The Africa Development Bank, (AfDB) recently fired back at World Bank’s President David Malpass. In a press release, they accused Malpass of making statements that are not fact-based saying the inaccurate statements of the President impugns the integrity of Africa Development Bank, undermines their governance system and incorrectly implies that the AfDB and World Bank operate on different standards contrary to their collaborative working. Remarks that AfDB has termed as going against the spirit of multilateralism.
World Bank’s President David Malpass, was quoted at a forum, suggesting that Multilateral Development Banks, AfDB included, are contributing to the continent’s huge debt through their tendency to lend too quickly. International Monetary Fund (IMF) Managing Director Kristalina Georgiev, also said they’re worried about lack of transparency, weak debt management and lack of capacity in an increasing number of low-income countries. She said investors have been keen to seek yield in African countries promising up to 8% or 9% on Eurobonds which is not cheap for low-income countries.
“We are faced with a duality. The sophistication of lending instruments is going up. The multiplicity of sources is going up—and capacity to handle is falling behind,” said Georgieva.
Malpass and Georgieva were speaking at a World Bank/IMF forum held in Washington and were specifically concerned about Nigeria and South Africa. “In the case of Africa, the African Development Bank is pushing large amounts of money into Nigeria, South Africa, and others without the strongest program to sustain it and push it forward,” said Malpass.
AfDB however, refuted World Bank’s statements saying the bank has significantly larger operations in Africa than the African Development Bank. According to AfDB, the World Bank’s operations approved for Africa in the 2018 fiscal year amounted to $20.2 billion, compared to $10.1 billion by the African Development Bank. AfDB’s response to the Malpass in regards to Nigeria and South Africa was that the World Bank’s outstanding loans for the 2018 fiscal year to both countries stood at $8.3 billion and US $2.4 billion, respectively. In contrast, the outstanding amounts for the African Development Bank Group to Nigeria and South Africa were $2.1 billion and $2.0 billion, respectively, for the same fiscal year.
The 2020 African Economic Outlook, captured at the end of June 2019, reports that the total public debt in Nigeria amounted to $83.9 billion, 14.6% higher than the year before. That debt represented 20.1% of GDP, up from 17.5% in 2018. Of the total public debt, domestic public debt amounted to $56.7 billion while external public debt was $27.2 billion (representing 32.4% of total public debt). South Africa’s national government debt was estimated at 55.6% of GDP in 2019, up from 52.7% in 2018. South Africa raises most of its funding domestically, with external public debt accounting for only 6.3% of the country’s GDP.
AfDB further reiterated that the bank maintains a very high global standard of transparency evident by their performance that made 2018 Publish What You Fund Report to rank the institution 4th most transparent globally.
“The African Development Bank provides a strong governance program for our regional member countries that focus on public financial management, better and transparent natural resources management, sustainable and transparent debt management and domestic resource mobilization,” read the statement.
Africa’s huge debt is one of the main problems crushing the continent’s hopes and development visions. Investments in most developing countries in Africa are not meeting their development goals. International Monetary Fund (IMF) warns that a country having a debt worth 50 percent of its GDP, is likely to face an economic crisis. According to World Bank’s data, the total external debt for sub-Saharan Africa jumped from $236 billion to $583 billion in 10 years, a crisis many have described as an unsustainable debt load to the continent.