ISTANBUL (Reuters) - The African Development Bank has sped up its lending to the region’s 38 poorest countries in response to the downturn in the global economy and will run out of resources by the end of 2010, its president, Donald Kaberuka, says.
“The discussion here is can we replenish the cycles earlier because we will be running out of money by 2010,” he said in an interview with Reuters on the sidelines of the International Monetary Fund and World Bank meetings here.
“We have front-loaded about 82 percent of all of our concessional window,” for the poorest countries, he added.
Africa’s poorest countries, many of them emerging from conflict, were vulnerable before the global economic downturn erupted in 2008, having just weathered a world food and energy crisis in 2007.
“Next year for poorer countries we will be having $1 billion. By end of 2010 we absolutely need to have fresh concessional resources for them,” said Kaberuka.
The world’s regional development banks and the World Bank are preparing to present their case for more resources to major donor countries early next year.
This week, World Bank President Robert Zoellick warned the bank’s 186 shareholder nations in Istanbul that while there were some signs of a global economic recovery, the global crisis was far from over in developing countries.
He said in many parts of the developing world, governments were only now feeling the full force of the global crisis, which could quickly return to advanced economies where it began.
Kaberuka said it wasn’t just the Africa’s poorest countries that are hit. Even a sound, well-run economy like Botswana had suddenly found itself locked out of funding markets by the global credit squeeze and forced to turn to the Africa Development Bank for financing.
Kaberuka said while global financial markets are showing signs of coming back, lending rates have been pushed much higher by high borrowing demand from governments in advanced economies.
In addition, he said he was worried about the rising debt levels of poor countries, including those whose debts were canceled under global debt relief programs.
“Many countries for which there was debt cancellation are beginning to accumulate debt levels which are of some concern,” said Kaberuka, a former finance minister from Rwanda.
“What is of bigger concern is that this is happening at a time when growth is decelerating. If that was happening and growth was accelerating like before the crisis, I would be less concerned,” he added.
Still, there is also optimism around prospects for Africa’s frontier markets — those where international investment opportunities are just beginning to emerge — once the global economy turns around.
In a note to clients on Wednesday, Razia Khan, regional head of research for Africa at Standard Chartered, said there were signs in recent months that investor appetite for frontier markets has returned.
“Here is a theory: frontier Africa is seeing new inflows not so much because risk appetite is back on steroids, but because the economic argument for investment in African markets is still compelling. Commodity prices are off their lows,” Khan said, noting that reforms have held up despite the crisis.
“African economies are generally starting off the weakest base and should therefore grow the fastest. And significantly, Africa has always offered the highest return on investment,” she added.
That return on investment was “somewhere north of 30 percent” before the crisis, Kaberuka noted.
He said as Africa tries to resume pre-crisis growth rates of around 6 to 7 percent, the biggest opportunities for investors lay in infrastructure development and agriculture.