorise the Bank to make a contribution to the third phase of the AFRITACs initiative from the Bank's Surplus Account in the amount of USD 7.5 million, equivalent to UA 4.8 million .

2.2 The Bank Group has supported the AFRITAC initiative since its inception in 2003. The first phase of the AFRITACs initiative (2003-2005) amounted to USD 40 million (UA 29.5 million), to which the Bank contributed USD 3.25 million (UA 2.1 million), or about 7% from ADF resources. The second phase (2007-2009) amounted to USD 48 million (UA 30.7 million), to which the Bank contributed USD 4.5 million (UA 3.02 million), also from ADF resources. The Bank contribution for Phase II accounted for about 10%, whereas the IMF contributed 16% and bilateral donors and host countries contributed 70% and 3%, respectively. The first two phases of the AFRITACs covered ADF-only countries. In the third and current phase, the Bank can no longer utilize ADF resources for two main reasons, namely:

(i) ADF-11 resources for multinational operations (MNOs) for regional public goods (RPGs) are overcommitted in 2010 and

(ii) the coverage of the third phase of AFRITACs will be extended to ADB countries which cannot access ADF resources.

2.3 Support to the AFRITACs has been identified by Senior Management as a high priority initiative that can benefit from an allocation from the Surplus Account given the impact such initiative is having on strengthening the institutional capacity of beneficiary countries to manage their public resources better. In view of the strategic importance of supporting the work of the AFRITACs and maintaining the collaboration with the IMF, Management recommends to the Board to allocate USD 7.5 million (UA 4.8 million) to the next phase of AFRITACs from the Surplus Account.


Rationale

The request for continued support to AFRITACs is based on the provision under the Guidelines for Distributions from the Surplus Account of July 2007 (ADB/BD/WP/2007/84) for funding important high-priority initiatives for which alternative source of finance are not available or feasible.

3.2 The rationale for continued Bank support to and engagement with AFRITACs is based on four main considerations:

(i) the relevance to Africa's development challenges in the context of the global economic crisis, as demonstrated by the results achieved by the two previous phases of the initiative;

(ii) the added value of the Bank's continued engagement as a pivotal regional partner;

(iii) the ability of the Bank to leverage additional resources for Regional Member Countries (RMCs) by working with AFRITAC; and

(iv) the relevance to and complementarities with the Bank's increased work on economic governance and public financial management.

3.3 Global economic crisis: The global economic and financial crisis, as well as continued vulnerabilities of African countries, makes the policy advice and technical assistance provided through AFRITACs even more relevant today than in the past. The areas in which the AFRITACs are providing assistance are critical to rationalising public finances and reducing poverty, including financial sector strengthening, debt management, revenue management and tax reform. This assistance is relevant to all Bank RMCs, including middle-income countries, which are severely affected by the global economic downturn and which have embarked upon dramatic reforms (Mauritius, Seychelles, and Cape Verde).

3.4 Added value: The Bank's added value in the AFRITAC partnership is based on its ability to influence the initiative and enhance Africa's voice. Through its engagement in the first and second phases of AFRITAC, the Bank has over time built a strong partnership with the IMF and become a pivotal regional partner in the implementation of the initiative, notably through its active engagement in the Steering Committees of the three existing AFRITACs; principally through the Bank's country offices in Mali (MLFO), Gabon (GAFO) and Tanzania (TZFO) and engagement from headquarters (OSGE) as well. During the third-phase, the Bank is better placed to further engage and influence the AFRITAC and bear the full benefits of its contribution, including through closer cooperation on targeted technical assistance and upstream diagnostic work. Important lessons for the Bank from the first two phases of the initiative include the need for enhanced awareness of and engagement with the AFRITAC technical assistance at the country level, including through the field offices and country departments, and more complementarity and effective coordination with Bank operations.

3.5 Leverage additional resources: Through a modest contribution to the AFRITAC, the Bank is able to leverage additional targeted policy advice and technical assistance for RMCs in critical areas of reform. By partnering with AFRITAC the Bank has created a platform for enhanced support to Africa's efforts to improve economic management and financial governance in the context of the recovery from the global economic crisis through the provision of targeted technical assistance and the building of institutional capacities. The Bank's involvement with AFRITACs is in line with the recently approved Bank Group Capacity Development Strategy approved on 13 January 2010 (ADB/BD/WP/2009/222/Rev.1, 24 December 2009).

3.6 Relevance to the Bank's work in economic and financial governance: The Bank's increased engagement in the area of economic governance and public financial management enhances the relevance of AFRITACs to its work. The Bank's Governance Strategic Directions and Action Plan (GAP 2008-2012, ADB/BD/WP/2008/70, 24 April 2008) focus the Bank's governance agenda on the improvement of economic governance and the strengthening of public financial management. There are potent complementarities and synergies between the AFRITACs' technical assistance and the Bank's support through policy-based lending and institutional strengthening projects, including in new areas of Bank engagement such as debt management and tax reform. Furthermore, AFRITACs' technical assistance will help inform the Bank's policy dialogue with RMCs and contribute to improve the quality-at-entry of Bank operations in the areas of economic governance, public financial management and financial sector reform, including budget support. Lastly, developing an effective partnership with AFRITACs allows the Bank to have an additional instrument to assist RMCs.

3.7 The AFRITACs' model is an opportunity for the Bank and the IMF to further strengthen co-operation and synergies. In the third phase of the AFRITAC initiatives, the IMF has agreed, based on dialogue with partners, including the Bank, and an independent evaluation undertaken in 2008-09, to

(i) revise the governance structure of AFRITAC by establishing a central steering committee for overall policy and strategy coordination,

(ii) facilitate the exchange and dissemination of technical assistance information and reports amongst AFRITAC partners, including the Bank,

(iii) further the IMF engagement in-country donor coordination, in particular in joint government-donors policy dialogue and relevant multi-donor technical groups; and

(iv) ensure sustainability of the technical assistance provided through more effective linkages with donor-supported capacity-building efforts such as the Bank's institutional support programs.


Key contacts

NDISALE Victor Charles - OSGE1


Costs

Finance source Amount
ADBUAC 4,700,000
TotalUAC 4,700,000