President Nana Addo Dankwa Akufo-Addo has called for an elevated role for African Development Bank (AfDB), to significantly boost resources for the socio-economic transformation of Africa.
President Akufo-Addo said as a Triple A-rated financial institution with an active portfolio of some $61 billion in more than 142,000 locations, the AfDB was in a position to drive sustained transformation in Africa.
He said with increased financial resources, the AfDB could recapitalize key African financial institutions—Regional Development Banks, Afreximbank, Africa Guarantee Fund, Africa-Reinsurance Company and Africa50—to engage in communities and fund country-specific programmes.
That, the President said, would harness Africa’s institutional strengths for sustained transformation and avoid situations where the IMF in 2021, lend US$41 billion to Argentina, with a population of 45 million but US$34 billion to the whole of sub-Saharan Africa, with a population of 1.14 billion people.
Speaking at the 57th Annual General Meeting of the AfDB in Accra, Ghana Tuesday, President Akufo-Addo said Africa’s debt had compounded, in pursuit of policy autonomy for economic transformation.
For instance, according to UNECA, Africa’s debt to GDP ratio rose from 60 per cent to an estimated 71.1 per cent between 2019 and 2020, largely because of the COVID-19 pandemic.
Even more compelling for AfDB’s strategic intervention, according to President Akufo-Addo, was that 18 African economies in 2021, suffered credit downgrades, “even when all economies were suffering fallouts from the pandemic in that same year.”
The IMF 650 billion Special Drawing Rights (SDR), approved in August 2021, meant to be of significant relief had not been impactful as based on the allocation principles, economies on the African continent got US$33 billion (about 5 per cent).
President Akufo-Addo said the initial facility to offer respite to economies with elevated debt challenges – the Debt Service Suspension Initiative (DSSI) – had expired in December 2021.
Even more compelling, aside from Africa’s unsustainable debts, according to him, were the consequences of the Russian invasion of Ukraine, which has further worsened the macroeconomic indicators of African countries.
He said since February this year, prices of staple food commodities have surged drastically, amidst fertiliser shortages of some 2 million metric tons this year (2022), estimated at $2 billion.
The fertiliser shortage, according to the International Fund for Agricultural Development, would potentially create a productivity deficit of some 20-50 per cent in agriculture.
Rising food prices, according to President Akufo-Addo, have disproportionately affected African families, as food consumed some 40% of household income, compared to less than 20 per cent in advanced economies.
To the President, the immediate economic consequences—rising inflation, lower growth, increased inequality, and greater financial instability – were likely to permeate deeper, as they coincided with weakened economic positions due to COVID -19, amidst debt challenges.
President Akufo-Addo expressed happiness that the AfDB Board had approved funding of US$1.5 billion for the Africa Emergency Food Production Plan to support countries to produce food rapidly while delivering climate-resilient agricultural technologies to 20 million farmers across the continent.
“I am also encouraged to hear that the ‘right noises’ are being made towards establishing an African Financial Stability Mechanism to protect our economies from future shocks.”
“I am persuaded that the African Financial Stability Mechanism will provide such protective cover for our economies, thus enabling us to counter effects of future pandemics amongst others,” the President stated.
Rex Mainoo Yeboah, ISD
