Since that meeting in Nairobi, a lot has happened, but the region still urgently needs investment to fight poverty and address the climate problem. Pressure on the two Washington-based organisations to do more on the continent is increasing as a result of the rekindled great power rivalry between the US-led West and China and Russia.
According to Bloomberg Economics study, China has expanded loans to Africa by five times since 2010. Contrarily, the cash provided by the World Bank has increased by about 2-1/2 times, and as a result of rising interest rates and weaker currencies, the area is currently experiencing a severe funding crunch.
Since 1973, the continent’s meagre part in the world economy has not changed, and African leaders complain that they are ignored. They want greater investment from both the East and the West, so don’t make them choose.
Former Executive Secretary of the UN Economic Commission for Africa Vera Songwe observed, “The option is not about whether we are picking friends and opponents. “The decision should centre on choosing interests that will advance the continent’s goals and interests.”
In line with many of the region’s leaders, Songwe, a senior fellow at the Brookings Institution in Washington and the head of the Liquidity and Sustainability Facility, thinks Africa should stay out of any new “Cold-War” rivalry between the US and China.
After an earthquake in the mountains above the city last month killed over 3,000 people, the decision to proceed with the October annual meetings in Marrakech, Morocco, is supposed to demonstrate the IMF and World Bank’s importance to the region.
When major emerging market nations convened in August for the BRICS summit in Johannesburg, denouncing the Western-led order and expanding their ranks to include Iran and Saudi Arabia, the necessity for such outreach became evident. A few weeks prior, African leaders were hosted by Russian President Vladimir Putin in St. Petersburg.
Abdellatif Jouahri, the head of Morocco’s central bank, told reporters on September 26 that increasing Africa’s presence in the IMF and the World Bank should be declared at least in Marrakech.
Now that Hamas has attacked Israel from the Gaza Strip, the discussions are also taking place against a background of violence that has claimed hundreds of Israeli and Palestinian lives. The Arab League Council’s emergency ministerial meeting has been requested by Morocco to discuss the situation.
The desire to increase the World Bank’s resources in order to offer concessional financing on a much larger scale will be a major issue at the meetings.
In order to combat poverty, address the climate issue, and deliver the development that the region’s youth expect, it is essential to increase the ability to offer affordable financing. Failure to do so runs the possibility of decades more of stagnation and the kind of rage that sparked recent coups in Gabon and Niger.
In an interview with Bloomberg published on October 3, IMF Managing Director Kristalina Georgieva said, “We cannot have a prosperous world unless we also have a stable and prosperous Africa.”
According to Treasury officials, the $2.25 billion in World Bank funds requested by the Biden administration from Congress may “unlock” up to $25 billion in further lending. The whole effort, including private financing, may exceed $100 billion if other wealthy nations follow suit.
However, the area has already looked elsewhere. According to Bloomberg Economics’ estimate, China now controls 10% of sub-Saharan Africa’s foreign debt, up from 1% two decades ago. However, since 2020, China’s new lending to developing nations has also significantly decreased.
However, the amount of funding needed is far greater than what Africa has been able to bring in from both sides put together.
According to a significant analysis released in July and co-authored by former US Treasury Secretary Lawrence Summers and Songwe, developing countries will require $3 trillion annually by 2030, including $500 billion from international development lenders.
The list of needs in these nations is extensive, according to Andrew Dabalen, the World Bank’s senior economist for Africa. But the most important thing is that the financing be reasonable and that they disclose what they are actually borrowing the money for.
Pressure for reform is growing as a result of the Washington-based lenders’ unwillingness to provide even a small portion of the financing the continent needs.
According to Mavis Owusu-Gyamfi, Executive Vice President at the African Centre for Economic Transformation in Accra, “the report card on the Fund and the Bank is at best mixed,” citing their immediate assistance during the pandemic as a definite victory. “We’ve seen some successes and some great initiatives, but we’ve also seen some failures.”
The Benban solar power facility, located in Egypt on the outskirts of the Nubian desert, is an example of what can be done when development financiers get it right. The project, which drew $2 billion in foreign direct investment, was built with World Bank assistance.
With a current capacity of 1.465 gigawatts, Benban has assisted Egypt in reducing its reliance on fossil fuels and relieving electricity shortages. This is enough power for over a million homes. Additionally, it’s reportedly produced 18,000 new jobs in the country of north Africa.
The engineer Ahmed Atef claims, “It completely changed our lives.” Before the initiative, many of the people had never had stable jobs.
However, other initiatives fell short. For instance, the World Bank stopped supporting an oil pipeline between Chad and Cameroon in 2006 after Chad breached its agreement to utilise the revenue for development and instead used some of the money for the military.
A sour memory exists in the region of the harsh structural adjustment programmes forced on struggling African countries as the cost of borrowing from the Bank and Fund.
In order to ensure that the institutions reflect African realities, they are now being asked to be more adaptable while also giving African states direct input into the decisions. This includes breaking with the custom of having a US citizen head the Bank and a European head the IMF.
Other endeavours, however, were unsuccessful. For instance, the World Bank ceased funding a pipeline carrying oil between Chad and Cameroon in 2006 after Chad broke its promise to utilise the cash for development and instead spent some of it on the military.
The painful structural adjustment initiatives that were imposed on impoverished African nations as payment for borrowing money from the Bank and Fund have left a bitter taste throughout the continent.
The institutions are now being pushed to be more adaptive and to allow direct input from African states in order to make sure that they reflect African realities. This includes departing from tradition and appointing a European to lead the IMF and a US citizen to lead the Bank.
Indeed, the topic was at the forefront of Ajay Banga’s statements at the recent summit of the Group of 20 leaders in New Delhi. According to Banga, “we face declining progress in the fight against poverty, an existential climate crisis, food insecurity, fragility, a shaky pandemic recovery, widening disparities, and a crippling war on Europe’s borders.”
According to World Bank data, life expectancy in Africa has climbed from 46 in 1973 to 60 today, while infant mortality rates have dropped significantly.
From about 56% at the turn of the century to 35% today, Africa’s poverty headcount ratio, or the percentage of the population living on less than $2.15 a day, has decreased. However, over a same time period, the same metric in South Asia decreased from about 40% to roughly 10%.
The pandemic and the general increase in inflation are just two examples of the things that went wrong for Africa but weren’t its fault. However, poor choices made when money was abundant and commodities prices were high, as well as bingeing on inexpensive borrowing that became unaffordably expensive as interest rates rose, are domestic issues.
This year, the IMF provided emergency bailouts to Zambia and Ghana after they both made default payments. Many others are unable to access the capital markets and are in debt crisis.
An economist from Ghana named Andrews Kwame Pianim, who was present at the annual meetings in Washington in 1971, reflected on the optimism of the time and how it had subsided over the previous 50 years.
“We believed we had the solutions: If nations would just follow the rules, everything would work out as it should. Naturally, we lacked the solutions, he remarked. “Africans must drive economic growth themselves and shouldn’t rely on the IMF and World Bank to do it for them.”