Africa: More World Bank Loans and Grants On the Cards for Continent

The World Bank’s International Development Association lends to the poorest nations. The economist heading its 2019 replenishment process, Antoinette Sayeh, told DW about the plans to boost its budget for Africa.

The IDA touches the lives of millions in Africa, but few know much about this part of the World Bank Group that gives loans and grants worldwide. Every three years, the IDA seeks new funds from member states. Its annual replenishment process – IDA19 – is being led by Antoinette Sayeh, Liberia’s former finance minister. Sayeh spoke to DW’s Daniel Pelz about the process and the association.

DW: You’re leading the current replenishment of the IDA. How has the response from the member governments been so far?

Antoinette Sayeh: I’m happy to say that, coming out of our last set of discussions on the margins of the International Monetary Fund and the World Bank, we arrived at a broad consensus to target the base scenario of $80 billion (€72 billion) up to the mid-high scenario of $82 billion. We’re very hopeful that we get this $82 billion and I think the soundings we’ve had from members and donors of the replenishment suggests that we can arrive at $82 billion.

What do you need the money for?

IDA supports the poorest and most fragile countries across the world with the objective of reducing extreme poverty and increasing prosperity. We support 75 countries. Much of that poverty these days is concentrated in Subsaharan Africa. So, certainly Africa is the key focus of the replenishment. In IDA18 2019, Sub-Saharan Africa was consuming three quarters of the resources, and we expect that to be similar under IDA19. We’ll be looking to provide financing around five special themes: One is fragile countries affected by conflict and violence. Another is to build a stronger institutions-improved governance. The third is to improve gender equality. Fourth is jobs and economic transformation, given the huge need for jobs across the world and in sub-Saharan Africa in particular. And finally on climate change that has a devastating impact on some of the poorest countries.

There are many new players in Africa, such as China and Russia. When you talk to African governments you often hear this notion “I would like to get our loans from China. It’s a very easy and quick way to get money.” Why is there still a need for players like IDA to be around?

China is not as new as it is sometimes described. It has had relationships with some African countries as early back as just after independence, like Tanzania. China is a very present partner, as are some private lenders. But the financing needs of the region are so huge and the specific comparative advantage of IDA is so significant in addressing the challenges that countries face, that IDA is very much still in very high demand from countries themselves. They want a strong IDA presence. IDA is a multilateral institution, bringing together financing and priorities of country authorities from across the world, including China, Russia and of course the traditional European and Western donors. Together they decide on the priorities for IDA and finance it to deliver those results. That has been very much appreciated and cannot be substituted for by either the private sector or by bilateral donors.

Experts are saying there are so many loans now flowing to Africa that there is even the risk of the country sliding into a new debt crisis. How is that impacting on your work?

IDA has been very much focused on looking at the issue of debt vulnerabilities. Nearly half of IDA country recipients are in or at high risk of debt distress, meaning that they’re not able to service their loans. The focus on that issue has been a key one in this replenishment with the view to help countries manage their debt better, giving them incentives to better manage debt and to rely more on concessional financing that IDA provides. IDA did this with the perspective of bringing non-traditional creditors around the table to make sure we’re working together to help countries address those issues. Clearly with countries at increased risk of debt distress there is an even bigger need for concessional financing. Where countries are taking resources over a very long period of time and not pressured by the need to repay very quickly. So IDA remains hugely important in that context and the grants capacity of IDA also becomes even more important.

The World Bank has a bad image in Africa because of the tough austerity measures it imposed on African countries in 1980s and 1990s. Has it learned its lesson?

IDA and other partners in Subsaharan Africa have many lessons that can be taken away from this so called structural adjustment period, when countries were dealing with big macro stability issues. When you are in crises, the options are much more limited in what you can do to exit that crisis. So we’ve tried to build a partnership in IDA, in particular with countries before they get to crises, and around issues that will mitigate the impact of crises on them. We’ve drawn lessons from the experience of conditionality, the need for strong ownership from country governments and the society at large, and significant investments in relationships beyond governments.

We see many conflicts springing up in Africa, particularly in extremely poor countries: South Sudan, the Central African Republic and parts of the Democratic Republic of Congo. How can you work with countries like these where it seems almost impossible to deliver any kind of development to the people because of the conflict situation?

IDA is working both in fragile countries that are in risk of being in crisis, and increasingly in countries in conflict. Past experience shows that if you’re not safeguarding minimal institutions and preserving the ability of the poorest to have access to services in those communities, it becomes even more difficult when the crisis is over. IDA has partnered with other institutions and UN agencies to try to preserve basic service delivery, and it had been shown to have some good results. IDA 19 will be increasing resources to those countries because that’s where poverty is and that’s where we asked to make a difference.

Many Western governments are subscribing to the view that more private investment in Africa is the key to reducing poverty. What is your take on that?

Even if governments do all they can to improve their domestic resource mobilization to better manage expenditures, governments by themselves are incapable of doing that even with the support of external partners. It is absolutely important that their partnerships with the private sector contribute investments for more inclusive and sustainable growth. Not to say that the private sector replaces governments. Governments will always be needed for producing public goods that private companies and firms cannot deliver, for dealing with public challenges like climate change that the private sector is not able to address by itself.

Antoinette Monsio Sayeh previously worked as the director of the International Monetary Fund’s African Department. She was Liberia’s finance minister from 2006 to 2008.


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