The International Monetary Fund (IMF) has strongly supported the African Development Bank Group’s (www. AfDB. org) call for African countries to avoid taking loans guaranteed through their herbal resources.
IMF Managing Director Kristalina Georgieva met with African Development Bank Group President Dr. Akinwumi Adesina in Abidjan, Côte d’Ivoire, on Thursday. This is the first time an IMF leader has visited the Bank’s headquarters since its inception in 1964.
Saluting Georgieva, Adesina said that “loans secured through natural resources are not transparent, they are expensive and make it difficult to settle the debt. “He warned that if this trend continues, “it will be a crisis for Africa. “
Georgieva said the fund’s monitoring team “will conduct a thorough evaluation. “We will speak out forcefully to tell countries to pave the way for predatory and enslaving lending. “
He said the factor would also be discussed at the Global Roundtable on Sovereign Debt, which is composed of bilateral creditors, creditors and borrowing countries. The roundtable is co-chaired by the IMF, the World Bank and the G20 Presidency. The African Union joined the G20 in September as a permanent member.
Georgieva is traveling to Marrakech, Morocco, for the annual meetings of the World Bank Group and the IMF that were last held in Africa 50 years ago.
The IMF leader said her visit to Africa comes at a time when the continent offers wonderful promises of more dynamic expansion around the world.
“We concentrate on the difficult situations facing the continent, as this is where the effect of weather conditions is much more severe, where macroeconomic and monetary instability and debt are amplified. “
“But we need to take advantage of the opportunities in Africa because of the undeniable fact that the capital is in the North and a young population is in the South, basically here in Africa. If we don’t build a bridge for capital to get to where it’s needed in most cases, it may simply lead to a bigger problem.
Adesina praised IMF leader and U. S. Treasury Secretary Janet Yellen’s ambitious efforts, at the height of the Covid-19 pandemic in 2021, to the global economy by allocating $650 billion in Special Drawing Rights (SDRs).
Africa, with a population of more than 1. 2 billion, earned about $33 billion in SDRs, accounting for five percent of the total allocation, the smallest percentage among the world’s regions.
The African Development Bank continues to conduct discussions and expand models that will allow SDRs to be redirected through multilateral progression banks. MDBs can exploit these resources for 3 to 4 times their original value. Adesina thanked the IMF for working with the African Development Bank team on an initiative that could simply channel SDRs through MDBs.
“In collaboration with the Inter-American Development Bank, we have developed a style that is tailored to the IMF’s reserve asset status. If we channel $5 billion through the Bank, we will use our leverage and that can equate to $20 billion in new financing for Africa. Adesina said.
The Bank leader said the initiative would provide something much-needed to African countries where post-pandemic debt remains a major challenge. “It’s more serious for the low-income countries that make up the concessional lending window of the Bank, the African Development Fund. “It is also the world’s most vulnerable to climate change.
Georgieva, who has publicly supported the Bank’s SDR initiative, said the two institutions will continue to work in combination with tactics to implement SDRs as hybrid capital.
“Officially the Bank’s efforts and if it succeeds, there will be a significant expansion of the monetary capacity of countries, even beyond our years in office,” he said.
The African Development Bank Group’s SDR proposal has the support of African leaders, including UN Secretary-General António Guterres.
The IMF leader also welcomed the Bank’s initiative, in collaboration with the African Union, to create an African Financial Safety Facility to protect the continent from exogenous shocks such as the effect of Covid-19.
According to Adesina, “Africa is the only region in the world that has a safety net against crises. Europe has it. Asia has it. The United States has it. The Middle East has it. “
The African Union and African Development Bank Group’s proposal for the mechanism at their February 2022 summit.
Contact: Salomón Mugera Communication and External Relations media@afdb. org
About the African Development Bank Group: The African Development Bank Group is Africa’s leading progressive financial institution. It contains 3 separate entities: the African Development Bank (AfDB), the African Development Fund (ADF), and the Nigerian Trust Fund (NTF). With a presence in 41 African countries and an external workplace in Japan, the Bank contributes to the economic and social progress of its 54 regional member states. For more information: www. AfDB. org
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