Adesina announced that the proposal which the African Development Bank is working on with the IMF would be complementary to the Fund’s efforts
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ABIDJAN, Ivory Coast, June 23, 2023/ — The head of the African Development Bank (www.AfDB.org), Dr. Akinwumi Adesina on Thursday once again underscored the case for multilateral development banks (MDBs) to be allowed to leverage International Monetary Fund Special Drawing Rights. With an increased allocation, MDBs could crowd in much-needed resources for developing nations to fight climate change and fast-track the UN Sustainable Development Goals, he argued.
Speaking during a panel session at the ongoing Summit For a New Global Financing Pact (https://apo-opa.info/3JxU6Tl) in Paris, Adesina said MDBs could leverage an allocation of $ 200 billion, and turn this into a trillion dollars.
Adesina said: “The MDBs are leveraging machines. They can leverage the SDR’s by three to four times. So that leverage is very important to have.”
The African Development Bank and the Inter-American Development Bank have been championing the re-channeling of Special Drawing Rights (SDRs) issued by the International Monetary Fund to multilateral development banks. With the re-allocation, the African Development Bank can provide greater financing to regional and national development banks across Africa, as part of the Finance in Common, to accelerate achievement of the 2030 UN Sustainable Development Goals.
Adesina announced that the proposal which the African Development Bank is working on with the IMF would be complementary to the Fund’s efforts. He thanked the IMF for its support in the push.
IMF Managing Director Kristalina Georgieva, who spoke on the same panel, announced that her institution had reached its target of making $100 billion in special drawing rights available for vulnerable countries.
“We have reached $100 billion on lending of SDRs. That was our target from 2021. We have achieved that target, and US$ 60 billion of [this is] already in the Fund working for countries,” Georgieva said.
The high-level panel—which also discussed debt relief for developing and middle-income countries—featured President Ranil Wickremesinghe of Sri Lanka, President Mahamad Idriss Deby of Chad, President Kais Saied of Tunisia, and Prime Minister Édouard Ngirente of Rwanda. First Deputy Prime Minister Nadia Calvino of Spain, who is also Minister for Economy and Digitalization, moderated the session.
Speaking on debt, Deby said his country, one of the most vulnerable countries on the African continent, was fully committed to fighting extreme poverty and achieving the SDGs with support from its creditors. He said Chad—part of the 36% of Africa exposed to at least one extreme climate-related weather shock—had weathered floods in 2022. He said this had led to the displacement of over 1 million people and the loss of thousands of acres of land. He explained that Chad is also dealing with a significant refugee population from neighbouring countries, most notably Sudan, with over 200,000 since the ongoing conflict in that country broke out. “This has a heavy impact on our budget,” Deby said.
The Chadian leader called for debt forgiveness from rich countries, who he said were responsible for climate change as a reparation for climate change damage not caused by African countries.
Drawing from Sri Lanka’s experience, President Wickremesinghe decried delays and bureaucracy and said building a roadmap for the global financial architecture would need customized solutions.
President Saied of Tunisia called for a reform of global financial architecture, which he said would require new and different ways of doing things.
Prime Minister Ngirente said Rwanda was one of the first countries to successfully negotiate an IMF program. He said his country appreciated the importance of the summit and the charting of a new pact through partnerships.
“We can’t fight climate change alone, we need to have partnerships,” the prime minister said.
With 21 African countries in or at high risk of debt distress, Adesina said the G-20 Common Framework for Debt Treatment was vital. He said there was no time to waste. “So, we do have to make it work faster, work at scale. Very, very important,” Adesina said.
The African Development Bank chief added: “It’s a great thing to have a common framework. It’s way too slow and it treats only a small number of countries. We need to have a more coordinated approach.”
Adesina said enabling MDBs to leverage capital from SDRs for health, education and more would be extremely impactful. Several African and heads of state and development partners, and more than 30 international organizations, private sector partners and non-governmental organisations are attending the summit.
Opening the summit on Thursday, United Nations chief António Guterres said many African States were spending more on debt repayments than on desperately needed healthcare. He called for a debt relief mechanism that supports payment suspensions, longer lending terms, and lower rates to make borrowing more affordable for poorer nations. He also called for increased access to liquidity for developing countries via the IMF’s special drawing rights.