African Development Bank annual meetings : reforming the global financial architecture

By the editorial staff

The annual meeting of the Board of Governors of the African Development Bank (AfDB) and the African Development Fund (ADF) in Nairobi, from May 27 to 31, 2024, will be a crucial platform to discuss the challenges and opportunities shaping development in Africa. With the theme « Transforming Africa, the African Development Bank Group, and Reforming the Global Financial Architecture, » these annual meetings will provide a platform for dialogue on reshaping the global financial landscape for more equitable and sustainable development.

Financing remains a major challenge for Africa

Financing remains a major challenge for Africa, largely due to the rules and practices of global economic and financial governance. African countries face increasing debt, difficulties accessing concessional financing, and unequal allocation of international financial resources. « Africa’s total 2022 external debt, estimated at $1.1 trillion and set to rise to $1.3 trillion by the end of 2023, is troubling, » warned AfDB President Akinwumi A. Adesina at the Doha Forum in December 2023. « Twenty-five countries in Africa are in or at high risk of debt distress…a multilateral approach requires that we understand the structure of the debt itself.”

The global financial architecture should be more responsive, inclusive, accountable

According to its president, Akinwumi Adesina, known for his frank and direct discourse,  » the global financial architecture should be more responsive, inclusive, accountable and re-engineered to support the accelerated development of the world, especially Africa.” In its current operation, he denounces, it hinders Africa’s development in more ways than one.

The world is not facing a resource crisis, but a crisis of sharing

The Nairobi Assemblies should thus be the starting point for the continent to demand more justice. As United Nations Deputy Secretary-General Amina J. Mohammed puts it, « The world is not facing a resource crisis, but a crisis of sharing.”

The Nairobi Annual Meetings will also be an opportunity to highlight successes and development projects in Africa. Since its establishment in 1964, the African Development Bank has accompanied African countries on the path to development. Every year, the institution supports both middle-income and fragile states on the continent in their efforts to better manage their resources and improve the daily lives of their populations.

“More than 5,000 projects supported in 60 years of existence”

In July 2003, the world’s largest credit rating agencies awarded the African Development Bank the highest possible credit rating, « AAA. » This historic financial performance has remained strong over the past two decades. In 2015, the launch of the Bank’s five major operational priorities, known as the « High 5s, » strengthened its action in African development and made a difference in the lives of millions of Africans. In addition to inclusive growth and transition to green growth, the Bank focuses its actions on infrastructure development, regional economic integration, private sector development, governance and accountability, and access to technology.

The partnership between the AfDB, which has supported more than 5,000 projects in 60 years of existence, and African countries has led to significant advancements, such as the Senegambia Bridge over the Gambia River, awaited for over 40 years, financed in partnership with Senegal and the Gambia.

Changing the landscape of global financial architecture

The African Development Bank Group has allowed countries on the continent to follow the development cycle set by industrialized countries at their own pace. In order to achieve results, the institution is throwing its weight behind reforming the international financial architecture for better access to resources.

This was the essence of the call by the President of the African Development Bank Group, Akinwumi Adesina, in September 2023 during a high-level roundtable at the 78th United Nations General Assembly. He declared that the resources provided by the current financial system were insufficient for Africa to achieve its growth and development priorities. Mr. Adesina clarified that Africa faces a $1.2 trillion financing gap by 2030 to fund its sustainable development goals. Also, the global financial architecture penalizes countries that need resources the most in favor of the wealthiest nations.

Out of $650 billion in Special Drawing Rights issued by the International Monetary Fund, Africa received only $33 billion, or 4.5% of the total, added the President of the African Development Bank Group. While the total amount of budgetary measures taken to combat the Covid-19 pandemic reached $17 trillion, Africa received only $89 billion, representing 0.5% of the global value.

“But what can such a vast continent, with such enormous needs, achieve with 0.5% and 4.5% of mobilized resources? As it grapples with the weight of debt, whose restructuring is complex due to the current financial architecture, change is necessary”.

Solutions exist, and President Adesina has outlined a framework: simplification of the global climate finance architecture, deployment of risk mitigation instruments through multilateral development banks, improvement of their capital base, issuance of hybrid capital to increase the Bank’s lending capacity for climate and social projects to $21 billion, and channeling a greater share of the International Monetary Fund’s Special Drawing Rights to these banks. These are all avenues to be promoted.

The 2024 Annual Meetings of the African Development Bank Group, to be held in Nairobi next May, will certainly serve as a platform to explore these proposals because, ultimately, achieving balance in the redistribution of resources in the global financial architecture will enable African countries to accelerate their transformation.

« Today, Africa has a debt stock of $640 billion and pays nearly $70 billion in interest annually. It would only be fair for us to have a financing mechanism that treats us on an equal footing, » said Kenyan President William Ruto at the 5th Semi-Annual Coordination Meeting of the African Union in July 2023 in Nairobi. unequivocally: the global financial architecture must be reformed so that Africa is no longer the world’s poor relative.

Kenya, a champion of climate change adaptation

Kenya, the host country of the meeting, also illustrates Africa’s commitment to sustainable development. With increasing investment in renewable energies, the country has become a champion of climate change adaptation. Geothermal and wind energy projects, supported by the AfDB, contribute to strengthening the country’s energy security and reducing its carbon footprint.

These are topics on the agenda of the upcoming Annual Meetings of the African Development Bank, which promise to be a platform for discussing development challenges in Africa and advocating for reform of the global financial architecture.

For more information : African Development Bank Group – Annual Meetings 2024