The African Development Bank

by E. Philip English and Harris M. Mule

During the 1980s, most African countries underwent rigorous structural adjustment and monetary liberalization. The hope was?and is?that the resulting free market forces, together with the focus on the private sector as the engine of growth and the state playing a positive and facilitating role, will place the continent on a new, stable, long-term growth path. Success in this process still eludes most.

During its more than 30 years of existence, the African Development Bank (ADB) has had to operate in a politically unstable setting and among stagnant and declining economic regimes. Widely regarded as African's premier multilateral organization, it has been the subject of increasing scrutiny and criticism.

In 1991, E. Philip English and Harris M. Mule set out to answer some basic questions about the ADB: Has it been an effective agent of development? Has it made a contribution distinct from the World Bank's larger involvement?

Growth And Governance

The Bank was created in 1963 by 33 African nations on the basis of self-reliance, with no nonregional members. Operations started very slowly: total annual loan approvals averaged only $21 million in 1970-72. The group's concessional arm, the African Development Fund (ADF), began operations in 1973 with grants of $82 million from 13 nonregional members plus the ADB. The Fund, under separate governance, allowed nonregionals a 50 percent vote. Meanwhile, however, the Bank's paid-in capital hardly increased during the 1970s, and nonregionals were finally admitted to Bank membership in 1982, while being limited in power to one- third of the Board of Governors. Loan approvals then accelerated sharply as this table shows (p. 26):

Problems And Challenges

English and Mule point out the problems this remarkable growth brought. A rise in oil prices and a "free fall" in the relative price of Africa's exports during the 1980s resulted in debt- servicing problems to many countries. Arrears due the Bank grew from $104 million in 1989 to $741 million in February 1995. While underlining the serious threat posed by growing arrears, the authors discount the risk of a Bank collapse or a calling-in of capital. They applaud the Bank's tightened policy of sanctions on defaulting countries, and point out that the five largest borrowers?Nigeria and the four North African states?account for a relatively small proportion of arrears: Zaire and Liberia accounted for two-thirds.

Personnel is another problem highlighted. While the ADB Group had fewer than 400 staff in the project and country program departments in 1995, the World Bank had 1,720 employees working on Africa, with its average commitments running 50 percent higher. The authors say that, while lower lending levels have become the short-term solution, the Bank must have more and better qualified staff (including non-African) if it is to play a more substantive role in the continent's development.

From the outset, regional integration has been a priority for the ADB Group which hoped to put 10 percent of resources to multinational projects. Until recently, however, political differences between members have prevented it from achieving higher than 2.4 percent of commitments. This may change as the political climate for regional integration becomes more favourable; if so, the ADB is poised to play a leading role.

Performance In Three Countries

Three case-studies, to explore the strengths and weaknesses of the Bank's lending operations, were commissioned on Kenya, Mali, and Egypt. The authors conclude that the hands-off approach of the Bank Group, respecting the borrowing-country priorities, paid off when the executing agency was competent. But, they add, "in most cases the Bank Group has gone beyond responsiveness to become a captive of its borrowers. It must rely on governments to identify priorities without having the capacity to provide an informed second opinion." Nevertheless, these studies note successes in major road construction in Kenya and power projects in Egypt, while crediting the ADB with helping rehabilitate the Mali Development Bank.

About The Book And The Authors

Published in 1996, this study is part of a larger project on the multilateral banks, launched by the North- South Institute in 1991, and supported by the Canadian International Development Agency, the Ford Foundation, the Swedish Ministry for Foreign Affairs, the Norwegian Ministry for Foreign Affairs, the Netherlands Ministry for Development Cooperation, the Inter-American Development Bank, the Caribbean Development Bank, the African Development Bank, and the Asian Development Bank. The results are presented in four volumes, one on each of the regional development banks, plus a synthesis volume, Titans or Behemoths?, by Roy Culpeper, published in 1997.

E. Philip English worked at the African Development Bank from 1985 to 1988 and is now a Washington-based economist. Harris M. Mule was permanent secretary in Kenya's Ministry of Finance and Planning and has held senior positions in the International Fund for Agricultural Development.

The North-South Institute is a Canadian, independent, nonpartisan, not-for-profit corporation which carries out policy-relevant research on relations between industrialized and developing countries.

Cette publication est aussi disponible en français.

Available at a cost of $25 from: Renouf Publishing Co.