This was received only today due to technical problems. Again, it is not
all gloom and doom for the African continent. Together, we can build a
better future for the continent and its people.
BRIDGE INTERVIEW:
ADB's Kabbaj on growth, poverty reduction --
By Paul Adams, BridgeNews
Abidjan--June 1--The African Development Bank group is financially sound
and is focusing its loan operations on measures to promote high growth and
poverty reduction, Omar Kabbaj told BridgeNews in an exclusive interview
Wednesday. After last year's general capital increase and the replenishment
of its soft credit window, the bank has got the resources it asked for, and
now it is aiming to put its new policies into practice, he said.
Kabbaj was speaking after this week's extraordinary general meeting of
governors approved the 1999 accounts and re-elected Kabbaj president
unopposed.
Financial results
Net income in 1999 continued the ADB's upward trend over the past 5 years.
"For the ADB window (non-concessional loans), net income rose to 125
million Units of Account (about $160 million) and for the whole ADB group,
including the concessional African Development Fund (ADF) and the smaller
Nigeria Trust Fund, net income was 145 mln UA (about $200 mln), Kabbaj
added. For the ADB window, this is a 1.3% return on assets. "In a study
last year, S&P compared all the multilateral development banks on this
ratio and we came out equal or better than all the others," Kabbaj said.
"The main ratio watched by the rating agencies is borrowing compared to
usable capital, which is made up of paid in capital, reserves and the
callable capital of the triple-A rated countries ( of which there are only
16). "Our ratio is 66%, it has improved from 100% when I joined the bank.
"The current ratio is helped by the fact that we have just carried out a
general capital increase (approved in 1999). "Meanwhile all the other key
ratios are moving in the right direction except the ratio of full
outstanding loans to countries in arrears relative to reserves--this is the
one ratio where we are faring worse than the other multilateral development
banks." Kabbaj pointed out that arrears are fully covered by reserves.
The ADB has also begun a policy of adding 100 mln UA to reserves each year,
after allowing for allocations for debt relief and the ADF window.
Loan operations
"Loan operations were worth $1.7 billion in total in 1999. However, unlike
the previous year ADB window operations exceeded ADF. "This was because
the ADF was not fully replenished until the end of the year, so we were
limited," he said.
The ADF is topped up by the OECD or non-regional donor countries and is the
only source of ADB group credit for 39 countries in Africa. Although the
replenishment was committed in early 1999 the funding was not available
till the end of the year.
"Otherwise operations should have reached about $2.1 billion," said Kabbaj.
"Our objective is still to reach operations of $2.5 billion a year over
time. Most of this will be on poverty reduction. Our Country Strategy
Programs (CSP)s accentuate this policy direction." However Kabbaj
acknowledged that the pipeline of projects for approval is not long enough.
"The pipeline is several months for some countries up to a year for others
at present. We would like to have a 3 year pipeline for projects but we
have recently moved to a new approach (loans to promote high growth and
poverty reduction) and it will take time to build up."
Kabbaj also admitted that the procedures for approval, including widespread
consultation with both governments and civil society in borrowing
countries, is heavy and bureaucratic. "But this is the plight of all
international lending institutions," he said.
Private sector constraints
Now that the bank has a healthy balance sheet and growing resources, the
ADB is looking to improve the impact of its loans, but Kabbaj admits that
in its new private sector department expansion is difficult. "In the public
sector, we all know the problems and there is so much to do.
But for the private sector lending, I agree that it is a difficult
environment. Stock markets are too small and there is a local exchange rate
risk higher than in developed markets, he said. There are problems both of
state and corporate governance, Kabbaj added.
"We are targeting measures that will have the most impact in attracting
foreign investment into Africa." Kabbaj cited the ADB's participation in
the $500 million AIG fund for Africa and lines of credit by the ADB to
African commercial banks, such as the $50 mln loan to Citibank Nigeria and
a similar amount to the British Egyptian Bank. The bulk of foreign direct
investment in Africa continues to be on energy and mining projects. "This
imbalance is something for African countries themselves to address," he
said.
End
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