MDB Reform and African Priorities

JANE MARIARA:
With the Partnership for Economic Policy. I'm very happy to be co-hosting this meeting, especially being from Nairobi. We've communicated with a lot of you, and I do hope that you travelled safe and those who are still traveling will join us. So just to say a little bit, Partnership for Economic Policy, PEP, as you can see over there, the orange logo, it's a global NGO registered in the US as a charitable organization, but headquartered in Nairobi. Our core focus is capacity building, research, and policy engagement. Really ensuring that research and policy go together in a co-production model. But also, most important, we position ourselves as the go-to think tank that is focusing on participation. I want to thank you again very much for finding time to come for this workshop to dedicate time to prepare for the same, focusing on multilateral development, bank reform, and African priorities. I know you are all working in this area. And I would want to begin by recognizing our convening partners that you can see in the background there.

We have the African Center for Economic Transformation, ACET, based in Ghana. Please just raise up your hand if you are a representative of that institution, as I mentioned. (APPLAUSE) The Center for Global Development, CGD, based in the US and UK. And thank you, thank you, CGD, for bringing us together. We would not be here if it were not for you. Then we have the Policy Center for the New South, PCNS, based in Morocco. Let's see you. (APPLAUSE) We have REPOA, based in Tanzania. Let's see you. (APPLAUSE) Last and not least, PEP, please raise your hand. Partnership for Economic Policy. (APPLAUSE) Thank you. I think there's one more. I don't know whether he missed his flight, but we are expecting someone from Pakistan as well. Most important, we are also very grateful to the Bill and Melinda Gates Foundation, BMGF. Do we have anyone from Bill and Melinda Gates? No. I know one of them wrote to me at night saying the flight was delayed, so they are still on their way. And then Open Society Foundation.

We had one person last night. Maybe he's still on the way. We really appreciate them. Can we applaud for them for supporting this event? And we thank them for that. We are pleased to be hosting this workshop alongside the African Development Bank annual meetings. I hope you've been to some of the sessions there. The African Development Bank has been a leader on reform, as you know, especially in innovative finance, as exemplified by the introduction of hybrid capital to help expand lending operations. So AfDB is a vital partner for this region, which is facing profound challenges due to a combination of external events, as we know, perhaps starting with the global pandemic, although it's now behind us, and now including high commodity prices, the triple crisis that we are talking about, a high interest rate environment. We have deteriorating debt dynamics and an increase in the frequency and intensity of shocks that we can think about. And also climate-related disasters, just to mention a few.

I think we all know the kind of shocks that we are facing, and some of them, you are actually addressing in your research. As a result of these shocks, the development and poverty reduction gains of the previous decade are at risk of being erased. So we need to do everything possible that we can to ensure that this does not happen. So over the last two years, there has been a wide ranging effort to reform MDBs to better enable them to help countries meet these challenges. However, much of the conversation has been dominated by donor countries rather than by citizens, institutions, governments in the South, and also think tanks. And that's why you have this opportunity now. For those who know, the health of the heads of state event hosted by our beloved president for Kenya, President Ruto, last month was a step in redressing this imbalance as the region's leaders were given the opportunity to publicly make the case for generous financing from the world Bank. Today, we hope to continue this dialogue with think tanks, all of you, civil society organizations, MDB officials, and government officials.

I do hope we have government officials here. Together, we'll explore specific issues at the center of MDB reform. OK? So how are we structuring our day today? We will begin the day with a plenary session. I hope you've all seen the agenda that will further explore the impact of global economic trends on low income countries. This will be followed by several breakout sessions, a luncheon, and a closing plenary. All of this is detailed in the agenda. Finally, I would like to turn to Gyude Moore to open the plenary session. Mr Moore, where are you? Raise up your hand. Yeah. Please come over here. Please come. Mr Moore is a senior policy fellow at the CGD, where he focuses on governance, infrastructure, finance, and Africa's response to the changing landscape of external actors. Mr Moore is also a lecturer at the University of Chicago and previously served as Liberia's Minister of Public Works. Wow! Thank you all for coming. And to our online audience, to our online audience who are tuning in for the plenary session, I wish all of us a very fruitful day, very interactive, and thank you.

GYUDE MOORE:
Thank you. (APPLAUSE) The panel has just come up, right?

SPEAKER:
Yes.

GYUDE MOORE:
OK. So, panelists, please come up and then we'll introduce you once you've...

SPEAKER:
Can I just say, this stage is not short people friendly.

GYUDE MOORE:
Yeah, yeah. (LAUGHTER) Sorry about that. (LAUGHTER) Morning, everybody. And welcome to this opening plenary. And obviously, the esteemed panel, I will introduce them. I will start with Mavis. Mavis Owusu... It's a soft 'G'?

MAVIS OWUSU-GYAMFI:
Gyamfi.

GYUDE MOORE:
Gyamfi. She's currently executive vice president of ACET, the Africa Center for Economic Transformation, but as of July, she will be the next president. Congratulations, Madam President. (APPLAUSE) ACET is a Pan-African economic policy institute supporting Africa's long term growth through transformation. Welcome, Mavis. Next is Serah Makka. She's the ONE Campaign's executive director for Africa, where she leads ONE's advocacy strategic engagement for the continent. Good morning and welcome.

SERAH MAKKA:
Thank you.

GYUDE MOORE:
And at the far end is Miss Hannah Ryder. Hannah is the CEO and the founder of Development Reimagined, which is pioneering African-led, women-led international development consultancy. Ladies, welcome. (APPLAUSE) I have some remarks, but I have to read them and just sort of set the table for our conversation. So recently, the world Bank released this report that said that globally, the poor, the global poor bore the brunt of economic scarring from the pandemic, and that incomes fell across the poorest countries more than they did in the rich countries. As a result of income losses, the world's poorest were twice as high. The income losses of the world's poorest were twice as high as the world's richest and global inequality rose for the first time in decades. Those losses were more pronounced in sub-Saharan Africa, where incomes are falling further behind the rest of the world. We're hoping that our conversation here will be able to set the stage for what will happen for the rest of the day.

When I was in government, we came into government at the end of a civil war. Everything was broken. Everything was destroyed. And because of that, every single thing was a priority. So the government was forced to make a priority list out of existing priorities. It seems as if we've found ourselves, especially for low income countries, in a position like that again, where every single thing is a priority. And when we think about what the agenda for MDBs should be, well, we have to make a list out of a list of priorities. So I wanted to begin by giving the panelists an opportunity. What are the challenges? If you were to create this list, what would be on your list and why? I will start with you, Mavis.

MAVIS OWUSU-GYAMFI:
Thank you, Gyude. And thank you, colleagues for this opportunity. So I was thinking about what would be on my list for prioritization. And starting from the point you made around poverty and the importance for us to think about how we make our way out of poverty, I think for me, Number 1 would be for our leaders to really push for MDB balance optimization. Balance sheet optimization. And it's great that they started doing that. But if you look at what the world Bank has done thus far, it's very much on IBRD, which is mostly for middle-income countries. So what happens when you're sitting in Africa? We need to think out of the box on how we increase concessional financing like IDA and the ADF. How do we get more money into those instruments. 'Cause without concessional financing, honestly, we are just spinning. We need access to more concessional finance. The first thing I'd be doing would be pushing the MDBs to think out of the box on concessional financing. The second thing I would be looking at is where they invest that money, priority investment.

I'm often worried that when we think about emergencies, we forget the underlying foundations that causes that emergency. So you can't think about more money without thinking through what you're going to use that money for. So I would be pushing African governments to really push MDBs, to invest in the types of initiatives that will lead to transformative growth. That's really, really critical. And I think our message would be, "Well, World Bank, AfDB, you are great in emergencies, OK?" It's amazing how quickly they mobilize in an emergency. "This is an emergency." So that would be my Number 2 priority, investing in transformative growth to lay the foundations for the future and to deal with today's problems. The third would be how international IFIs work with African MDBs and African financial institutions. We've got to look at this whole thing as a holistic process. And we've got to,'cause if African financial institutions can better leverage the global system, once our governments are stable enough, we can start to realize the ambitions that President Akufo-Addo made recently about 30% of our balance sheets being invested in these organizations to grow and enhance our investments.

The fourth one. He said what were my priorities, he didn't give me a number, so I'm just giving you my five priorities very quickly.

GYUDE MOORE:
Do it. Do it.

MAVIS OWUSU-GYAMFI:
Very quickly. My fifth one is a seat at the table. Thank you, World, for giving AU a seat at the table. We really appreciate it, but it's not good enough. We really want a conversation on quotas and voting shares. So Development Reimagined have done some fantastic work on what quotas and voting shares should look like for Africa. Not for LICs, not for any other structure, but for Africa. And then we were in a discussion where we were told, "This is really great work, but the geopolitics is tough." Not good enough. Just not good enough. Let's push. Let's really push for that conversation to be held and for a fairer system to be provided for Africa alongside the world fight in its geopolitics. And finally, I will say to our African leaders, if we are all going to work on pushing this, you need to show that we're not going to get back to this place again, which means starting to put in place some of the fundamentals around, you know, responsible fiscal management, legal and policy frameworks for responsible debt management and debt use, thinking through domestic savings, and laying the foundations for domestic resource mobilization.

Lots of countries are talking about how they are increasing DRMs. They are squeezing the tiny middle class. There are lots of technological ways to broaden the net. Let's demonstrate that we are serious about not getting back here by putting some of these systems in place. It was really hard to pick five. And I had lots of others, but I've stuck to five. (LAUGHING)

HANNAH RYDER:
We might bring some others up. (CROSSTALK)

SERAH MAKKA:
I have a mic here with me.

MAVIS OWUSU-GYAMFI:
Oh, OK.

GYUDE MOORE:
Thank you, Mavis. We'll go to Serah now for another seven things on the list. (LAUGHTER)

SERAH MAKKA:
I'll make that ten. I actually wanted to start where Mavis ended. So take a step back, I think the state of play, the global outlook, does... Many countries are grappling with similar things, right? So the scale of which they're grappling is different. But we know sort of the interest rates challenges, the inflation challenges across the board, cost of living across the board. So when we look inward and low income economies and Africa as a proxy, we think about the global financial architecture, because that effectively says what are the sources of revenue for low income countries, for African countries. But I think we can have a conversation about sources of revenue without having the uses of revenue. And that's the complete picture of the global financial architecture, what we're fighting for. But I'll focus on the sources of revenue. And I wanted to start with on the immediate term as concessional finance, as you mentioned. I mean, I think, given where we are with IDA and ADF coming, those are really important sources of concessional financing.

But if we look at the need, the numbers are pretty astronomical. So for Africa, for SDGs, $1.3 trillion. If you look at all of low income countries put together, $4 trillion. Then we look at the scale of concessionality, which is not the be all and end all, but IDA is asking for 120 best case, which seems impossible, but let's see. Or $100 billion. ADF is going big this year, and big next year means 25. So what do we have? $145 billion, best case scenario, which looks a little shaky to be honest. But that's 145 of what we need of $1.3 trillion on the continent. So we can't stop there. It feels to me like the global financial architecture conversation is about what part of the elephant are you touching? But for us to move this thing forward, we have to move the whole elephant forward. So we have the concessional, which is Number 1. The second is illicit financial flows. So this goes back to DRM because domestic resources - I'll come to that as my third - is important. But the scale of leakage we have in illicit financial flows of $88.9 billion... $88.6 billion every year is pretty significant.

So what if we plug that hole? And currently, there are efforts to plug that hole through the international tax treaty, because those impact how African countries domestically can actually raise funds. Because once a multinational enters your jurisdiction, all of a sudden, you're engaging in international tax treaties. And what we're finding is those tax treaties actually benefit developed countries. When a developing country and developed country come face to face on taxes, we lose out. So how do we make that more equal? And there's a whole conversation in the UN to try and create some kind of framework convention that makes it a bit more equal so we have more voice. So that's illicit financial flows. That's taxation all around DRM. The third is DRM fully. 20 years ago, we were talking about debt. 20 years later, we're talking about debt. In 20 years, are we going to be talking about debt. Like, at some point, we need to stop talking about debt. So how do we plug it so in 20 years, we're not talking about debt again?

What are the fundamental challenges with the structure that has the cyclical every generation we come back to the same conversation. God forbid my children gather in this place in the next 20 years having the same conversation we're having. So how do we fix it? And the fix, some efforts are going on on credit rating agencies and how we price Africa's debt, but that's one part of it. The other part is how do we add value to what we have on the continent? Where do we get a consensus across the continent that indeed we must add revenue, we must add value to our revenue so we get more. And I do think there's a moment in time with climate transition, the green transition, that African countries can really ride this wave of adding value and increasing our revenue base. And I think I'll add, in addition to that, two more things. One is remittances. And I know we don't talk about this a lot, but remittance is about $100 billion for African countries. I keep this like bean counter in my head. I'm trying to tally to $1.3 trillion, because that's the goal, right?

So I'm counting 145. I have 100 here. I have, you know, $88.9 billion here. We're still far from at $1.3 trillion. DRMs should be 75% to 90% of a country's profile of revenue. But we're not there yet on the continent. So how do we increase our revenue profile to get to 75% to 90% of our revenue generated internally? Remittance is about $100 billion. And we're seeing a lot of diaspora motivation and action happening. Yet we know that sending remitting money back home has a cost element to it, especially to the continent. So is there room for us to tackle that reform on the cost of sending money home? Because while remittances is diffused, it's hard for governments to kind of put their arms around it. It is in volumes, and it's helping to kind of cushion what people are feeling. Nigeria, for example, inflation rate is about 33% this month, which means every day you go to the store, the price of food has increased. How people are surviving, the individual, is really hard. So those remittances actually make a difference.

How do we ensure that the flows come in while we take care of other gushing challenges (UNKNOWN)? And I think the last one I'll talk about is sort of foreign direct investment. This one, again, has fallen. The reform element of FDI is more tied to taxation because there's an interesting balance where African countries want to attract FDI, but they also don't want to sell out some tax revenue because they're trying to make these deals more lucrative for multinationals coming in. But I think, maybe to sum up, we have a roadmap. Agenda 2063 is a roadmap. So it's not a question of roadmap. There is a question of coordination for... I think there's 71 different reforms on global financial architecture when we last counted. Yes. When you said everything was a priority, it feels like 71 different reforms. Where do we start with how do we categorize what's required? I do think we need a subset of them that we can do in the short term, in the medium term, and the long term. But the goal is that we're fixing some systemic, financial, architectural, structural reforms so again, we don't come back here in 20 years talking about where Africa is and it's lack of resistance to the shocks that are coming at it.

GYUDE MOORE:
Thank you, thank you.

HANNAH RYDER:
OK. So my list is only four. (LAUGHTER) But I'm going to... I'll kind of give an opening as to why these. And I think when we're thinking about priorities, quite often, when it comes to MDBs, the easiest thing to look at is amounts, right? And it's easiest for, you know, presidents or prime ministers, you know, advocates in general to be, "OK. We want this amount." But I think one of the points is that a key issue is that we need to go well beyond that. We can't just have MDB reform which is just about let's increase capital. Yes, that's important, but there's also a number of structural changes and issues with these, with MDBs that needs to be tackled. And so in terms of for African governments, what we have to realize is that many of the challenges that governments are facing now, the reason why we're having some of these conversations, again, is to do with that system that MDBs are locked into. And so you're not going to get out of this system, you're not going to get out of this cycle if you don't change those fundamentals.

So we have to change the fundamentals as well as increasing capital. So while capital definitely should be an important aspect of it... And I think it's important, again, from an African perspective, to remember that $100 billion, even $120 billion, is not an increase in absolute terms, effectively, in terms of for IDA. IDA has been declining overall, so it would not actually lead to an overall increase in terms of what countries get, knowing that African countries do, of course, get around 75% of IDA. So that's not really ambitious. So we need to kind of work out what does ambition look like from an African perspective? What do we need? Even if it might not be what we get, we still need to say what that is. So that's Number 1 priority. Number 2 is in terms of thinking about kind of how MDBs operate. It's also what do MDBs prioritize? Now, AfDB, we're here on the sidelines of the African Development Bank meetings. 60-year-old institution. Excellent. Great you're celebrating its anniversary.

And one of the great things about AfDB is it has been really helpful with regards to infrastructure, which is obviously a major priority. Gyude, you talked about everything kind of being gone in Liberia. Well, yes, your infrastructure is not there. And we still really lag very, very behind. Just to give you an example for Kenya, we have looked at what it would take for Kenya to make sure that every single person had access to the internet, had access to 100% electricity and transport. Just, you know, a basic level. And that would take Kenya spending at least 14 to 21 billion US dollars every year, which of course is going to hit debt sustainability ceilings, et cetera. And again, that explains just why concessional finance because of your ability to pay long term is just so important, and low interest et cetera. So I think trying to find ways of providing concessional finance for infrastructure, MDB is doing that more. IDA only spends less than 50% on kind of physical infrastructure, if that.

And one of the reasons why infrastructure is so important is because it delivers what we would call, the economists in the room, endogenous growth. Right? So it's a productive asset. Productive and effectively a public good. And that's where governments really need support. Domestic resource mobilization, of course, people want to see their own taxes going into the health system. They want to see their own taxes going into education. But where you reach out for external finance, that's where you can really create some really important public goods that will last for a very long time and generate goods on their own. So I think that's the second priority. Make sure MDBs are spending a lot more on infrastructure, public goods that will generate growth, that will be assets. The third one - and again, coming back to these sort of structural issues - is that... I guess one could call them the 'techie things'. I don't know how else to describe it. There are a number of things that the multilateral development banks do and have in their toolbox, which structurally, create barriers to, for example, financing infrastructure, or being able to get more concessional finance.

Think about the thresholds for IDA and IBRD. So we have an infographic coming out which shows the number of countries that have graduated from IDA, several of them have ungraduated back in. Right? And what is the point of having a... What is the point of the threshold? It creates constraints. There is actually a disincentive to become a middle-income country, because as soon as you become a middle-income country, you're then paying extra in terms of your finance. So there's reasons why you might not declare extra GDP, because if you declare you can't access IDA or you can't access ADF. So there's, you know, a whole set of very strange, systemic, techie things that MDBs have that are fundamental to how African governments, countries, engage with the MDBs. And they need reform too. And things like debt sustainability frameworks. you know, all of those come in there. And last but not least, going back to what Mavis was talking about, voice and decision-making has to be fundamental to this.

Those things won't be resolved in the long term, and won't be able to be flexibly improved over time, unless African governments have more voice in the institutions. Of course, African governments do have the maximum voice that we have in the AfDB. And decision-making power in the AfDB, that's still limited due to board structures, which also, of course, themselves need reform. But at the same time, there is so much work to be done with regards to our 80-year-old cousins, the IMF and World Bank. So hopefully, that's also something that can be worked on.

GYUDE MOORE:
Thank you. So part of what we're trying to do here, of course, is, you know, establish this landscape of the challenges we face and the inadequacy of the MDB system to deliver on those, and the priorities of how the reform in those things will look like. Maybe we discussed this today or not, but of all of the MDBs, the African Development Bank has this structure where it is owned by the borrowers, unlike, say, the Inter-American Development Bank or the Asian Development Bank. And to some extent, that structure has placed significant limitations on how big the African Development Bank can actually be. So do we as Africans give up more control of the African Development Bank so that we can increase the amount of money that's available? Or do we retain our independence and continue to hold to our borrower ownership of the bank so that, you know, we control what it says? I don't know. I was just putting that out there. But I wanted to give each of the panelists an opportunity now to respond to what they heard.

Each panelist had a list. Mavis had 17. (LAUGHTER) Serah had like ten. And Hannah had like, you know, eight. So I just wanted to give you an opportunity to respond to what you heard the other panelists say concerning the list of priorities as we think of at this time. Let's start with you, Serah, and then we'll do Hannah, and then we'll come to Mavis.

SERAH MAKKA:
It's hard to, I call it 'where to start peeling the tape from'. You need a little hook to start peeling this thing from. I think the heat is around the professionality of MDB reform. That's where the heat is. So I do think it needs to be on the table. I think consolidating that, I think IDA has potential to triple its own base to $279 billion by 2030. And IBRD has about - if the balance sheet can be optimized - about $500 billion. I'm still a little concerned that a lot of low and middle-income countries are ceding their the driving seat of their development to the external world. So until we're able to find the representation areas where we fundamentally change the system, it feels to me that the graduation, as you mentioned, and then the un-graduation will keep happening. IDA in 1970s was focused on Asia. Asia no longer needs IDA. Africa is the place of heat for IDA. I hope in 20 years, Africa will no longer... I think we need an exit strategy off of these concessional pots of funding, as important as they are today.

But I think if we're not creating a fix for the long term, what we have is this cycle of dependence on the structures that predated Africa's existence as independent countries. And so the journey for us really should be... The second place of heat should be how do we unlock systemic areas that prevent full participation so that those systems align with our economies? For example, the international tax treaty, the history of it is 1920. And it's still adheres to the principle and standards of the 1920s. We're in 2024, and we're still fighting the battle of 'we want more voice and tax treaties'. International tax treaties. Like those are the things we need to be able to harness. The AU or the G20 is only as good as we use it. So again, it's no good for us to fight to get these things, and then we kind of leave value on the table by not utilizing it to its core. So I think that's where my mind is at. There's so much swirl. There's so much we can do. But can we... We need to identify the things that are immediate, which is concession and concessional funding, and we can see it clear as day, but we then need to pivot and maybe concurrently work on the things which are systemic so that we can be in the driver's seat and prevent our cyclical conversations.

GYUDE MOORE:
Thank you. (INAUDIBLE).

HANNAH RYDER:
Yeah. So I think I take a... So I want to come to your question afterwards, Gyude, but I think I take a slightly different view in terms of when coming back to this question in 20 or 40 years. We were talking about 40 years yesterday. But coming back in 20 years because I think, again, we've got to come back to this point. Debt is not bad. Taking out, having lending, borrowing, in general, is not bad. It is what you borrow for and also at the rate at which you borrow. So, you know, as individuals it's expected, you know, in a functioning economy. So let's say a functioning multilateral system and multilateral where we have ownership, that there will be individuals who take mortgages all the time, but there will be 25 years plus, they'll be able to repay and so on. And while they've got their mortgage, they'll be doing things that grow. And I think part of the issue is that we've almost stigmatized borrowing to such a degree that we actually want to get out of it completely. I don't think we have to, but we do need to get out of the cycle.

And that's where the concessionality is so important, but also some of these other structural features. With regards to AfDB and decision-making, how to increase capital, I think, of course, having more capital from African countries is important. And, definitely, we should be trying to stretch as far as we can because we're investing into an organization that is triple A rated, can therefore get finance at a much cheaper rate than we can on our own. That's the benefit of it. And also can do potentially some very innovative things like regional financing. It has some incentives for regional financing. We can come back to this question about how to strengthen those incentives. But I think the AfDB definitely as an African institution can play a great role. But at the same time, we have to remember that there is always, and there's a bigger opportunity cost to our countries putting in more capital into the bank than getting that finance from others who have more capital available to put into productive asset, kind of asset classes like a multilateral.

So, when we put money in there, the opportunity cost is that money can't be used for something else and that's our people who are poorer than everybody else. The average African has a much lower GDP per capita than the average American or Chinese person. So those countries putting in more money or Brits putting in more money is gonna be easier for them. But at the same time, I think we can also separate out decision making from finance. We've really got arrangements that, but do that in the AfDB. The UK, the High Commissioner to Zambia was talking about this last week. The UK is the 14th largest shareholder in the African Development Bank, has a shareholding of something like 1.7% or maybe just under 2% anyway. It has got a seat on the executive board. So that means just for 180 million, I think it's US dollars a year, the UK gets to have some very, gets to wield quite a lot of power in terms of decision making at the AfDB. So maybe those are the things, things like board structure doesn't have to be related to and it actually isn't related to shareholding necessarily.

So those are the things that we can consider, some creative options around that.

SERAH MAKKA:
Can I just add one thing on ADF? So, this year, potentially next year for ADF, ADF wants to go to the capital market just like IDA went to the capital market. So that's another opportunity for innovation to get to 25 billion. So, I just wanted to, and a plug that we're having an event on ADF today at 3.30. So come hear more about it.

MAVIS OWUSU-GYAMFI:
Love it, Serah. So, I think the reason my 20 went to ten to eight is the interconnectedness of the issues. So, I made my number two priority how the money is invested, and I said it must be invested in transformative growth. Hannah talked about the importance of investing it in infrastructure. We can debate that later. But I think the issues are so interconnected. I talked about the importance of concessional finance. Serah talked about concessional finance is critical now, but we've gotta think about how it leverages others and think about the whole basket of financial tools available to us and how do we leverage off each other? How do we make the different tools work for what we need right now? So, I actually don't feel like we necessarily disagreed on anything. We probably came to very similar points from very different entry points. If there was one thing that we probably didn't talk about enough, and I didn't say this 'cause I really thought Serah was going to say, was the whole issue of regional collaboration, OK.

If we do absolutely nothing as a continent, we must work together in fixing these issues. And I think that's the only way we can stop ourselves from sitting here in 40 years. Because we are all trying to tackle these issues individually as countries. We go on global platforms, and we talk about the five priorities that matter to Africa. Then we go into bilateral rooms and have bilateral conversations. And we've got to be much better at saying when we look at concessional finance, these are the things that matter most to us, and everybody repeats the same thing. When we are looking at IDA and ADF priorities, it's great that we're all talking about economic transformation, I said, it's mega happy about it, it's everywhere, economic transformation right now. But what do we actually mean by economic transformation? Do we have a tight definition of it when we go into these rooms? When we talk about infrastructure and we talk about, are we talking about infrastructure out or are we talking about connecting each other with each other, OK?

When we talk about value addition, OK, countries out there don't care about our value-added products. Let's be honest about it. They care about our raw materials. But our value-added products matter to us, OK? So why is it that this fabric, so I keep doing this and it really irritates people, but I'm gonna do it again. This outfit I'm wearing, probably with this outfit as well, OK? The cotton came from somewhere on the continent, OK? It got shipped to Southeast Asia to be processed. Then we bought it back and then we printed it, or we sent, I don't know, Holland bought it and printed it. Then we buy it back, then we make the clothes, OK? And then we buy some of the fabric back and we make the shirts and stuff that you are wearing, then we ship it to Europe. And then when they get bought, they send it back to us as secondhand clothes and dump it, OK? Does that make sense to anybody? Because our whole economy is outward looking, whereas imagine Mali shipping their cotton to Ghana, Nigeria, Cote d'Ivoire, processing those textiles, OK?

That textile is shipped to East Africa. East Africa produces the shirts and blouses, etc, that goes to Europe and North America. West Africa factories use the same textiles, print it, send it to the fashion houses in West Africa, ship it out to the rest of Africa or wherever, or send it to South Africa to be printed into fabrics, or send it to East Africa to be printed to Kanga. What's stopping us from doing that? So, we ship out, ship in, ship out, ship in, there's something fundamentally wrong. So, if the infrastructure you're talking about is about that, it works. But I can bet you your bottom dollar that right now there's a minister sitting in front of a bilateral agency talking about the infrastructure from their port to their city to a village somewhere. So, these are some of the things that we need to, they need to talk about, that collaboration.

GYUDE MOORE:
Well, thank you, Mavis. This works. That was interesting. Mavis. Sorry. So, I'm glad that we're having this conversation because we have these lists and there's some convergence in the themes that the different panelists highlighted. But I'll come back to this point to say that resilience is actually a function of preexisting strength, right? How resilient a person or an economy is, is a function of how much strength was in the economy before the crisis. And so, our ability to be resilient to external, internal shocks require us to be strong before. Many African finance ministries spent down on reserves responding to COVID. Then we had Ukraine and all of its impact on the global economy. Obviously now we have Gaza. And internationally the global international system and attention functions like a cat and a laser, it can only focus on one thing at a time. And so, once Gaza began to happen, all of the oxygen is sucked out of the room. I'm raising this to say that we have this list of priorities, but we face a world where attention is very limited, which means we gotta do the thing that we did in Liberia.

If we had to come up with a list to Serah's point, it can't be 71, it can't be 21. So, if we're now forced to have to come up with a list that is more restrained because of the difficulty we face, more importantly, a lot of the donors are now beginning to spend at least in Europe, they're beginning to spend money at home and count that as development financing, especially what's happening in Ukraine. So can we go back now that we don't have an unlimited budget in terms of the things we can have on our list and say, OK, instead of five Mavis, let's go with two each so that at the end of the day, the list that we're looking at when we're thinking about MDB Reform or interacting with the rest of the world is actually six, it's not 71, it's not 22. Let's start with Hannah, and then we'll come back to each.

HANNAH RYDER:
I've got two.

MAVIS OWUSU-GYAMFI:
Two.

HANNAH RYDER:
OK, I will focus on, I think it has to be voice, well, decision making power, not voice, decision making power and amounts. So decision making power, I think, is one where there is a very kind of clear story to be able to tell, and if that is the early outcome, then that can enable the space for other outcomes to be achieved because if you have more decision making power, you can then help to make sure those things get done and the other changes get done. So, I think I would put that as top priority, in fact, because it enables everything else. But then the second one would be amount of finance going into the MDBs for Africa specifically, and so, of course, increase for ADF, increase for IDA, and I think the pitch is that multilateral spending enables things like regional spending, it enables countries to do joint submissions, for example, it enables pooling of risk, what I talked about in terms of rating and so on, so it enables much lower interest rates versus bilateral spending, and also from the treasury point of view of those who do spend and put money into the MDBs, it is definitely less overhead compared to managing bilaterals.

And those arguments have always been made, it is just that I think the arguments around national interest have started to become much higher, and so that is why you have seen a lot of countries, a lot of donor countries use the national interest argument to be able to kind of start to put spend into bilateral and also then be able to kind of find the loopholes that enable them to spend money on refugees at home and so on. So yeah, I would make a much stronger pitch for why multilateral finance versus bilateral finance of your availability, available spend. And I think also in the time of challenging geopolitics, shall we say, I think being seen to be generous internationally I think is also very important, and in the national interest fundamentally, so I think there is a stronger case to be made there.

GYUDE MOORE:
So, voice and volume, absolute amount of money that is available, Serah?

SERAH MAKKA:
This works. This does not work. I think it does. OK, do you hear anything?

GYUDE MOORE:
Use Hannah's.

SERAH MAKKA:
Two, I love the fact Gyude you are like, was that a cat and a laser? You wanna make sure we are making just two points. I think for me my two would be concessionality of funds and courage. So, the first on concessionality of funds is because it is what is required now. But it can also be really catalytic if Africa deploys it well. And courage, the second point is really around the courage of African leaders to implement the things, and Mavis set me up for this beautifully, that foster continental free trade area. Because at the end of the day, resilience, as you mentioned earlier, being a function of our past strength, many economies might not have had that resilience, but we can start growing it, so we don't pigeon hole ourselves and say, well if you weren't resilient before you can't be resilient in the future. I do think the continental free trade area has some really important leverage points for Africa. The first it is tests, what will you transport, what will you ship across the continent?

We're still doing what, 14% trade internally, and we've just built the largest free trade area. If we increase that by a few folds, and kudos to the continental free trade area for testing trading between eight countries and finding them is falling short, it took six months for tea to get from Kenya to Ghana, an indictment. But at least they said, OK, six months is too long. Now it's opened up the guided trade areas and they're trynna figure out, OK, what does it take? And what it takes is infrastructure to make sure that the pathway of the infrastructure is not necessarily the road to my village, but where's the pathway that wheat from Ethiopia gets to the rest of Africa? Now let's build that pathway out so that Ethiopia can actually ship some wheat to other parts of Africa. Where's the pathway for rice to get from Nigeria and a few other countries to the rest of Africa? If we test and kick the ties in the continental free trade area, we will start investing with the concessional funding in these areas, they're gonna promote more productive, and the name of the game is more resilient economy.

So, if I could settle on two, it would be the concessional funding that can be catalytic, and the courage to implement the continental free trade area.

GYUDE MOORE:
Thank you. Mavis.

MAVIS OWUSU-GYAMFI:
Thank you. And just to show you how decisive women are, OK? I have to, I'd like to echo the point that my sisters have made on we need more concessional finance. And then the second one I think really builds on Serah's point as well, which is, and I'm articulating it as invest in the type of transformational growth that the region needs. And Gyude, you talked about how, as a continent, were we resilient before these shocks? The Africa Transformation Index showed we weren't. So, the Africa Transformation Index, which is an asset product, looked at 30 countries across the continent, and they represent 86% of the continent's GDP. And we have been regressing on transformation for a very long time. We looked at the countries that were performing well and saw that as a financial crisis, they actually rebounded faster than the others that were not transforming pre the financial crisis. So, there is a direct correlation between transforming your economies and actually being resilient. So, for me, if we don't think about transformative growth, if we don't think about how we are diversifying economies, enhancing productivity, export competitiveness, all of those things, this will be a constant vicious cycle.

So, to be clear, we've come up with three in total. You gave us six. We've ended up in three. Just wanted to let you know.

GYUDE MOORE:
Fair enough. (APPLAUSE). So, maybe the woman should run things. But.

MAVIS OWUSU-GYAMFI:
Why maybe? I mean, what is the maybe about, really?

GYUDE MOORE:
It was just. The woman should run things, no maybe. We had this joke that it wasn't true, but we say that because my boss was a woman, Ellen Johnson Sirleaf, and every new hire, we asked, how do you feel about being fired by a woman? But I wanted to talk a bit, and with 20 minutes to go, we're gonna open up for audience questions. So, if you have a question or comment.

SPEAKER:
We're at about 15 minutes to go.

GYUDE MOORE:
Oh, my bad. We're at 15 minutes to go, so we should, just before the audience questions, and then maybe I will say this, and then we'll open up to the audience question that you can put in your answer. Is this issue of heterogeneity, right? The continent with all of these challenges, and is it possible that a single list can be more, can we speak to the individual issues of each country and still speak to the general issues of the entire continent? Is that possible, or is this some sort of unicorn? And then once we do that, though, then there's this question of coordination, because there are great ideas on the continent, great ideas about what Africa's priorities should be in shaping MDBs, but like Mavis said, I would just give this anecdote that I was speaking to someone who works in behind the scenes in politics here in Africa, and he said that some countries were not very excited about President Ruto's recent visit to the United States. The reason was that they felt President Ruto overstated the case for his leadership on the continent, and so they're upset.

And the point is President Ruto didn't go to the United States representing Africa, he went to the United States representing Kenya, and he's doing everything because Kenyans voted him into office. So, we run into this problem of countries acting in their national interest as individuals but expected to present a united front as a continent. So how does one work with the coordination so that Kenya's priorities are reflected, but also in that reflection we see Africa's priorities? So, with that, just keep that in mind when you're doing your responses. We'd like to open up to the audience now for questions. Apparently, 15 minutes to go. Sir, here, and then here, and there. Is there a woman,'cause it's all men. Let's start with him here.

VIVEK MITTAL:
Thank you very much.

GYUDE MOORE:
Right here. She's bringing the mic.

VIVEK MITTAL:
OK. Thank you. I'm Vivek Mittal from Afida Africa. We are a network of private sector developers and funds. We have a great working relationship with ACET, we have conducted training together. We ourselves run an accelerator for African startups and energy and infrastructure, so I'm coming from that perspective, so please don't be annoyed and rob me, unfriend me after this. Just two questions. One is, do you know of any country on planet Earth that has fulfilled its needs for infrastructure and energy and development capital by using only international capital? Do you know of any? There is none. Yeah? We have to use domestic capital, and there are many other reasons for that. Second, please guess, what is the differential in capital cost, the weighted average cost of capital is a technical term, of an infrastructure and energy project in Africa compared to one in the UK, or Germany, or the US? Any guesses?

SPEAKER:
40%?

VIVEK MITTAL:
1%.

SPEAKER:
Oh, wow.

VIVEK MITTAL:
So, we're talking about it costs 1% more to fund a project today in Africa compared to that in Europe. So, where's the problem? The problem is not in the cost of funding, the problem is not in, the problem is Africans or developing nations do not do enough on their own. We need both capability and capital from the continent to engage in this. Last one.

GYUDE MOORE:
Thank you. This is right here and then in the back there.

DR MOHAMMAD ZESHAN:
Thank you for the opportunity. This is Dr Mohammad Zeshan. I am from PIDE, Pakistan Institute of Development Economics, which is a think tank of federal government of Pakistan. So, I head international trade at PIDE. So as Mavis said rightly that the transformation needs many challenges like diversification, export competitiveness. So, we also feel the same problems in Pakistan, we have similar problems. The bigger problem in Pakistan is distortions, like tax import tariffs and high export subsidies. So initially we used to think that import tariffs will protect domestic trade and export subsidies will grow more exports. But we quantify that, and we see that they cost the economy around $6 billion, the one third of the overall FBR tax revenues. So, if they have high cost, I think now we are focusing on removing distortions from the country by eliminating more import tariffs and export subsidies. And the second thing is I was coming from airport last night to hotel, I had a little talk with the driver.

He told me that you don't need any visa in the East African country, so you can go anywhere in the, so it's like a big country, East Africa. So, there is a big opportunity for the global value chains. The global value chain is missing. The era of export is gone. So, this is the era of global value chains. There's no time you make a complete product and sell it. There's no market for that. So, I think we need to focus on the global value chains as well. These were my comments. Thank you.

GYUDE MOORE:
Thank you. And then the gentleman there, not him, there was a hand before you, sir. Yeah. And then you.

JEFF HALL:
Hey, everybody. Good to see you. Jeff Hall with Open Society Foundations. And I guess this is super thought-provoking. And thank you so much. And I'm embarrassed to be the third in a mantle of questions here. But I did just wanna maybe ask, start with Mavis, but I'd be interested in hearing from others also. You spoke about economic transformation. I thought your example was brilliant. And I guess, it sounds a lot like industrial policy to me, which has become this big thing that we're all talking about now. And we've really been puzzling over the hypocrisy of the largest shareholders of the IFIs and the way that they're using industrial policy for their own ends. And yet, we don't really see that sort of coming into play within the IFIs themselves. And so, I guess I wonder, how are you thinking about that sort of mismatch between what large shareholders are doing and what's being done by these institutions that they largely control?

DONALD MMARI:
Thank you very much. I'm Donald Mmari from REPOA. Just two quick questions. One, I've heard a lot about the issue of graduation. So, the threshold is an issue. In the context of the ongoing reform, would it be in your view to focus, to recommend that the MDBs, particularly the World Bank, the IDA, to consider changing the threshold, the criteria to make it more balanced score card, because the GNI capita is really to me an artificial indicator. We have to include the number of poor people, we have to look at the elasticity of growth to provide reduction, so that means really an indicator of structural transformation. And much more. I think that's an area that I would wish to hear from you. The second one is the issue of the debt sustainability. When you look at debt ratio in Africa, sub-Saharan Africa average 42% to GDP, United States, 124%, Japan, 259%. But they have the capacity to repay. Nobody speaks about the sustainability or even worry about default, it's because the investment made is increasing the productive capacity of the economy, including long-term ability to repay the loans.

So, what can MDBs do to ensure that these loans, these concessional loans, actually increase the productive capacities of the recipient countries, so that the ratios do not represent uncertainty about capacity to repay, but rather increases the productive capacities of these recipient countries. Thanks.

GYUDE MOORE:
Thank you. And please feel free to choose what you wanna respond to.

MAVIS OWUSU-GYAMFI:
I love the way you just handed that to me. You go. OK. So, I'll try and pick up three, if possible. The first one on your point on coordination and heterogeneity, Gyude. I think, look, we have an organization that represents Africa. It's supposedly the voice of Africa. OK, so when that organization goes out there, it speaks for Africa. We have a challenge, though, with how that organization speaks for Africa because of its structure, you know, the rotating chair and the SG, etc. So, we've gotta really think through how we strengthen the voice for Africa. And then the thing, so I would not expect President Ruto to go to the US and speak just for Africa. I expect President Ruto to talk for Kenya, but say, in supporting Kenya, you are helping us to contribute to these value chains that will benefit these other 30 countries on the continent. So, think local, but act regional. So, 'cause Kenya cannot operate on its own. It needs to work with its neighbors. So, whatever he's getting in America is gotta benefit beyond Kenya.

So that's how I would expect President Ruto to represent Africa via Kenya. But I want an entity that can go out and speak for Kenya. Very quickly, Nicholas, I saw that. Vivek, I hear you, but my question to you is, back to you, is everybody says we don't have enough fundable projects. And so all of our pension funds are invested in US stock market. So, the question is, where are the fundable projects? Is it a myth? So that is just, I'm just throwing it right back at you. And then the point I wanted to really pick on is, Jeff, your point on industrial policy, it was a horrible word when I first started my career in development. The IFIs did not talk about industrial policy. It was corrupt, it was a bad thing. The good thing is that now everybody is talking about industrial policy and everybody's talking about the importance of regional value chains to global value chains. What we need to do is articulate what that means in practice. For me, the risk at the moment is we're talking about industrial policy as if it's a piece of paper you write at a country level.

It's not. We've got to think of real value chains that can be built to demonstrate how you build that industrial, you implement an industrial policy. So, we have to be very intentional in articulating what a value chain looks like across four or five countries in the continent, what are the different financial instruments you need to build that value chain? What is the infrastructure? What is the cross-border issues you need to deal with? And be very intentional in supporting the building of that value chain. And if anybody wants ideas on how to do it, we've got one on textiles, we've got one on chocolate, we've got a few to share.

SERAH MAKKA:
And just on, I'll pick up on three questions as well. I think Gyude the first question around the heterogeneity on the continent, I actually think it takes a committee of the willing. It never takes all of us to be ready to do everything at the same time. It takes a few countries. If we know that East Africa might lead the continent on renewable just transition, knowing that Mozambique probably has more ability to create green energy and can ship to its neighbors. We start there. We don't start with Nigeria, my wonderful country that is not quite ready. We start with the countries that are ready. So where are the committees of the willing, and can we push on that? That's why I do think Kenya being the leader on the African Climate Summit is important and is significant, and it's telling us that there's something happening in East Africa. So, I think we have to continue to look for those pockets that emerge and see how they lead. I thank you for sharing the story of Pakistan and the distortion in the market.

I think it's instructive for us, given how similar a lot of the economies on the continent are with that in Pakistan. Jeff, on your question, I think there's something else around voice. In my time working in advocacy, I feel like there's a coming of age where African leaders' voices are asking for more space, and the voice calls out duplicity, it calls out sort of misalignment. And I think we need to keep doing that, to say, well, you're seeing this here but not doing this there. So, my push is for us to continue to identify areas of misalignment, especially when they adversely impact African countries, and to call that out, at least shine the light on that. And lastly, on MDBs and their ability to, on debt sustainability, one of the good things about ADF is it focuses on three significant areas, one is debt sustainability for African countries. That's why replenishing it at scale really is important for many countries. The second is it invests in areas that enhance productivity. So, food security is one.

Infrastructure is another. I think ADF has a lot more crystal-clear pulse on the needs of the continent as a region and tries to funnel some funds, while they're still demand-driven, towards areas that can produce because the point of this is to leverage and show that these funds can leverage more productivity in the continent. And on bankable products, again, ADF is one of those funds that actually helps countries to prepare projects so that there is a pipeline of bankable products. So, I think that there's, MDBs are already doing that work in some ways. I think it's momme scale, and we need to do more of it.

HANNAH RYDER:
OK, I'm gonna take two of the questions as well and then come to the coordination one. So, I'll be quite brief. Just in terms of the thresholds and debt sustainability, I think, yes, there's so many calls for change. We, Development Reimagined, have quite a few papers on debt sustainability in particular on how that could be better reflected for African countries to enable unconstrained countries in their ability to access finance. But I think generally, and again, being here at AfDB, I do think there's a potential for the African Development Bank to be leading the way in some of these issues. So again, because there are a lot of African countries who are represented on the board still, and they can actually use that voice and, again, with the technical people behind it, can actually provide the way for other MDBs to follow on some of these issues around graduation and debt sustainability, some of the other tech issues. Just coming back on the point on infrastructure, I think in no way would I suggest that it would only be important to have external finance supporting infrastructure.

Of course, domestic finance should come in. But I guess it's a question of, again, economists' way of thinking opportunity cost. So, if in domestic finance ideally should at least fund recurrent expenditure, if it can fund capital expenditure, great, if there's enough. If there's not, then that's where you go to external finance, ideally. That would be just a kind of a very simple model of thinking about it. And I think there are many countries who've used that model at least. But also, I don't think there's, we need to be constrained by experience in the past. I don't think Chinese economy, or the tiger economies were constrained by the experience of the past. We can actually create a new model, but again, we have to be, I'm using the word that Mavis used, intentional about it and be very planned and strategic about it. So hopefully that's something that we can work on to meet our needs. Last but not least on coordination. Coordination again runs through all of our work at DR. One of the things we try to do is create those spaces and platforms for coordination of African governments, especially in other countries who, like China, for example.

But I think one of the key challenges with coordination and the heterogeneity issue is, of course, that they're just not, although there are a lot of spaces for that to happen, there's a lot of duplication. And so, is there a way that, and again, like what Serah was saying, can you have certain countries or groups of countries lead on particular issues internationally, take those forward where they feel really passionate about? And let's say a visit like Ruto's visit to the US, ideally what happens prior to that visit is some consultation with other countries to say, hey, what would you like us to get out of this? I've got this opportunity as a state visit. And but those things could happen over time, but we just need to create the spaces for them.

GYUDE MOORE:
Thank you. And please give the panelists a hand of applause. (APPLAUSE). And ladies, thank you very much. I think this is instructive, this is very inspirational, and it should guide our discussions for the rest of the day. We're gonna take a break now until 10:30. There's tea and coffee outside. When you come back, we'll have two breakout sessions. One will be here on the recipient perspectives of donor landscapes, and the other will be in a Hemingway Room on G20, implication of Brazil's presidency and a new AU membership. That's it? Yeah. Alright. So, thank you. And you have tea and coffee until 10:30. (APPLAUSE).

AMY DODD:
We are streaming the session online, just so everyone knows. And also welcome to all our online participants. (AUDIO DROPS), key topic and one that we know is a pretty pressing one. And we talked a lot today about kind of growing needs, a much more complex landscape, a lot that's changed in the last few years, including all the different crises and challenges that we're facing, some really interesting views on kind of recipient perspectives on what donors are doing in this space. But one thing we do know, one thing that came through pretty clearly was we need a lot more of it and it needs to be a lot better. So, here we have an excellent panel, expert panel, who are going to answer those questions for us and come up with those excellent answers to take us forward. So, starting on my left, we have Valerie Dabady from the African Development Bank, who's division manager there. Next to her, Daouda Sembene, who is the CEO of AfriCatalyst, a global development advisory based in Senegal. And last but obviously not least, Clemence Landers, who is a senior policy fellow at the Center for Global Development.

So, I'm going to go through a couple of rounds of questions, and then hopefully we'll have time for a little bit of discussion and questions from the floor as well. So, bank your questions if you've got them as we come through. Daouda, I'm going to start with you with maybe a sort of question, a leading question. Are African finance ministers generally happy with how the concessional finance system is working in Africa? And sort of thinking outside of the rather pressing issue of increasing the amount of financing, how can these sort of concessional windows, of which there are a number, how could they work better for countries on the continent?

DAOUDA SEMBENE:
Well, thank you very much, Amy, and it's good to be here. And good afternoon, everyone. I think the simple answer to your question is no. If you ask me whether African finance ministers are happy with the allocation of and volume of concessional finance. Of course, you're not going to be talking about the volume. I think, as you indicated, everyone knows that it's not enough. We've been witnessing the continuing decline in ODA trend over the past several years. And right now, I think, if I'm not mistaken about, it's about 65 billion for low-income countries, least developed countries, which is very, very little compared to their need. But I think actually the question that you ask is much more interesting is what to do to make it more effective from the perspective of finance ministers, or not just finance ministers, but African countries in general? I think one of the co-hosts of this event, ACET, has been sort of supporting the finance ministers in what they call the Marrakech agenda for global financial architecture reform.

If you look at that declaration, ministers of finance in Africa were actually advocating for more concessional finance. And I think if you ask me what [we need] is perspective—what we are talking about compared to what we have right now. So, that's the first thing. Increasing the volume of concessional finance. And what you also need is within concessional finance, I think African countries have been also calling for more climate finance. And more climate finance, it means, first of all, making sure that advanced economies meet their commitment to sort of mobilize $100 billion for developing countries. Yes, it's been reported it has been met. So, hopefully, the question is continuing under that trend, but not just under that trend, but also I think the call by many African finance ministers is for that money to come more in the form of grants rather than in the form of loans, which is currently the case. Especially when we talk about climate, I think the expectation is more concessional resources would be used for responding or for funding adaptation and mitigation policy.

And one other call by African countries is within climate finance to give room for more adaptation finance. I think there has been some global targets on this front, and I think they're looking forward for those targets to be met, including those targets set by the G20 in that area. I think that's very much critical. And I think if you ask me also one other thing that certainly African countries would want to see in order to feel like concessional finance is very much responding to their need is to try to think also, when you get the volume of concessional finance, how best to use it. And how best to use it means—I give you the example of IDA. You can either use it in the form of loans, or you can use it in the form of guarantees or in the form of some other thing. It is shown—and I'm sure Clemence and other CGD colleagues actually have really very much published a lot on this—that the leveraging effect of dollar, of concessional finance used for guarantees or risk mitigation might be much more important than loans.

Of course, I think this is a personal view because it depends on the country. Some countries would want to tell you, well, we want more loans. But I think at the end of the day, when you want to look at the impact of development finance, maybe it's better to allocate it where the leveraging effect is more important. But in any case, I think even the World Bank has recognized that they need it to increase the amount of resources used for guarantees. I think even [World Bank President] Ajay Banga was even talking about tripling, which actually would be quite [INAUDIBLE]. So, I think it's something that's very much important. So, just one last point, and I think it's critical, is when we talk also about concessional finance, what we may need to keep in mind is we need to avoid a situation where there could be a group of countries actually that would be sort of at risk of crowding out of the concessional finance going to low-income countries. The reason why I'm saying that is if you look at the pool of concessional finance as given, if you give more to some group of countries, it means that also it might come at the expense of others.

Why it is important is when we are talking about the same pie being sort of the same and not increasing, maybe we're not... It's less of an issue if we are talking about additional concessional funds. But if we don't make a good job of increasing that volume, I think the risk might be for those low-income countries to pay the bill. I can just give you one example. You have at the IMF, the RST, which is very concessional. But the IMF, I think you have more than 130 or 40 countries that are eligible to the RST, including, of course, low-income countries, lower middle-income countries, upper-middle. Of course, all of those countries deserve it. The question is not this country doesn't deserve. But I think at the end of the day, also, what you want to try to do is to make sure that as you allocate those resources, that you don't forget about those countries that may actually need it more than others in the sense that they might not have, like others, access to markets to get some affordable funding, and they might not also have some... I mean, they primarily rely on concessional financing to meet their needs.

I think those, for that reason, I think we need to be careful about how to allocate those resources. I think that's another critical issue. But I stop here.

AMY DODD:
No. That was amazing. Thank you. And I think you really pointed out that real challenge we have between growing needs, a shrinking or at least the same part of finance and lots of different countries who need lots of different things and sort of how we how we square that circle is not going to be easy. You picked out IDA and some IMF funds, but obviously we are sitting here at the African Development Bank meetings, and the ADF replenishment is coming up next year, which is going to be a pretty important one. And we are hearing this morning from some of the speakers about a pretty high ambition ask, which is great to hear. So, I guess it'd be great to talk a little bit about what are the priorities for the African Development Fund replenishment? What are you guys focusing on over the next year or so, I suppose?

VALERIE DABADY:
Thanks. Thanks very much, Amy, for the question. And thanks also to CGD for allowing us to talk about this. So, the ADF, the current two pillars, we like to call them hard and soft infrastructure. But essentially, the first is sustainable climate-friendly infrastructure, and that's what we call the hard. And the soft infrastructure is on governance, debt management, and capacity building. So, in the soft is in people, investing in people and upskilling and education and the like. Now, those aren't the only two things we do. I think you've also heard about our high fives—to integrate Africa, to provide energy to Africa, to industrialize Africa, to feed Africa, of course, and Pres. Adesina being a former Ag Minister of Nigeria, agriculture, I think, is a very big part of also what we do. And the last bit would be also simply to improve the lives of Africans. And there you put in education and water and sanitation and the like. I think what's important to retain about the African Development Fund is that we're a fairly focused institution.

Not much has changed since ADF 15, ADF 16, in terms of our orientation. I also don't believe that for the next cycle, ADF 17, that there will be significant change in that. I think infrastructure, particularly regional infrastructure, has been one of our main strengths, and I suspect that it will continue to be that. And of course, there is a lot of need to invest in people as well. You've got AI, digitalization, new economies, and so that's going to be education, I think, for sort of the next frontier.

AMY DODD:
Awesome. Thank you. That's a big tick list to make your way through. But I think a really interesting one. And as you said, I think a little bit more focused on some of the other MDBs out there potentially. But looking to the challenges of the future and colleagues this morning, we're talking a lot about the kind of new job market and the challenges in creating jobs. That's definitely an interesting piece. And I think this does point to though, a bit of a... We've talked a lot as a community over the last little bit. There's a bit of a replenishment traffic jam. There's a lot of calls on money beyond the things that you were both highlighting already. We know there's Gavi. Global Fund is coming up. IDA, as we've rightly highlighted, is a pretty important one. But maybe Clemence I could come to you to sort of zoom out and map us a way through that traffic jam and the kind of donor landscape and what's happening there and this sort of increasingly messy environment, I would say.

CLEMENCE LANDERS:
Well, thank you, Amy. And thanks for using the term “traffic jam.” That's what I was actually going to start with because earlier this year at CGD, I and a couple of colleagues, Nico Martinez, who's in the room and Janeen Keller, put out a paper called “The Upcoming Replenishment Traffic Jam: Are We Headed for a Roadblock?” And one of the things that we noted was over the 2024-2025 period, about 12 major concessional finance windows—these are windows that are heavily reliant on donor resources—are coming forward for replenishments, or their versions of kind of funding asks. And we estimated that these 12 funds are going to be collectively asking for about $100 billion, which is a record. The last time we had a similar event kind of occur where a lot of funds came together and asked for funds, it was in 2018, 2019, and the ask ended up being about $60 billion. So, we're in much bigger territory. But as a lot of the speakers have noted, this is kind of hitting against some stark political and economic realities.

A lot of donors are pointing to the fact that they are very cash constrained, and a lot of major donors are actually going through election cycles over the next 12 months. We found that about six of the ten largest donors are going through election cycles. And why do I mention this and why does it matter? It's one of the things that's happening now, that election cycles can yield much more radical outcomes than they have historically, and radical outcomes in terms of rethinking ODA and rethinking how much money is allocated to foreign assistance. And this is notably the case in the United States, for instance, where you have very two radical alternatives for the path that the United States could take forward over the next four years, and which would have extremely stark implications for the foreign assistance agenda. And I don't need to elaborate on that any further because it's very clear what I'm referring to. I would like to kind of maybe dispel a couple, though, of myths that are a leaving donors a little bit off the hook right now.

One is—and I have a great colleague from Gates who's constantly reminding me of this—that ODA overall is going up. We're not in a world where for the most part ODA is going down. It's going up for a lot of the major donors. But what's happening is ODA is increasingly going to upper middle-income countries. So, ODA for low-income countries and lower middle-income countries is indeed going down. And then when you look at a lot of the bigger donors, ODA is increasingly being channeled bilaterally. And I think this is kind of one of the big challenges that a lot of the concessional windows have coming up is to kind of reaffirm the importance of aid for development. And I thought the conversation earlier about development effectiveness was extremely important and kind of a stark reminder of, yes, we don't talk about this anymore because, in fact, one of the core advantages of an ADF or an IDA is that it is so embedded in the country model. I mean, it is demand-driven use of country systems.

I mean, these were part of the core kind of principles of aid effectiveness of IDA country decide how I'm going to spend my aid resources. So, that's one point. And then the second point is the multilateral financing aspects. And Daouda was pointing out this out earlier, but when you put a dollar into a multilateral fund, it just simply leverages a lot more than you do bilaterally. Now, that can vary tremendously across different funds, and there's a lot of really interesting analysis to be done about that. And I think a lot of donors need to do their homework a little bit more, about really thinking about how to put their funds in funds that are actually leveraging more and how to get the funds that they're putting their money in to be better at leveraging. But that's another a separate point.

I do want to make two more remarks, because I think... I think, you know, the concessional architecture is obviously not really an architecture. It's not really operating as a system. And what you lose out there—and I think someone was making this point earlier today—is these grants. And, you know, concessionality is the scarce resource in the system. And when you don't have a system operating and allocating resources strategically, there's a problem with how resources get allocated. And so, for instance, at CGD, I and my colleague Nancy Lee looked at the different concessional climate finance entities. There was really no correlation between the countries that were getting mitigation finance being the biggest emitters or the ones that had the highest level of country risk, and so, ergo, needed concessional or grant financing. And then on the flip side, countries with the biggest vulnerabilities to climate change weren't getting the most adaptation financing. So, you realize that is not operating as a system because the grant and the subsidy is not being allocated strategically.

I can't help myself, I also want to just make another little point about this traffic jam, and this kind of lack of strategic-ness that I see in the system. And I think this has been said a couple of times earlier, so I won't elaborate on this. But one of the bad behaviors I think that the donor community has gotten into is creating new institutions instead of capitalizing the ones that already exist. And so this year alone, over the past 12 months, we have the loss and damage funds, and now we have this new Livable Planet Fund at the World Bank. Just as we're saying, you know, capitalize our existing institutions and kind of recognizing that we're in a tight donor environment, you're potentially creating these very unhealthy paradigms for donors where it's “Do I contribute a dollar to the Livable Planet Fund or do I contribute a dollar to ADF or IDA?” And you really are setting up, then, that kind of tension between financing for low-income countries and financing for upper middle-income countries, which is exactly the tension that we want to avoid.

I'll stop there, but happy to elaborate further later.

AMY DODD:
Thank you! There's a lot in there to unpack, but I think that $100 billion number is a kind of stark, stark reminder of where we are. And I'm excited that we have another $100 billion funding target that'll be helpful. But I think it does, yeah, point at this sort of challenge around how do we actually think about prioritization within that list as well. So, Valerie, we talked a bit about obviously, priorities for the African Development Fund next year. But thinking about that, and I don't want it to be competition—I think as you were saying Clem, you want to be thinking about best use of resources—but how are we going to kind of demarcate that a little bit from IDA, and make the case to donors? Preparing for this session, you were talking a lot about—I'm going to paraphrase a little bit, but kind of shifting geopolitics and shifting power, and shifting tensions. So, yeah, how are we going to be talking about ADF in a way that's going to make sense to folks in capitals where (INAUDIBLE) live?

VALERIE:
Yeah. So, let me start off by saying or sharing that yesterday we had an incredibly important session with ADF beneficiary countries, and we don't often have all of them in the room at the same time to hear from them. And what came out from that, and particularly, at my level, because, you know, I'm working on documents and things. I meet mostly with donors, but not beneficiaries. So, it was really useful. And what came out of that is to hear them say the impact that ADF has had on their growth and development, and give concrete examples. So, let me just share with you a couple. We have the ministers of finance, of course, that were in the room. The minister of finance from Central African Republic, which is a country that has a small allocation—this allocation is 27 million (INAUDIBLE), so, let's say it's like $35 million over three years, yeah? But we have an envelope called the regional operations envelope that allows a country with a small allocation to essentially leverage [it]. So, putting in about $2 million, they were able to participate in a $200 million regional infrastructure project.

They call this a multimodal... It's (SPEAKS FRENCH), which is river, road, and the like, but allows CAR to have access to the port in Congo-Brazza essentially. And that's the kind of, if you will, advocacy, right? So, the question was, how do we differentiate sort of ourselves? Well, we, of course, can tell the story, and I can sit here before you and say, we're great, I do great things. But it's more important to hear from our clients when they say, you're great, you do great things. And this is really in concrete terms what you've meant for me, right? Another testimonial came from Niger. So, Niger as you know, went through a coup, and it's a little bit tricky politically, right now. But we were able to broker a deal with Togo to allow Niger to use the port in Lomé for shipping through essential materials, medicines, and the like. And that's also, I think, an important part of our brand. It's not always money, I think, that makes the biggest impact. And in this case, it's about trying to find a solution, a very practical solution to an issue, and that, I think, was also amazing.

And finally, to hear from Mozambique, the Nacala corridor that we financed. And their minister of finance essentially said a million people now have greater access to products, to, you know, food, and the like, that they're able to transport on this corridor. And I think that's the kind of testimonials that we will be relying on as we go into the replenishment. So, that's the first thing.

I think the second thing is to also speak about, again, our focus. We are a regional development bank. We're only working in Africa. And, of course, it's a big challenge. And Africa, I think, is also incredibly diverse. The fund also only works on the 37 low-income countries that qualify for its concessional finance, right? And out of those countries, you have an ability to have or to allocate resources. So, many of you would have heard about the performance-based allocation, the PBA. But beyond that, we have other windows, the regional operations window, the transition support facility, which, you know we've been working in transition countries now for about 20 or so years. And this is a facility that allows—out of the 37, about 21 countries qualify for TSF, and TSF provides you additional funding on top of your PBA. And it was created specifically, to recognize that if you have a system based on performance, and yet you are a fragile country, typically, you're not going to perform very well. But your needs will still be fairly stark. And so, it allows this sort of dynamic balance, if you will, between performance and needs, which I think has worked very, very well. It's also the same window through which we clear arrears of countries. So, a country can come into arrears, essentially, be late in servicing of its debt, then it goes into all sorts of issues, if you will, with a AAA-rated institution. And so, the credit rating agencies don't look too favorably, if you will, when countries are in arrears. We still continue to engage with them. But we've essentially cleared arrears through this funding window for about 15 or so countries, with only one remaining, and that being Zimbabwe.

And so, in the last two years, Somalia was cleared, Sudan was cleared. And now, I think our most complicated case is going to be Zimbabwe. So, that's the second- or maybe third-level answer to your question. You know, what are we doing to differentiate ourselves? And I think finally, it's also about innovation. We don't have the biggest balance sheet in the room. And I think that forces us to be innovative on how we can provide products that will still meet our clients' needs. So, let me just give you two examples. We have something called a partial credit guarantee that allows countries who want to issue on the capital markets to have the benefit of this guarantee. So, it's partial because it covers up to, I think 75% of the face value of the emissions. They give 25% of their PBA. And the most recent example is Benin. They went to the capital markets late October. And on face value, I think about 300 million euros, a Eurobond issue, because of our guarantee they're able to save 90 basis points, which is not a small, insignificant amount, you know, when you're talking about those amounts.

So, guarantees. And then also in ADF 16, we put into place something called the climate action window. Again, just for ADF countries. And we got 429 million from four donors. And that's also for 75% adaptation, 15% to mitigation, 10% to TA. And we, two days ago, met with the donors to vet a pipeline of about 40 projects. And all ADF countries were, in fact, covered by this. And it's, again, our way of working both with our donors, because we set it up because of a particular constraint that some of our donors had. But at the same time, we're always looking to meet the client's needs. We already do a ton of climate finance. And I want to say that, if memory serves, the AfDB group has—what it does is about 55% climate finance. But this is, again, very specific to ADF countries. So, I'll stop there. Thank you!

AMY DODD:
Thank you! And I think those are three really important points for us, and for those of us who work on politics and advocacy in the room as well to kind of take away. And I think your first point sort of answers some of Clem's question about, what does strategic allocation look like? It has to look more like, what is a country's value? And what sort of funds do they value? And we know ADF, and things like IDA sit pretty high up that list. So, I am going to move to you, Daouda. And I guess we've talked a lot about the bank, and well, other banks as well. So, we were thinking about... You mentioned the sort of IMF, PRGT, RST coming along. Where do you see them sort of sitting in this picture? What should they be doing into the future?

DAOUDA SEMBENE:
Well, I think definitely, the IMF has a big role to play here. Right now it is estimated that it has more than $1 trillion sort of lending capacity. Of course, this can make a big difference. So, let me remind you. At the onset of the COVID crisis, the IMF mobilized $9 billion of PRGT lending to countries. $9 billion. For those who don't know much about the IMF, that was a big jump from previous work. When I was executive director there, there was a so-called PRGT self-sustainability principle, which actually was barring the fund from sustaining lending of over 1.25 billion SDRs over a period of time. So, it was—when you're talking about—that's less than $2 billion. So, going to lend more than $9 billion in a year in 2020, that was a huge thing. So, the idea or the question is... I think the IMF would be very well advised if it was to continue at least sustaining a large amount of lending, of course, depending on the needs. Coming back again and reminding you what was said here during the Africa Climate Summit, there was a proposal by the president of—by the African head of state for a request for the IMF to issue 650 billion SDRs every year to help address the climate crisis.

My guess is, it's never going to happen. (LAUGHS) It's never going to happen, of course, for many reasons, of course, especially, at this stage also, given the politics in the US, and others. But I think the point that I want to make here is, I think if they're asking for that, it means that there is a need, there is a demand for IMF support to help address those crises. They talked about the climate crisis, but people would tell you also about the security crisis or the security tension. You see in many African countries military spending exceeding into double digits, and that's a lot. Other people would tell you also about, you know, other type of crises that would bring some need—you know, the pandemic is not too long [ago], and we're also at risk of other similar sorts of health emergencies. So, for all of those reasons, there is a need for the IMF to support. Of course, the RST is meant to be there. So, one first thing that needs to be done before I get back to the PRGT, is, of course, to make sure that the pandemic closed window is sort of activated as soon as possible.

But to come back to the PRGT, I think if you want to sustain large amount of lending under that trust, you need to have both adequate loan and subsidy resources. I think for the going-on you know, the current cycle, it was back in 2021 that the IMF actually had initiated this round of replenishing the PRGT, and it was seeking about, something like $16.6 billion in loan resources and about $3 billion in subsidy resources. And those targets were met. The problem now, the issue is now for the next round, how you can mobilize enough? And, of course, to get also to the type of volume that we're talking about, the issue there is less so mobilizing the loan resources, but more of the subsidy resources. And I think there needs to be some sort of innovative solution for the IMF to be able to mobilize the type of resources that we're talking about. I think there has even been calls for the IMF to sell part of its gold so that it can sort of fund that type of subsidy resources.

When you want to do that, you face some opposition from the gold market participants. But I think if you really want to help vulnerable countries address the many crises they are facing, I think we need to not only be innovative, but we also need to be bold. And of course, being bold also means, you know, having to address the potential challenges. And of course, you can always do off-market sales if you want. But anyway, so it's just one proposal.

But I think I talked a lot about raising the resources within the PRGT. You can do that. But at the end of the day, you don't want the IMF to do so and then keep the resources in its coffers or actually to allocate to some of those countries that need it the most the less. Because, as you know, when the IMF provides lending, they do it in proportion of the quota of the country. So I talked about being on the board. The countries that I represented, there were 23 of them. I think it was only three or four that had a quota share that was more than 0.1. You can imagine—so what it means is if you don't have, first of all, a very flexible and bold sort of access limit policies from the IMF, chances are, even if you mobilize so many resources, they may not end up actually helping address the needs of those countries.

So you need flexible and adequate access limit policies. And for those who don't know, when you talked about access limit policies at the IMF, it applies both to the annual limits—so what countries are entitled to get in proportion of their quota every year—but also cumulative limits. It means what they are entitled to get over the course of the program. Usually, it's a three-year program under the PRGT. I think both need to be flexible enough and large enough. So to the credit of the IMF, whenever there has been some crisis, there has been the board allowing or approving temporary increase in access limit. But I don't think it's enough. If they feel the need of doing that, that is because, first of all, they're resource-constrained, and they also understand that the access limit policy was not adequate. So it means that you need to really find a hopefully permanent solution to this. And the best way to do it is to have adequate loan and subsidy resources.

And finally, I think what I would want to say about this is you also need to make sure that at the, you know, the board level, you also have enough, and I think it's not a call for the IMF, it's more for, you know, countries also to have the best adequate voice and representation as possible. And when we talked about voice and representation, of course, it means having low income countries and lower-middle-income countries having enough say at the IMF. But it is also mean also having adequate gender diversity at the board. Because just always to give an example, again, when I was there, we were 24 executive directors, and there were only two women. So it's that type of issues that also needs to be addressed. And I think if we don't do that, I hope the issue that we are talking about, about the adequacy of the IMF concessional lending policy, would continue to be unsolved.

AMY DODD:
Thank you. Again, a lot of concrete stuff for us to take away, and always in favor of a little bit of gender diversity. We appreciate you being the token male on our panel. That was very kind of you.

DAOUDA SEMBENE:
(INAUDIBLE)

AMY DODD:
I know that's what I'm saying.

DAOUDA SEMBENE:
I better be careful about what I said.

AMY DODD:
Yeah, we were worried we wouldn't have any men up here. No, but I think that's great. And there was a lot of concrete stuff there around, you know, you were talking about quota share, and that's a conversation that's come up a lot today, this kind of power imbalance and what it means in practice, including when you get to things like quota rights. You were also sort of pointing out what the board should be doing. And I think that's actually going to point a little bit towards Clem. So short question, but a big one. What should donors be doing about this? What would we be telling donors to do if we could or encouraging them to do?

CLEMENCE LANDERS:
So I guess this is the fun part where I get to make a bunch of Olympian pronouncements. So let me go, let me go. I have three. So first of all, I mean I said this earlier, but I think the international community just needs to get out of the bad habit of creating new instruments and new funds every time there's an international crisis, for politically—I think, often very politically expedient reasons. We have very good institutions. We need to capitalize them adequately. And when they're not, you know, fit for purpose or where they're slightly missing in the moment in a crisis, we need to work with them to help them be more nimble. But the bad habit of creating new institutions every time there's a crisis is one that we need to break. The second is, and I'm going to go back to my point on multilateralism versus bilateralism. I would simply like to see donors transferring a lot more of their money multilaterally. And I'm going to pick on—you know, I used to work for the US government and I'm going to pick on the US a little bit in my next comments, which I know is always very popular.

So I'm pandering a little bit here. But, you know, the US is one of the worst at this. 15% of the funding it provides is multilateral. That really is deviating in very significant ways from the norm. And this is actually going down, not going up, in relative terms. And I simply think that's a big problem. But, you know, this is something that other countries are doing as well. There are a number of other countries, like Germany I believe, like the UK, which are really channeling less to the multilaterals in relative terms. So I would like to see a big donor commitment to really look at foreign assistance, at development, at climate as a multilateral challenge and to be funneling much more money through the multilateral system. And that gets us out of this kind of zero-sum competition between these different funds—which can only lead at the end of the day to negative outcomes—to a bigger pot of resources. And again, this is a little bit more of a US-focused comment because it's the donor that I know the best.

But, you know, I think donors need to just think much more strategically about how they allocate resources across institutions. And here again, I mean, I think for a long time the UK kind of stood out as a model here of really thinking strategically of like “how do I allocate resources across institutions?” and UK colleagues can correct me if I'm wrong about this, but I understand that you know, you used to have something called a MAR where resources would be allocated, looking at where's the most financially efficient and policy efficient mechanism, and then what are the mechanisms that are the most aligned with our own development priorities and then kind of allocating resources based on that. That is not how the US allocates resources at all. The US system for allocating resources is much more ad hoc, much more political in a lot of ways. And as a result, when you kind of look at how the US allocates resources across the different multilateral funds, it really looks very un-strategic and not something that has been kind of thought through at a very high level.

And so I would like to see the US adopt something much more similar to the MAR, to kind of orient itself as a donor and be a much more predictable one, a much bigger one, and a much more strategic one.

AMY DODD:
Thank you. And you're right, we did use to have a MAR and in fact a BAR, a multilateral aid review and a bilateral aid review. But I think you're right. It was political, but it was evidence-led in terms of allocation, which was a model we might have drifted away from. Maybe it's a call to the potentially new government coming in the UK as well. So that's enough from us for now. I'd love to come to those in the room if we have any questions, comments are very welcome or just thoughts on these questions we've been discussing as well. Great. And we'll start back there. And if anyone else has questions in the interim, just pop your hand up and we'll come around.

VIVEK MITTAL:
Thank you very much. Vivek Mittal from Africa Infrastructure Development Association. Debt-for-nature-swaps, are they part of your toolkit? Good? Bad? What do you expect of them?

AMY DODD:
Great. That's a good question. Short and pithy as well. Any other questions before I come back to the panel? Jeff, please.

JEFF:

So it sounds like there's ground support for ADF and IDA, and I guess I'm just curious, does anybody want to make an enemy and say who they'd axe? Like, which concessional funds do you want to get rid of and fold into IDA and ADF?

AMY DODD:

Julie, it looks like she's volunteering to answer that question, so.

AUDIENCE:

No, no, I actually had a totally opposite question. Yeah. We've talked a lot about the need for more coordination among the MDBs and different approach to Jeff's question, perhaps, curious about whether there's room for any more coordination around replenishment, specifically among institutions. We've talked about, you know, reaffirming the importance of multilaterals through IDA and ADF replenishment. It seems like there could be potential there for coordination among the institutions. Just curious if that's something you're thinking about. And I think related maybe a question for Daouda: Is there more potential for coordination among borrowers on that front? And also maybe to climb on the donor side, are there any champions, perhaps, that we can really highlight as donors that have really leaned into the multilateral space, perhaps?

AMY DODD:

Great. Thank you. So three—some slightly tricky, thanks Jeff—questions there. What would we axe, better coordination on the multilaterals, and thinking about our kind of replenishments and debt-for-nature swaps. So I might start with you, Clem. Anything you'd want to pick up from those? I feel like you might have pointed at an institution you would chop already, but.

CLEMENCE LANDERS:
I feel like I can only get myself into trouble today. Let me start with the debt-for-nature swap question, which is a really interesting one, and it's actually one that we're researching currently at CGD. And maybe just we don't yet have ourselves a kind of a fully formulated response to that yet. We're kind of crunching a lot of the numbers, but a couple of points, because the debt-for-nature swaps do use credit enhancements. And Valerie made a really important point on the partial credit guarantee instrument at the ADF. And we did a study on partial credit guarantees writ large at the MDBs. They're very underemployed instruments, but we found that on average, they can help lower countries borrowing costs by about 300 basis points. So, you know, it really depends on market conditions and on the country's macro. But these are 90 basis points, 300 basis points—these are really big numbers. And they're very significant in terms of debt service costs saved.

But they are very underemployed instruments. I mean, IDA hasn't used one for about six years. It's great to hear ADF is back using those. I understand that countries’ demand for them is very strong. And so that does link a little bit with the debt-for-nature-swap point. One thing that I will, you know, say about the debt-for-nature-swap is, you know, I think there are real questions about their financial efficiency. And I think there are a lot of really legitimate questions around the conditionality tied to them. And, you know, if a country is reprofiling or restructuring debt and creating savings, is it not that country that should then be using deciding how those savings are used, rather than sometimes having bondholders sort of dictating the terms of how a country uses its savings after a reprofiling. And so I think that is an important question. And then when you look across the different instruments, you know, there's not a taxonomy yet for these kinds of things. So in some contexts, you see a very strong verification system set up. And in other contexts, there's really nothing. So, you know, these are still new nascent instruments and with I think some potential but a lot of question marks still.

And then, you know, I think Julie, on the point of donors, I mean, I think one of the things that we're seeing in IDA, and I hope we'll see in ADF as well, is I do think this is an interesting moment where you are seeing some newer donors kind of coming up and taking on a bigger role. So I was extremely excited to see Korea announcing that it would be hosting the IDA replenishment. Korea is the 15th largest donor in IDA, but if it doubled its IDA contribution—and that's something that often countries that are hosting replenishments do, you know—it could be in the top ten. It's the same donors that have tended to dominate the concessional window space. And that's one of the things that makes the concessional window so vulnerable to shifts in the political environment in donor countries and shifts in the budgetary environment, that, you know, a couple of donors have bad elections, and then all of a sudden there's an existential threat for some of the concessional windows.

So I think it’s diversification and bringing in new donors—and it's not just Korea, obviously, China has been absolutely remarkable in how it's really stepped up its increase in IDA. And those are just two examples. I know Brazil is part of the G20, and it's very eager to reengage in a big way with IDA and hopefully with ADF as well. So these are just a couple of examples. But I think, you know, moving a little bit towards that reality of a bigger donor landscape is an important one.

DAOUDA SEMBENE:
OK. Maybe just to add to what Clemence said about debt-for-nature swaps, we at AfriCatalyst did some research on that and it's available on our website. Definitely, there is room for having more of those type of innovative financial solutions for countries that are debt-trapped. If you take this continent, we have many countries that are either at the high risk of debt distress or in debt distress, about 21 of them. I think for those countries, there could be very much an appetite for this type of swap. Of course, you have to address all of those sorts of potential issues that Clemence raised. But I think these are very desirable financing tools. And I think if we really sync it with some adequate and political commitment, maybe we could even think about something like the HIPC at that time for those type of countries so that they can have a multilateral initiative that could really facilitate this type of initiative. So, definitely. On the issue of IDA replenishment and the importance of borrowers’ coordination, I fully agree with what Julie said there.

The best advocate you can have for a historic and ambitious replenishment of IDA, or of ADF, is to have borrowers make their view well known, [that are] very much knowledgeable about the issues and actually have the right tactics and strategy for that. And I think that you cannot get it if you don't have adequate borrowers’ coordination. You cannot get it if those borrowers' reps that are sitting around the table on behalf of borrowing countries are not necessarily well prepared to really discuss with their counterparts from donor countries. Donor countries have already their coordination mechanism, very well designed. They meet very regularly ahead of the replenishment cycle and the negotiations. And they coordinate their views and they come to the table well prepared. This has not been the case, unfortunately, for borrowers, particularly from Africa. So this is the reason why we also at AfriCatalyst are thinking about, and working with—it’s not just AfriCatalyst, there are a number of African organization and advocacy partners that are really thinking about that. We have very regular meetings where we meet and discuss about how to support those borrowers and particularly the representatives, so that they can really help achieve those goals that all of us have in terms of either replenishment, but also hopefully replenishment of ADF, and I think this is something that certainly requires not only coordination among the borrowers, but also among partners, among advocates, and among, of course, philanthropists here, whether it's the, you know, foundations—the Gates Foundation or OSF or the philanthropists that are here and that are not here—but also, you know, multilateral development [banks]. I think people like Valerie certainly would very much welcome having support about how to really get the best of the borrowers, and it requires, of course, having coordination and discussing between us. And we are committed at AfriCatalyst to work on that, along with other partners—I can talk about ACET here, (UNKNOWN) and all of those organizations that are very much working day by day to support this, and we will continue to do so.

VALERIE DABADY:
Super. Thank you very much. So I'm going to use a little bit of executive privilege and answer a question that wasn't really asked, but is related to, I think, something really important. There's a question about, you know, which institutions would you axe? And I think the question or the answer I want to provide is, what are the things you can do to remain relevant in this space if you have an institution which, like the ADF, is 50 years old, essentially, right? So we were created at a time when there wasn't really foundations or philanthropies, or really vertical funds. You didn't have a shareholding structure that's tiered like the Trade Development Bank has and the like. And I think what's required is to really assess the landscape, the context every couple of years and decide what are the things that would be required to be relevant in today's landscape. So I'm going to go on a little bit of a limb here, and none of this has been checked with management or anything. But, you know, we have a shareholding structure where only sovereign countries can come in.

Right? And if we're out talking to, let's say, Gates Foundation or Rockefeller, as if we want them to participate in the climate action window, they'll say to us, OK, that's fantastic. We can do that, but what do we get in return, right? And we'll say, well, you know, we'll finance climate for you, but they don't really get a seat around the table. They're going to stay in what things we finance because that's just not our setup, right? So I think that's the first thing that we would say. I think the second thing that we would say, and this is something that we're in the process of changing our charter. ADF does not allow us to either borrow or lend on anything other than concessional resources. So after about a 15-year conversation, we've gotten the approval to go to the markets and to issue, OK? And that's going to be another source of, I think, income, much needed income for us. It's about $5.5 million every three years. But that was something that we did because well our charter didn't allow us to do it, and so we had to actually change the charter. We're in the middle of doing it. It's a very long political process.

But we took a look at what's happening around us. IDA went to the markets, and they also didn't have the same prohibition. And in order for us to at least have more funding for our clients was something that we felt we needed to do. So we have the ability to do that now. We have the, I would say, the OK from the donors. We'll put in place the necessary sort of, you know, ALM guidelines and adopt the right framework. And we have to get a credit rating. So it's not, you know, an automatic sort of deal, but at least it allows us to go towards something which is new. And that's this idea of what am I doing to meet my clients’ needs. What can I be doing more to do so, OK? And then, to really hunker down and to do that, it's the same thing with the SDRs. So what about two weeks ago? Finally, the IMF board agreed that SDRs were to be considered as reserve assets and they could be channeled through MDBs. That's the fruit of about three years of work with the Inter-American Development Bank.

And the first response was, can't be done. And so, OK, you go back, and you say, alright, can't be done. So on what conditions do you think you could ever be done? And what do you think we could do? When you go back and you engage and you continue this dialogue because ultimately, I want to always be reminded and remind others that development is a service. Right? I mean, you're doing a service for others, and that's how it should always be looked at. Let me switch now to this debt for nature swap. So I'm not aware that we've done any in Africa. I think we've read... we've done a couple of maybe in Ecuador or something, but here are the things that would be relevant for that. I think, first of all, issues of sort of valuation. What you're going to maintain, I think, as you know, environmentally maintained and the like, I think if, for example, the Congo Basin forest, the second largest sort of lungs of the world after the Amazon. Right? If you had to do something and, you know, forgive the debt of either Gabon or DRC or what have you... what's the valuation?

What does that mean to the world? What's the value of keeping that intact? Right. And I think that even the US, about a year or so ago worked with DRC, so it wouldn't exploit the forest, but it had to actually give something in return. And so when you're talking about that, but that's a global public good. I mean, that's the subject of all of our discussions right now. Right? How do you finance global public goods? What's the benefit to others, and what are we willing to pay for it? Right. So that it can be maintained? I think it's an incredibly important debate because those who bear the burden sometimes of maintaining these are not appropriately compensated for maintaining them. And I think, frankly, if the Congo Basin were to disappear tomorrow, it would be a huge disservice to everybody on the planet. So I think I'll end there.

CLEMENCE LANDERS:
Thank you very much. No, that was, I mean, that was a great practical example at the end there. I think that it does cost something to maintain these things. I think we're pretty close to wrapping up. So I'm going to say thank you to my panelists. There's a lot to take away from this discussion, but I think fair to say we all agree we need more money. It needs to be definitely a little bit better, more aligned with what countries are doing. Less fragmentation of resources into lots of different parts, but also, I think, some real tensions in the system around. You're talking a lot about competition over concessional resources—who gets what? And yes, we need to grow the pie, but that competition is still there. I really liked your point about, you know, the impossible is actually possible. This whole MDB reform agenda, outside of actually the African Development Bank, people said was impossible a few years ago. So maybe that's my final thought for the day. So I'll ask you to give my panelists a round of applause.

Thank you. And I'm going to invite you all to leave the stage. Thank you very much. And Mavis is going to come up...

MAVIS OWUSU-GYAMFI:
And by saying that there's been numerous efforts to reform the multilateral development banks over the past few decades. And much of those conversations in the past have been really dominated by global partners. We haven't seen an active voice by the South, most populated—what's the term we're using these days? I'm never sure which one, but we haven't—pardon.

SPEAKER:
Global South.

MAVIS OWUSU-GYAMFI:
Global South. OK. So, we really haven't seen a lot of a very strong voice from the Global South in the past, but this round of discussions are different. The voice of countries that are working with multilateral development banks are a lot stronger than we've seen in past reforms. And today's discussion is part of that voice. It's part of the thinking, the analysis that is needed to inform those discussions. The analysis that is needed to provide our political and policy leaders with the information and evidence they need to engage strategically in those conversations. So today we've spoken about the MDBs. We've talked about... we've spoken about climate, we've spoken about debt, the G20. We didn't talk about the G20, did we? Sorry. We didn't talk about the G20. But we spoke about climate finance, and we've talked about concessional finance. We've had a very deep conversation on what Africa needs from all the MDBs to make progress. So the first panel this morning, I took away four points, and where is our excellent convener of the panel? He's not here. OK.

We got to four points eventually out of the 60 or so we started with, and it was voice and representation. The importance of African countries not just having a voice but also having representation and a vote at these MDBs. We talked about the importance of volume. How do we get the money we need. So we spoke a lot about volume on concessional finance and innovating. And we said everything from we need more IDA, but we know it's going to be a lot harder. We need more ADF, but we know it's going to be a lot harder. But illicit financial flows should not be that hard. We should be able to get some of that money back. So we looked at a much wider pool of how we get some of that money back. And then we talked about the importance of regional collaboration and the continent of Africa in particular, as we're thinking about MDB reform, as we're thinking about our asks, we need to work together to make this a reality. So that was a really big part of the conversation. And then finally, we talked about the importance of investing in economic transformation.

We did say that. I'm not just saying that because it's my pet subject, is it? We did agree on economic transformation. Yeah. So we need to invest in economic transformation. And then this afternoon, there were a number of different conversations. So there was a conversation around, you know, how do we ensure—what are the roles for the different financial institutions as part of this reform process? So it's not—we often talk about, you know, MDBs as being the bank, etcetera. But actually, Africa has a lot of MDBs. So how do we ensure that in the discussion on reforms, we are also talking about the role of African MDBs in that discussion. We talked about development effectiveness. How do we ensure that the money actually works for development? I remember when, you know, at some point in defeat when I was an ex-civil servant. When I was a civil servant—I'm an ex-civil servant now—development effectiveness was everything. It's kind of like seems to have disappeared. OK? So how do we get back to the importance of development effectiveness?

And on one of the panels, I think the question was, if for every dollar that is spent on bilateral aid, we only actually maybe get 60 to 70 cents. And for every dollar spent on the MDBs, we can leverage it ten times. I think we are missing a trick here. So how do we leverage? But it's pointless leveraging ten times if it then takes three years to release the money. You know, so there's a lot around the development effectiveness discussion that we have to look at very carefully. We talked, you know, this afternoon sessions also touched on concessional finance, the ADF partners. Of course, we talked about domestic resource mobilization and the role of African countries in driving their own development, the importance of fiscal responsibility, the importance of debt. And I'm not going to be able to cover everything but my summary from all of this, which the great thing about being the last speaker is you get to summarize what you want. My summary from all of this is number one, we need to collaborate.

We need to work together. And I think these efforts are making a huge difference in the influence we have. The fact that we are all sitting around the table, Africa, Asia, Europe, North America having a conversation about how we change the global financial architecture is the first step in how we do it. We're not kind of like competing amongst ourselves. The fact that African policy institutes are now collaborating on key messages and getting those messages to their governments are making a huge difference. So that for me, was the first takeaway. The second takeaway was, don't get tired and quit. Systemic reform, focus on systemic reform. We almost have to go back to focusing on that systemic reform at every level within the MDBs, within our government. And the research will come from us. The policy advice will come from us. The advocacy to hold them to account will come from us. So I hope that we continue this partnership not just for the next 12 years, but this is the beginning.