World Bank ready to assist Africa with $60bn

Recently,the World Bank Group is beginning to work out the details of its new financing package for Sub-Saharan Africa.

Record funding of $57bn over three years was announced at a meeting of the G20 finance ministers in Baden Baden in Germany on 19 March but details of how the money will be used are still being decided. World Bank Group president Jim Yong Kim has also signaled a change of policy or at least culture by insisting that his organization will no longer tell African governments what to do.

“With this commitment, we will work with our clients to substantially expand programs in education, basic health services, clean water and sanitation, agriculture, business climate, infrastructure, and institutional reform. This financing will help African countries continue to grow, create opportunities for their citizens, and build resilience to shocks and crises.” Kim said.

He further explained that some of the money will be directed at regional initiatives, such as supporting refugees and their host communities. It will also fund regional cooperation initiatives, such as the Niger River Basin Management Project, which will enable the Niger Basin Authority to promote greater economic, social, political and security cooperation in the Sahel.

In addition, the World Bank will launch the new Private Sector Window, which will promote trade through lending in local currencies. Indeed, the new finance package strengthens the trend of the multilaterals increasingly cooperating with the private sector. The target areas for private sector cooperation across the Group are infrastructure, financial markets and agribusiness.

The International Development Association (IDA) will get $45bn; the International Finance Corporation (IFC) $8bn; and the International Bank for Reconstruction and Development (IBRD) $4bn. In addition, the Multilateral Investment Guarantee Agency (MIGA) will continue to offer political risk insurance and credit services on the continent. The budget covers the period from the start of this July to the end of June 2020.

The region will receive the lion’s share of the IDA’s global $75bn budget and the IDA’s priorities for the period will be: Tackling conflict, fragility and violence; building resilience to crises including forced displacement, climate change, and pandemics; reducing gender inequality; promoting governance and institution building; and promoting job creation and economic transformation.

It is often difficult to measure the outcomes of such investments but the IDA has set some more tangible goals for its programmes over the three years: 5 GW of new renewable energy generating capacity; access to improved water supplies for up to 45m people; and the provision of essential health and nutrition services for up to 400m people. The last of these targets is the most ambitious but the caveat of “up to” provides a lot of wiggle room.

Following the Baden Baden meeting, Kim left for Dar es Salaam where he clarified the cultural change in the World Bank’s approach. He said:

“Another thing that we will never go back to is the bad old days when the World Bank and other organizations told countries what to do. We don’t do that anymore.”

However, he also emphasized that he did not want African governments to return to the high debt ratios of the past, which suggests that the Bank will still try to encourage fiscal discipline in the region. Moving on to the Kigali Convention Centre in Rwanda, Kim called for the World Bank to restrict itself to financing that could not be provided by the private sector.

He was supported by Rwanda’s Finance Minister, Claver Gatete, who said:

“The projects that are so easy to get into and have guaranteed returns should be done by the private sector. If it can be done commercially then all development partners should avoid financing it. We can ask governments not to take the easy route and not accept the loans for projects that can be funded by the private sector.”

Over the years, World Bank has successfully lifted many countries from recession. However, this is another bold step what will encourage African leaders to seek for assistance which will definitely enhance world growth and development.