African Dev Bank president calls for Caribbean debt relief
The President of the African Development Bank said the Caribbean and Africa desperately need debt relief, debt restructuring and sustainable debt.
Delivering the keynote address at the Dr. William G Demas Memorial Lecture in the Turks and Caicos Islands on Tuesday evening, Dr. Akinwumi A. Adesin said the two regions needed special drawing rights significantly higher than those allocated by the Fund. international monetary policy (IMF).
While bilateral debt represents 27% of debt compared to 52% in 2000, commercial debt represents 40% of total debt, compared to 17% in 2000. The cost of servicing Africa’s debt was 221 billion dollars in 2019 – a 44% of the government’s annual revenue of $501 billion,” he said.
“The International Monetary Fund has issued the largest Special Drawing Rights (SDRs) in its history, at $650 billion. However, Africa only received $33 billion in SDRs. The Caribbean region received only SDR 1.75 billion or $2.5 billion. A challenge of course in the Caribbean region is that with so many small countries, with a high degree of vulnerability to external shocks, and all with large financing needs, many more levels of SDRs are needed.
He said that given the nature of the economies, the question is how to pool these SDRs so that the region can benefit in terms of increased borrowing from international capital markets, a proposal being pushed by the President. of the Caribbean Development Bank. .
“The African Development Bank is pleased to work in strategic partnership with the International Monetary Fund on Special Drawing Rights (SDRs). Our goal is simple: to use SDRs to accelerate Africa’s development. Africa can accelerate its development and face other challenges such as climate change, debt, insecurity and the effects of the Russian war in Ukraine on their economies, if we make better use of special drawing rights (SDR) from the International Monetary Fund,” he said.
He said the African Union has called for a reallocation of $100 billion of SDRs to Africa, part of which is going through the African Development Bank, as the prescribed holder of SDRs.
“We should use SDRs more pragmatically, to support countries. The provision of SDRs also through multilateral development banks has several advantages. First, multilateral development banks can take advantage of SDRs. At the African Development Bank, we can quadruple the leverage of SDRs. Second, SDRs can be absorbed by the Bank as equity, which will expand our ability to lend to countries,” he explained.
“Third, the mobilized SDRs will be used to provide additional capital and financing to the SDRs to achieve impactful results on the ground. The MDBs will also work closely with IMF development banks in Africa, within the framework of pooled financing. SDRs can also be provided as concessional loans to the African Development Fund.
He said the African Development Bank is confident that the provision of SDRs to Multilateral Development Banks (MDBs), such as the African Development Bank, the Inter-American Development Bank and the Caribbean Development Bank, will also enhance the global financial architecture.
“This will promote greater complementarity between the IMF and the multilateral development banks. The IMF will focus on macroeconomic and fiscal stabilization, its areas of comparative advantage, while the multilateral development banks will focus on sector programs, including sector policies that will ensure that the Poverty Reduction Trust Fund and Growth (PRGT) and the new Resilience Fund and Sustainability Trust (RST). Also providing SDRs to Multilateral Development Banks will be a game-changer to accelerate the development of countries. We can be very creative and suggest that the acronym for SDRs could become “Supporting Development Revitalization (SDR)”. This way, people on the street will feel the effects of SDRs on their lives.
The William G Demas Lecture Series was held as part of the 52nd Annual Meetings of the Caribbean Development Bank.