It would be like trying to run up a steep hill with a backpack filled with sand. That was how Dr. Akinwumi A. Adesina described a predicament in which Africa could potentially find itself. He suggested that there could be no recovery from the current economic malaise without addressing Africa's external debt burden of $700 billion.
The President of the African Development Bank joined peers from all over the world on 11 May at the Finance in Common Summit, held virtually, to discuss how to achieve a green and resilient recovery in Africa, the continent most vulnerable to climate change and the impact of the Covid-19 pandemic.
Here are some of the other key messages that emerged from Tuesday's virtual discussions among public development banks.
Without stimulus, countries will be mired in a debt trap
Khaled Sherif, African Development Bank Vice President for Regional Development, Integration and Business Delivery, said the Bank went all out to counteract the economic crisis.
"We retooled our entire lending program, everything down to our grant facilities, to make sure our regional member countries across the continent had access to stimulus. We provided about $5 billion in stimulus in 2020 and we continue to provide more," Sherif said. "Without stimulus, countries will be mired in a debt trap. They will face difficulties of not being able to service their debt; they will be downgraded."
The Paris Agreement on climate change and the Sustainable Development Goals
Patrick Dlamini, CEO of the Development Bank of Southern Africa, said public development banks were a central part of the financial ecosystem, and therefore green and inclusive growth. "We have a role in driving alignment with the Paris Agreement as well as alignment with the Sustainable Development Goals," he said.
Pivoting is key
Kevin Kariuki, Vice President for Power, Energy, Climate & Green Growth at the African Development Bank, outlined its efforts to combat the pandemic. In April 2020, the Bank launched the $10 billion Covid-19 Response Facility. It also launched a facility to expand electricity access to health facilities, 60% of whom were without power in Sub-Saharan Africa when the pandemic struck.
"Public development banks must use the instruments that they have at their disposal and the relationship they hold with the private sector... to be able to accelerate this particular recovery," Kariuki said.
Solomon Quaynor, Vice President for the Private Sector, Infrastructure and Industrialization at the Bank, said it engaged with regional and national public development banks, commercial clients and governments to understand how best to resolve the issues they were grappling with. The Bank realized that it needed to adjust its approach.
"We pivoted and we began to support small and medium enterprises significantly through the support we provided to governments." That was part of the Bank's efforts to stabilize the crisis. The next step is to shore up the recovery process, which involves support across the life cycle of small businesses. The Bank is doing so through a joint initiative with the European Investment Bank that targets young entrepreneurs, among others. Women are also on the radar because of their multiplier effect. Statistically, women comprise a significant demographic in Africa, Quaynor said. "When you help one woman, you really help five other people in the household."
Should public development banks raise their game?
Serge Ekué, president of the West African Development Bank, recounted his institution's response to the pandemic, which included €400 million in funding to member states and short-term bonds to fund Covid-19 relief measures.
Asked whether African development banks could be more ambitious, Ekué responded: "We all understand we had to have a swift and immediate reaction... I think that was the appropriate response to the crisis... In terms of strength and our capacity to do more, we will discuss this down the road."
