Minister of Finance, Mr Ken Ofori-Atta, has urged the African Development Bank (AfDB) Group to consider leveraging the balance sheet of the African Development Fund (ADF) to raise $50 billion in capital for the next five years on the capital markets.
The banks, he said, must be “unshackled” to provide competitive financing to member countries through the implementation of proposed reforms on ADF regulations that will help the fund leverage its resources to raise more funds and lend at lower coupon rates to members.
“It remains puzzling that the ADF is not able to come to market. We must rethink and address this in the face of the present challenges that confront us” he said.
Speaking at the opening of the Annual General Meeting of the AfDB Group, the Minister said that the continent needed to design an economic response strategy that would lead to innate resilience amid high inflationary pressures caused by exogenous factors.
The minister, who is also the Chair of the AfDB group Board of Governors, advised that the support of the AfDB to this strategy must be hinged on digitalisation, the potential of raising climate finance innovatively, exploring possibilities to scale up social protection programmes as well as bringing greater transparency to the methodologies of rating agencies.
“We must make progress on Special Drawing Right (SDR) rechannelling and use the AfDB as a conduit for deploying SDRs on the Continent,” Mr Ofori-Atta said.
The ADF in its 50 years life span has provided over $45 billion in support to member countries.
In Ghana, for instance, the ADF funded the construction of the 4-tier Pokuase interchange located in Accra.
Dr Akinwumi Adesina, the President of AfDB, disclosed that the bank was looking at how the ADF could use its accumulated equity of $25 billion to leverage $ 33 billion for the purpose of reducing the debt of countries by delivering much lower concessional lending rates compared to very high interest rates the countries get on the global capital markets.
“Then together, we will build more equitable growth and development from the middle-income countries to the low-income countries and fragile states. No development of any country will be left behind,” he said.
He also reiterated the call of the African Union (AU) for a reallocation of the SDRs to Africa, with a portion of it going through the African Development Bank as a multilateral bank to support countries.
This, he said, would be a game-changer for the accelerated development of countries as the bank could leverage the SDRs by a factor of four times.
The SDR he noted could be used to provide additional capital and financing to the development banks in Africa and can also be absorbed by the Bank as equity which will expand lending capacity to countries.
“The SDRs can also be provided as concessional loans to the African Development Fund. The SDRs could become “Supporting Development Revitalization (SDR). That way, people on the streets will feel the effects of the SDRs on their lives” he said.
GNA
