The African Development Bank (AfDB) has described as “misleading and inaccurate” comment by the World Bank President, David Malpass, that the financial institution alongside other regional development banks is worsening the debt situation of already “heavily indebted” countries by lending too quickly.
Media reports say Malpass made the statement on Monday at a World Bank-International Monetary Fund debt forum in Washington, United States of America.
Reuters reported that the World Bank chief said AfDB, Asian Development Bank (ASD) and the European Bank for Reconstruction and Development were contributing to debt problems of countries.
Malpass was quoted to have said that while ASD was “pushing billions of dollars” into a fiscally challenging situation in Pakistan, AfDB was doing the same in Nigeria and South Africa.
“We have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official export credit agencies, have a tendency to lend too quickly and to add to the debt problems of the countries,” Malpass insisted at the forum.
But in a statement released on Thursday 13th of February by AfDB’s Director of Communication and External Relations Department, Victor Oladokun, the multilateral financial house picked holes in the statement which it said was “inaccurate and not fact-based.”
“It impugns the integrity of the African Development Bank, undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank.
“The very notion goes against the spirit of multilateralism and our collaborative work,” the Bank said in its reaction, adding that it maintains a very high global standard of transparency.
It further said, “The African Development Bank provides a strong governance program for our regional member countries that focuses on public financial management, better and transparent natural resources management, sustainable and transparent debt management and domestic resource mobilization.
“We have spearheaded the issuance of local currency financing to several countries to mitigate the impacts of foreign exchange risks, while supporting countries to improve tax collection and tax administration, and leveraging pension funds and sovereign wealth funds to direct more monies into financing development programs, especially infrastructure.
“The African Development Bank’s Africa Legal Support Facility (ALSF) supports countries to negotiate terms of their royalties and taxes to international companies, and terms of their non-concessional loans to some bilateral financiers. We have been highly successful in doing so.”
The Bank further noted that with regards to “heavily indebted” countries, it recognizes and closely monitors the upward debt trend saying that “there is no systemic risk of debt distress”.
On Malpass’ comment of its “pushing billions of dollars” into fiscally challenging situations in Nigeria and South Africa, the Bank pointed out that the World Bank has significantly larger operations in Africa than itself – highlighting the difference between the World Bank’s US$20.2 billion and her US$10.1 billion operational budgets for Africa in 2018.
It further provided details of Nigeria and South Africa’s debt profiles on the domestic and foreign fronts.
“According to the 2020 African Economic Outlook, at the end of June 2019, total public debt in Nigeria amounted to $83.9 billion, 14.6% higher than the year before. That debt represented 20.1% of GDP, up from 17.5% in 2018. Of the total public debt, domestic public debt amounted to $56.7 billion while external public debt was $27.2 billion (representing 32.4% of total public debt).
“South Africa’s national government debt was estimated at 55.6% of GDP in 2019, up from 52.7% in 2018. South Africa raises most of its funding domestically, with external public debt accounting for only 6.3% of the country’s GDP,” the Bank said in the statement.
On Malpass’ comment regarding the poor level of transparency in lending through use of hidden liens and non-disclosure clauses that could hamper economic growth, the continental bank said it, among other things, closely coordinates its lending activities, especially its public sector policy-based loans, with sister International Financial Institutions (notably the World Bank and the IMF).