President Kaberuka Receives Ambassadors
Bank Group President, Donald Kaberuka, on Tuesday in Tunis hosted a luncheon for ambassadors and heads of diplomatic missions in Tunis. The meeting also served as an occasion to take stock of activities in 2007 and exchange best wishes for 2008. Speaking on the occasion, Mr. Kaberuka said the continent was recording some interesting growth numbers, adding that there were greater prospects for growth as international demand for commodities was rising and macroeconomic stability was being consolidated across the continent.
"Across the African continent, average economic growth continues to be buoyant. I expect this year’s economies to grow on average 6.5%. As I outlined to you last year, we still consider four factors to be key: First, strong international demand for commodities and other natural resources. Second: the consolidation of the gains in macro-economic stability which is enhancing trade and investments. Third: improved business and investor confidence and the changing perception of Africa. Fourth and last, for several low income countries increased resource flows both from traditional and non-traditional sources. I must note, in particular, that debt relief has created real opportunities for expanded social service delivery. A new element would seem to be that the volume and diversity of resource flows from new emerging donors, philanthropic funds are set to increasingly play a larger role," he said, adding that "this is a development that portends a significant potential realignment in the global framework for development assistance, with implications for the way traditional development agencies, including ourselves do business for maximum impact."
He commended the G8 and other OECD countries for keeping Africa on the Agenda at the Gleneagles Summit in 2005, and Heiligendam in 2007. Though the pace of delivery in increasing core development financing to Africa was still not commensurate to MDG challenges - if debt relief is excluded -, he applauded many OECD governments that have continued to support different Bank initiatives on water, regional integration, infrastructure, clean energy, governance and gender, among others. He said that the replenishment of the Bank Group’s concessional window, the African Development Fund, concluded last December in London was truly symbolic and historic. Participating states, he said, had agreed to replenish the fund with a record increase. This provides the Bank Group with nearly US$9 billion over the next three years to finance development in low income countries.
Mr. Kaberuka informed the ambassadors that growth prospects on the continent remained good, but the chances of many countries attaining the MDGs remain slim. He advised that absolute poverty for millions in rural areas and urban slums remained a scar on Africa’s face. He outlined five areas of major concern, including growing inequalities which in some areas are generating social tensions which could serve as roots of instability. The challenge of managing debt especially for natural resource-rich countries is getting more complex, he said, citing strong vulnerability to a possible downturn in the global economy or internal disruption, bottlenecks in infrastructure especially in the energy sector which is raising the costs of doing business, and finally, the impact of rising oil and food prices in some low income countries on the continent.
He however sounded optimistic given the ambition in many countries to overcome obstacles and a realization in these countries that conditions that inspire business confidence must exist. This implies the availability of sustained stability and sound policies. He stressed that many countries were undertaking what he considered as irreversible reforms to promote a more conducive business environment. Many surveys in this domain, he said, had indicated clearly that Africa was fairing well among the top reformers of the investment climate. In low income countries, the combined effect of sustained economic growth and debt relief, has contributed to improvements in the credit quality of this group of African countries, making them for the first time, investor attractive, he emphasized.
Mr. Kaberuka however expressed some concern about the risk of reversals by countries that are faring well, but could suddenly fall back and lack the capacity to sustain progress. The negative perceptions about our continent that this entails can be quite damaging, he said, adding that "our fervent hope is that in 2008, in Africa as a whole, progress is sustained, not reversed, that the few countries that remain stuck in severe conflict stabilize, so that the African region can definitely shed this unduly high risk and negative perceptions."
In this regard, he applauded Bank shareholders for their strong support to the Fragile States Facility Initiative, a US$600 million facility that helps to address challenges facing countries emerging from conflict, or other sources of fragility. He thanked the donors who last year enabled the Bank Group to deal with the arrears of Liberia and the Comoros, thereby normalizing their relationship with the international community as was the case with RCA in 2006.
Speaking about Bank Group operations in 2007, Mr. Kaberuka said that 2007, once again, was a very good year. "Our outturn both in terms of operations and finances are at record high and our institution is strengthening its delivery capacity. Total financing approvals by the Bank Group, excluding debt relief, reached a new peak at 4.3 billion US dollars, 25% higher than the amount recorded in 2006, driven by both the public and private sector windows," he said, adding that the private sector window was overtaking the public sector for the first time. The resources available under ADF X have been fully committed and the pipeline under the new ADF XI looks very strong, he stressed. The Bank’s outstanding portfolio has begun to reverse what was a steady decline over the past several years, he said.
"The Bank financially continues to be rock strong. The financial statements of the Bank Group in 2007 are currently being finalized for the year end audit. I am pleased to share with you provisional and yet to be audited information confirming robust earnings for the Bank windows. The Bank is expected to report income before transfers as approved by Governors in excess of 400 million US dollars compared to 292 million US dollars in 2006, to a large extent, due to the reduction of the number of countries in arrears. Such a record level of earnings will serve not only as additional buffer against unexpected adverse events, but also reinforce our capacity to finance our development programmes," Mr. Kaberuka said.
"The Bank’s triple "A" rating has been confirmed by all major rating agencies reflecting the strong financial position of the Bank, the sound financial and operational management, comfortable levels of capitalization and solid shareholder support. As a result of the Bank’s prudent risk management policies and practices, the effects of the current turmoil in financial markets on the Bank Group have been significantly minimized. The Bank holds sizeable amounts of unused risk capital that will help to support scaled up operational activities in the medium term. As the Bank strives to do so, making most of its strong risk bearing capacity, I am happy to report that portfolio quality safeguards are adequately secured by an integrated prudential framework of financial management policies," he stressed.