Re-channel part of your SDR for Africa – Akufo-Addo urges developed economies
President Nana Addo Dankwa Akufo-Addo has, through a declaration, called on wealthy economies to channel a portion of their Special Drawing Rights (SDRs) for Africa through the African Development Bank (AfDB).
“Call on wealthy economies to channel a portion of their Special Drawing Rights (SDRs) for Africa through the African Development Bank (AfDB),” he said.
The AfDB stands as a prescribed holder of SDRs, which can equally be used to meet the development needs of African countries, including food insecurity and climate change and also finance and capitalize on African public development Banks.
The Accra Declaration, following the 57th Annual General Meeting of the AfDB, which was co-witnessed by four other Finance Ministers across Africa, indicated that the SDRs can be absorbed by the Bank Group as equity, which will further expand lending capacity to African countries and be used to provide additional capital and financing to development banks in Africa.
The SDR, an international reserve asset, was created by the International Monetary Fund (IMF) in 1969 to supplement its member countries’ official reserves. “Welcome the leadership of the African Development Bank Group to explore options for the strategic use of the SDRs to support Africa and note that providing SDRs through Multilateral Development Banks has several benefits including leveraging the SDRs,” President Akufo-Addo said.
He further acknowledged that providing the SDRs to Multilateral Development Banks will also strengthen the global financial architecture and foster greater complementarity with the International Monetary Fund (IMF).
To ensure the financial sustainability of the Africa Development Fund (ADF), President Akufo-Addo called on Governors of the African Development Bank to facilitate the amendment of the Articles that preclude the African Development Fund (ADF) from accessing the International Capital Markets to leverage its balance sheet and raise capital for the development of the continent.
The ADF is the concessional financing window of the Bank Group that provides low-income Regional Member Countries (RMCs) with concessional loans and grants, guarantees as well as technical assistance for studies and capacity building in support of projects and programs that spur poverty reduction and economic development.
For instance, in July last year, the International Development Association (IDA) of World Bank (the equivalent of ADF) priced a 10-year Sustainable Development Bond that raised €2 billion. Subsequently, IDA’s funding programme expanded from US$ 5 billion in 2020 to US$ 10 billion in 2021. Such is the demonstrated power of the market beckoning the ADF. With an ADF equity of US$ 26 billion, the prospects could be an additional US$ 8-10 billion which could drive sustained transformation, especially for both fragile and states in transition on this continent.
Finance Minister, Ken Ofori Atta and the immediate past Governor of the Board of Governors of the African Development Bank (AfDB) at the closing of the 57th Annual Meeting of the Bank said Africa needs a unified voice and should table initiatives – such as the introduction of carbon-credits – to ensure Africa can build forward better while avoiding being derailed by the fall-outs from events across the world.
“As we advance, we must continue to have a unified voice and table initiatives (such as the introduction of carbon credits) to ensure Africa can build forward better, smarter, and boldly while avoiding being locked into stranded assets and having our progress derailed by the fall-outs from events that occur hundreds of miles away,” the Minister said.
“Undoubtedly, advancing progress on initiatives such as granting ADF market access, and rechannelling SDRs through the AfDB should go a long way towards helping mobilise the requisite capital for our development and enhancing the prospects of market-access for economies on our continent,” Mr. Ofori Atta said.
Also speaking at the ceremony, Vice President, Dr. Mahamudu Bawumia, expressed confidence in the AfDB to help African economies to steer through the fallouts of the Russia-Ukraine war, “which are compounding the existing socio-economic vulnerabilities triggered by the COVID-19 pandemic.”
According to him, the latter development is why the continental average real growth rate is projected to decline from 6.2 percent in 2021 to 4.1 percent in 2022. “The short-term economic consequences – in the form of rising inflation, subdued growth, increasing inequality, and greater macro-fiscal instability- are affecting the cost of living on this continent,” he added.
He also commended the Boards of Governors for their foresight in endorsing the broad framework of the Bank’s Strategic Outlook: 2023 – 2032, for the next ten (10) years, to build “a prosperous Africa, based on inclusive growth and sustainable development.”