African development finance institutions have warned governments not to use the country’s natural resources to support infrastructure financing. Instead, they want the state to explore public-private partnerships to fund development projects.
At a press conference in Abidjan, Côte d’Ivoire, during the Africa Investment Forum, executives from eight African multilateral financial institutions said most countries on the continent were heavily indebted and that global economic volatility was high. He said it was exacerbating the debt situation. Borrowing should therefore be delayed in order to seek cheaper ways to finance development.
Multilateral development banks work with wealth funds to finance infrastructure development.
Repay the infrastructure loan properly
Led by the African Development Bank (AfDB), the organizer of the Africa Investment Forum, they pledged the continent’s creditworthiness, noting Africa’s success in repaying infrastructure loans.
AfDB President Dr Akinwumi Adesina noted that Africa has the lowest infrastructure loan default rate of 5.5% in the world. According to Moody’s Analytics, the largest defaulter is Latin America with him at 12.9%, followed by Asia with 8.8%, Eastern Europe (8.6%), North America (7.6%) and Western Europe (5.9%). .
“We have to start seeing infrastructure as our asset. The issue of risk in investing in Africa is exaggerated. How do you manage it,” said Dr. Adesina.
“So the risk of bias should not be ruled out. In other words, the perceived risk is not something we should be rid of. I don’t want it, it will only worsen the debt situation, so they need to open up space to the private sector and I would say at least let the private sector in energy, transport, health care, infrastructure, etc. We strongly believe in the need for public-private partnerships. Let’s expand the private sector space for infrastructure.”
Building African capacity
The lender has pledged to work with African governments to build the continent’s capacity for agriculture, renewable energy and electric vehicle manufacturing.
On agriculture, they support agro-processing zones across Africa to transform agriculture into a wealth sector.
In electric vehicles, banks are looking to fund the value chain of minerals such as nickel, cobalt and lithium that make parts and batteries.
“We will combine resources, technical resources on technical evaluation, project development capabilities here, co-financing capabilities here to develop the battery value chain on the continent and attract investors to build cars. ,” said Dr. Adesina.
For energy, we will invest $20 billion to build 10,000 megawatts of solar power in 11 countries to power 250 million people.
“In the world, solar panel manufacturing is overly concentrated. There are 11 kilowatts of photovoltaic power in Africa as they try to maximize and optimize renewable energy. collectively, we have decided to help design, support and plan for
The institution is AfDB, Africa50. African Finance Corporation, African Export-Import Bank, South African Development Bank, European Investment Bank, Islamic Development Bank, Trade and Development Bank.
They are also asking the International Monetary Fund (IMF) to use the Special Drawing Rights (SDR) cash for infrastructure development.
“Now the world faces all kinds of challenges. Of course the big ones are climate change, Covid-19, the war in Ukraine and what it has brought in terms of energy costs, food prices and inflation. …we have a huge funding gap for infrastructure, but lots of money on the table to help developing countries.One way to really address this is through special drawing rights ,” said Dr. Adesina.
The IMF has issued $650 billion of Special Drawing Rights in 2021, the largest amount ever issued. But Africa got him only $33 billion from that sum.
Multilateral financial institutions have argued that SDRs should be given to finance growth and poverty reduction programs on the African continent.
“I commend the IMF for its efforts on resilient trust, which is great. You can invest, now for us, $1 in SDR is $4 for the country, so if you get $10 billion, that’s $40 billion, $20 billion is $80 billion That’s the leverage effect, which is very important for the SDR to complement the IMF’s efforts.
“I think this is important because as we look at global challenges, we have to ask ourselves: From the IMF to multilateral financial institutions, how best to optimize the global financial architecture? What? Quadruple the SDR and that is money that can be used to recapitalize and support the South African Development Bank, the African Finance Corporation, Africa50, the Trade and Development Bank, the Islamic Development Bank, and others.”
But they called for transparency and accountability in spending infrastructure money.
“It’s not just the amount of money you put into infrastructure. It’s the efficiency of that spending.”