The continent’s leaders seek a bigger say in global finance as hosts of the annual IMF and World Bank meetings for the first time in 50 years.
(Bloomberg) — When Africa last played host to the International Monetary Fund and World Bank’s annual meetings in 1973, then Bank President Robert McNamara urged rich nations to show more generosity toward the poor.
A lot has changed since that gathering in Nairobi, but the region still desperately needs investment to defeat poverty and face the climate crisis. Renewed great power rivalry pitting the US-led West against China and Russia is ramping up pressure on the two Washington-based institutions to do more on the continent.
China’s lending to Africa has increased fivefold since 2010, analysis by Bloomberg Economics shows. The World Bank’s funding, by contrast, has grown roughly 2-1/2 times, and the region now faces a worsening funding squeeze amid rising interest rates and weakening currencies.
The continent’s miserly share of the global economy has barely budged since 1973 and African leaders complain they’re overlooked. But don’t ask them to choose between East or West — they want more investment from both.
“The choice is not about whether we’re picking friends and foes,” said Vera Songwe, the former Executive Secretary of the United Nations Economic Commission for Africa. “The choice should be about picking interests that will advance the objectives and interests of the continent.”
Songwe, now a senior fellow at the Brookings Institution in Washington and chair of the Liquidity and Sustainability Facility, says Africa should avoid involvement in any new “Cold-War” competition between the US and China, echoing many of the region’s leaders.
The determination to go ahead with the October annual meetings in Marrakech, Morocco, after an earthquake in mountains above the city last month killed nearly 3,000 is meant to signal the IMF and World Bank’s relevance to the region.
The need for such outreach was made clear when major emerging market powers gathered in August for the BRICS summit in Johannesburg, decrying the Western-led order and broadening their ranks to include Iran and Saudi Arabia. That meeting came a few weeks after Russian President Vladimir Putin hosted African leaders in St. Petersburg.
“What should be announced at least in Marrakech is boosting Africa’s representation within the governing bodies of the IMF and the World Bank,” Morocco’s central bank Chief Abdellatif Jouahri told reporters on Sept. 26.
The meetings are now also taking place against a backdrop of violence that has killed hundreds of Israelis and Palestinians, after Hamas attacked Israel from the Gaza Strip. Morocco has called for an emergency ministerial meeting of the Arab League Council to discuss the situation.
A key theme at the meetings will be the push to expand the World Bank’s resources to provide concessional credit on a much greater scale.
Boosting the ability to provide cheap finance is vital to defeat poverty, confront the climate crisis and deliver the development that the region’s youth demand. Failure to do so risks decades more stagnation and the type of anger that fomented coups in Niger and Gabon in recent months.
“We cannot have a prosperous world unless we also have stable and prosperous Africa,” IMF Managing Director Kristalina Georgieva told Bloomberg in an Oct. 3 interview.
The Biden administration has requested $2.25 billion for World Bank funding from Congress, which Treasury officials say could help “unlock” up to $25 billion in additional lending. And if other rich countries follow suit, the total effort, including private capital, could reach $100 billion.
But the region has already been looking elsewhere. Bloomberg Economics’ analysis shows China now holds about 10% of sub-Saharan Africa’s foreign debt, up from 1% two decades earlier, though its new lending to developing countries has also slowed substantially since 2020.
Even so, the scale of financing required is multiple times more than Africa has been able to attract from both sides combined.
An influential July report co-lead by former US Treasury Secretary Lawrence Summers, to which Songwe was a contributor, sees $3 trillion needed per year by 2030 for developing countries , including $500 billion from international development lenders.
“If you just catalogue all the needs these countries have it’s massive,” said Andrew Dabalen, World Bank chief economist for Africa. “But the key thing is the financing has to be cheap and they have to be transparent about what it is they are actually borrowing for.”
The Washington-based lenders’ inability to deliver anything like the funding needed by the continent is driving pressure for reform.
“The report card on the Fund and the Bank is at best mixed,” said Mavis Owusu-Gyamfi, Executive Vice President at the African Center for Economic Transformation in Accra, who cited their emergency aid during the pandemic as a clear win. “We’ve seen some successes and some great initiatives, and we’ve also seen some failures.”
On the fringes of the Nubian desert in Egypt, the Benban solar power project is a showcase for what can be achieved when development lenders get it right. The World Bank supported construction of the project, which attracted $2 billion in foreign direct investment.
With a current capacity of 1.465 gigawatts — enough to power more than a million homes — Benban has helped Egypt ease electricity shortages and scale back its use of fossil fuels. It’s also created an estimated 18,000 jobs in the north African nation.
“It totally changed our lives,” says engineer Ahmed Atef. “Many of the people never had steady employment before the project.”
But other projects didn’t deliver. The World Bank suspended its funding for a Chad-Cameroon oil pipeline in 2006, for instance, after Chad broke its promise to use the income for development and some of the money went to the military instead.
Harsh structural adjustment programs imposed on troubled African economies as the price of borrowing from the Bank and Fund are also remembered with bitterness across the region.
The institutions are now being urged to be more nimble while also granting African nations direct input into the decisions, so that they reflect an African reality. This includes abandoning the tradition where a European leads the IMF and a US citizen is at the helm of the Bank.
“When Africa has a position, it has to start a whole global advocacy campaign to get anybody to listen to us,” said Owusu-Gyamfi. “It’s a bit tiring.”
Half a century has gone by since McNamara challenged the West — in a voice cracking with audible emotion — not to “turn away in cynicism and indifference.” That was music to the ears of Daniel Ritchie, a junior World Bank loan officer at the time, who was at the meeting because he’d learned Swahili as a Peace Corp volunteer in Kenya in the 1960s.
“It was a pioneering move,” said Ritchie, who retired in 1998 and still lives in Washington. “I didn’t realize it at the time, but 50 years later the World Bank is still talking about poverty.”
Indeed, the issue was foremost in remarks by new World Bank President Ajay Banga at the Group of 20 leaders summit in New Delhi last month. “We face declining progress in our fight against poverty, an existential climate crisis, food insecurity, fragility, a fledgling pandemic recovery, widening disparity, and a crippling war on the borders of Europe,” Banga said.
Certain gauges have improved: Life expectancy in Africa has increased from 46 in 1973 to 60, according to World Bank data, while infant mortality rates have fallen sharply.
Africa’s poverty headcount ratio, or the share of the population living on less than $2.15 a day, has declined from around 56% at the turn of the century to 35%. But the same metric in South Asia has fallen from almost 40% to around 10% over a similar period.
Some of the things that went wrong for Africa — including the pandemic and global inflation — are not its fault. But poor decisions when money was flowing in when commodity prices were high, and gorging on cheap borrowing that become unsustainably expensive amid raising interest rates, are home-grown problems.
Zambia and Ghana have both received emergency bailouts from the IMF this year after defaulting. Many others face debt distress and are shut out of capital markets.
Andrews Kwame Pianim, a Ghanaian economist who attended the annual meetings in Washington in 1971, recalled the optimism of the era and how the hope faded in the ensuing half century.
“We thought we had the answers: As long as countries just followed the rules things would go the right way. Of course, we didn’t have the answers,” he said. “Africans must do the work of economic growth and not expect the IMF and World Bank to do it.”
–With assistance from Yinka Ibukun, Souhail Karam and Antony Sguazzin.
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