AfDB’s Board approves measures to strengthen Development Effectiveness in Africa’s Middle Income Countries

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Tunis, 4 May 2005 – The Board of the African Development Bank (ADB) approved on Wednesday a set of Bank management’s recommendations aimed at strengthening the development effectiveness of its interventions in Africa’s Middle Income Countries (MICs).  The recommendations and undertakings, prepared by a Task Force of Bank staff, cover a set of procedures, processes and products involved in the provision of lending and non-lending support to MICs.

The staff report reviewed perceived needs of the MICs, noting that despite the progress achieved by these countries, they still faced a number of important challenges that include persistent poverty and inequality, vulnerability to external shocks, pressures from globalization and economic integration, and the growth of the private sector.

The report noted that the needs and preferences of MICs in Africa have evolved, with countries increasingly reluctant to provide sovereign guarantees for loans to public sector enterprises, implementing prudent borrowing policies and proactive debt management strategies, and increasingly seeking customized program loans instead of project loans.  In the face of this, the report said, the Bank would have to adjust its procedures and policies to keep pace.

The Board approved the following recommendations:

  • Increase the amount of the MIC Trust Fund by UA 15 million, about US$ 22.75 million, from ADB net income and provide annual increases when needed;
  • Revise the Bank’s commitment fee structure;

a) Eliminate the commitment fee for all new sovereign-guaranteed loans;

b) Expand the range of the commitment fees for non-sovereign guaranteed operations from 0.50% -1% to 0% - 1%;

  • Simplify loan pricing:

a) Decrease the lending spread from 0.5% to 0.4% and eliminate the funding margin for new sovereign loans;

b) Eliminate the market risk premium for all new fixed rate sovereign and non-sovereign loans;

  • Reduce requirements for the publication of Environmental Impact Assessment for private sector projects in all countries to 60 days from 120 days for category 1 projects.

MICs are those countries eligible for ADB non-concessionary financing and include: Algeria, Botswana, Egypt, Equatorial Guinea, Gabon, Libya, Mauritius, Morocco, Namibia, Nigeria, Seychelles, South Africa, Swaziland, Tunisia, and Zimbabwe.

The Total Bank loan approvals to MICs for the period 1995 – 2004 amounted to UA 6,318 million, equivalent to US$ 10 billion, with an annual average of UA 631.8 million, or nearly US$ 1 billion.

*1 UA = 1.51678 $US as at 01/05/2005

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