The stakes are high for this year’s African Development Fund (AfDF) replenishment. The AfDF, the arm of the African Development Bank that targets the region’s poorest countries, is Africa’s only dedicated grant and concessional financing fund. Its mission is deeply relevant with the African continent facing a frightening confluence of severe crises including the economic fallout from COVID, an escalating food crisis, the damage to global growth of the war in Ukraine, the effects of rising global interest rates and inflation, and rapidly accelerating climate change that disproportionately threatens countries throughout the region.
But on the heels of last year’s landmark $93 billion replenishment of the World Bank’s IDA—and with the international community preoccupied with responding to Ukraine—AfDF cannot be an afterthought. Instead, the task for AfDF donors and regional recipients is to use this replenishment to empower the fund to target critical finance gaps—both public and private—that impede progress on climate vulnerability, food security, and poverty reduction and inclusion.
In a new note, we argue a replenishment of $10 billion would enable the AfDF to meet the critical needs of the region, with an emphasis on channeling investment across four key areas:
Resilient, green, and inclusive infrastructure ($5 billion). These resources would finance growth-promoting public and public-private infrastructure that builds resilience to climate- and health-related shocks, that strengthens food security and agricultural supply chains, and that is specifically designed to reach and empower excluded populations, including women.
Regional integration ($2 billion). Resources would build on AfDF’s already strong track record in growth-enhancing cross-border projects through its regional window that incentivizes infrastructure that creates efficient regional power and transport networks, helps implement the African Continental Free Trade Area (AfCFTA), and supports the region’s rich natural capital, including forests, arable land, biodiversity, and water sources.
Climate change adaptation and natural capital ($2 billion). Grants and concessional finance for agricultural adaptation, sustainable livelihoods from forests, fisheries and aquaculture, and tourism and the preservation of natural capital. This window could be augmented and its impact scaled by an additional $1 billion co-financing vehicle that pools contributions from private foundations and philanthropic investors with shared objectives.
Sustainable debt enhancement ($1 billion). Finance would be used to scale up the use of green and social policy-based guarantees (PBGs) to help countries reprofile their commercial debt, maintain or expand access to capital markets or incentivize private sector participation in debt restructurings.
A substantial replenishment focused on these areas would sharpen AfDF's focus--helping distinguish it from IDA--while also increasing the scale of its ambition at a time when the continent desperately needs more financing.
As Washington and other capitals act rapidly to support Ukraine, they must not neglect the range of crises buffeting African countries. With its track record as an effective, regionally led development institution, a scaled-up AfDF would be an effective tool to address new and ongoing crises, from food price spikes to climate change, and provide a concessional complement to other external financing to the continent.
The United States has already committed to remain a steadfast partner to the African Development Bank. The replenishment is a critical opportunity to demonstrate the seriousness of its commitment and motivate other donors.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
Image credit for social media/web: Rob Beechey / World Bank