Graphics Induction Presentation

1
6th UNCTAD Debt Management Conference
Concessional Lending Practice of the Past?
New Lenders and the Effect on the Markets
Stefan Nalletamby African Development Bank 19th
November 2007
2
Recent economic trends in Africa have been
favourable
Real GDP Growth
Terms of Trade
High oil and commodity prices led to continued
favourable terms of trade
23 countries achieved GDP growth rates of above 5
17 countries achieved GDP growth rates between
3 and 5
Inflation
Fiscal Balance as a of GDP
Fiscal balance has improved
Inflationary pressures have remained relatively
contained
Source African Economic Outlook 2007
3
However economic challenges ahead may differ


Source African Economic Outlook 2007
4
Progress towards reaching the MDGs remains slow
Source African Economic Outlook 2007
5
While financing needs remain significant

• Several independent studies estimate the
  additional financial needs between USD 50 to 100
  BN per annum until 2015 (source World
  Development vol. 35, 2007)
• Basic infrastructure financing needs for Africa
  are close to USD 10 BN per annum (source
  Commission for Africa)

Financing MDGs
Need for Increased Development Assistance

• Multilateral and Bilateral development partners
  have been sole providers of development
  assistance on concessional terms.
• In 2006, 42 of total ODA, USD 107 BN, was
  dedicated to debt forgiveness and emergency aid
  (source African Economic Outlook, 2007)
• Multilateral Debt relief for many African
  countries is now complete.
• Other forms of aid are needed to rise very
  quickly to compensate for this financing gap.

6
Non-Traditional lenders are playing an increasing
role on the continent
More Prominent Bilateral Relationships

• China Trade with Africa has risen six fold
  since 2001 to USD 28.6 BN in 2006. Africa still
  runs a trade surplus with China of USD 2 BN
• India Trade with Africa has also risen sharply
  to USD 9.14 BN in 2005.
• Korea Will increase bilateral aid to USD 1 BN
  by 2010

Private Sector Investments

• Foreign Direct Investments doubled between 2004
  and 2006 to USD 36 BN, driven by South South
  investments
• Private Equity Funds Actis Capital, Aureos
  Capital, Citibank Africa Fund
• International Bond Fund Managers
• Public/Private Equity funds Pan African
  Infrastructure Development Fund Atlantic Coast
  Regional Fund

Charitable and Philanthropic Organisations

• Charitable and Philanthropic foundations
  donations rose to over 11 BN in 2004
• GAVI initiative Has received pledges for USD
  3.2 BN (04/07)

7
This has shed light on the different approaches
to financing (1)
CONCESSIONAL LENDING

• Contributes to filling the financing gap
• Cheaper source of financing
• Longer tenors with grace periods
• Promotes international best practices

• Limited in size
• Hindered by political influences
• Loan conditionality
• Slower responsiveness and speed of delivery

8
This has shed light on the different approaches
to financing (2)
NON - CONCESSIONAL LENDING

• No or low loan conditionality
• Better flexibility
• Market driven
• Increased speed of delivery
• Greater transparency in pricing

• Costly
• Lumpy
• Selectivity
• Could threaten International best practices
• Risk of leading to unsustainable indebtedness of
  countries

9
The AfDB looks to reconcile these two approaches

• Promotion of Public Private Partnerships (PPPs)
  as method of financing
• Ensures an appropriate institutional framework
  is in place
• Provides suitable incentives to both public and
  private parties involved
• Major role of public institutions governments,
  regional organisations and donors, inspires
  confidence among partners

Maximizing Strategic Fit
Public
Private
10
and continues to champion development
initiatives across the continent

• Lead agency on both infrastructure development
  and financial and economic reforms.
• Over USD 1.2 BN loans and grants approved in
  2006.

Water Initiatives

• Rural Water Supply and Sanitation Initiative
  (RWSSI) A USD 14.2 BLN initiative to provide
  safe water and basic sanitation to 80 of rural
  populations by 2015.
• Africa Water Facility (AWF) strengthen Water
  resource management

• Hosts the Secretariat to the Infrastructure
  Consortium for Africa USD 7.7 BLN committed to
  infrastructure financing in 2006

Post-ConflictCountry Facility

• Created by the Bank to assist countries emerging
  from conflicts in clearing their arrears. Has
  been instrumental for 5  pre HIPC  countries.

Investment Climate Facility(ICF)

• Launched at the World Economic Forum 2006, a
  Public Private Partnership to improve the
   business climate  in Africa

11
In conclusion

• Financing needs for development in Africa are
  significant new lenders are welcome!
• Neither the Public sector nor the private sector
  alone can meet all these needs
• Public - Private Partnerships (PPPs) is one way
  to enhance the benefits of a collaborative
  approach to development between the Public and
  Private sectors
• Governments, Development Finance Institutions and
  the Private sector should work together to
  provide the most adequate funding and
  institutional framework for a sustainable
  development.

Conclusion
12

Thank You