Fourth African Economic Conference-AfDB Underscores Need for Strong African Institutions
Addis Ababa, 13 November 2009 – The timely and innovative actions taken by the African Development Bank (AfDB) Group and other multilateral development banks (MDBs) actually helped to minimize the damage caused by the glbal economic and financial crisis on Africa economies, the AfDB President, Donald Kaberuka has said.
In a statement titled “Africa: Reflecting on the Global Economic Crisis and the Way Forward” delivered at the 2009 African Economic Conference (AEC) in Addis Ababa, Mr. Kaberuka said the AfDB has had to double and, in some cased, tripled its lending, thus bypassing the Bank’s 2009 US$8 billion cap.
The institution innovated in new areas such as trade finance, improved operations process, response time and reactive capacity – actions that enabled some troubled African countries to cope with the impact of the economic and financial crisis.
“I believe that the AfDB’s ability to scale up its operations to such a level, in such a short time period and so flexibly has demonstrated the need for strong African institutions. We have given proof that we are on the way to a world class institution of which Africa can be proud,” he said. However, he explained that the crisis had also demonstrated the paucity of crisis response instruments of the Bank and peer institutions, noting that there was a need for remedial action.
While the Banks core function was long-term development financing, it nevertheless had a duty to understand the development process. He said it was important to find out “What works and under what conditions?”
He said that although economics may have much to atone for in the current crisis, papers delivered at the conference would nevertheless prove that economic analysis remains a powerful tool to understand complex economic and financial interrelationships.
On the impact of the crisis on the continent, Mr. Kaberuka said although Africa was hard-hit by the crisis at the macroeconomic level, the continent was emerging in better shape than earlier expected, attributing this to “stamina and firmness of purpose in staying the course on sound policies.”
The President said the problem of creating employment and stimulating global demand may be dealt with by extending Keynesian policies to African countries. He said following the great depression, Keynesian policies were eventually extended to Europe and it helped the continent in its post-war recovery.
He also urged the conference to address the issue of diversification – noting that after fifty years of independence most African economies were still commodity-dependent.
Mr. Kaberuka said the Bank welcomed the G20’s call on MDBs to scale up their activities and provided additional capital and concessional resources to its regional member countries, adding that the Bank was now working hard in preparing for a general capital increase.
He urged the group to address the global crisis issues. “Now that the G20 is a proxy for a quasi World Government, I believe this renewed legitimacy –of the G20– gives it power and indeed the responsibilities to address all sources of global imbalances and tensions, the main two being: financial imbalances and climate change,” he added.
Reaffirming the mission of the AfDB as a development finance institution catering to the integral needs of African economies, Mr. Kaberuka said: “We tried to do so during this crisis. I think we are beginning to get it right. Not only by positioning national challenges in their contexts, focusing our action on individual countries but also on regional growth engines.”
He explained that the AfDB is making its modest contribution in this regard by scaling up infrastructure (energy, water, transport), higher education and scientific capability, governance and regional integration.
Mr. Kaberuka told more than 300 researchers and policymakers in attendance that the conference’s merit lay in stepping back and reflecting on what should be done before the next crisis.
The AfDB President said he was convinced that while the crisis had been a major setback, the fundamentals of African economies remain in relatively good shape to rebound when durable global recovery happens, adding that the conferees had an obligation to be prepared.