AfDB’s African Development Fund mobilises $8.9bn for low income countries

The African Development Fund has raised $8.9bn from international donors to lend and grant to low income countries in the 2023-2025 financing cycle.

The Fund lends on highly concessional terms and provides grants to the less developed members of the Bank, using a performance-based allocation system to ensure efficiency and equity. The support is cheaper than the near-market rates of interest that wealthier African countries pay to access Bank support. 

Despite a difficult global economic outlook, with the IMF predicting Sub-Saharan Africa’s growth to slow sharply by more than 1 percentage point to 3.6% in 2022, this year’s replenishment represents a 14.24% increase over the previous cycle’s fundraising of $7.4bn. Akinwumi Adesina, president of the African Development Bank, praised the donor community for the level of support they have mustered. 

“I am impressed by the huge commitment and efforts of the ADF donor countries in stepping up support for Africa’s low-income countries, especially at this time of great economic, climate and fiscal challenges. This is the power of global partnerships and effective multilateralism in support of Africa,” he said.

Before the fundraising, Adesina had expressed concern that the Fund’s resources were increasing at a slower pace compared to those of other institutions. Speaking at the opening ceremony before the fundraising announcement, he said that the Fund’s share of overseas development assistance to sub-Saharan Africa declined from 11.4% in the fund’s eighth funding round to just 6.2% for the 2020-22 cycle.

However increased contributions from the Fund’s primarily Western donors were boosted by new African contributors Algeria and Morocco. They join existing African donors Angola, South Africa, and Egypt in their support for the Fund. 

Climate adaptation focus

As agreed at COP27 held last November in Sharm-El-Sheikh, the AfDB opened a new Climate Action Window, which accounts for $429m out of the total $8.9bn and aims at supporting climate adaptation in fragile African states.

“We had pledges of strong contributions to the Climate Action Window by the UK, the Netherlands, Germany, and Switzerland. We heard several donors are open to contributing to the climate action window in the future,” said Adesina.

On top of that, 40% of the ADF core funding will be dedicated to climate finance.

According to the Bank, the $8.9bn collected in Tangier will also be used to support infrastructure investment and debt management. The 2023 to 2025 financing cycle will also have a focus on empowering women and girls “as a condition for achieving inclusive and sustainable development.”

The Abidjan-based institution has set significant targets for 2025, including connecting 20m people to electricity, 32m people to water and sanitation, 15m people to reliable transport systems, and improved agriculture for 24m people.

UK gives $650m 

UK foreign secretary James Cleverly revealed that the UK had donated $791m to the replenishment, including $243m to the Climate Action Window. 

Speaking in Kenya on his first visit to Sub-Saharan Africa as foreign secretary, which will also include a visit to Ethiopia, Cleverly said the UK’s contribution will be used primarily to tackle climate change, strengthen food security, and boost Africa’s growing economies.

“The UK’s contribution to the African Development Bank shows our long-standing commitment to the continent. We will go far when we go together,” said Cleverly.

Since the creation of the Fund, the UK says it has contributed approximately £3.4bn ($4.1bn) during 16 replenishment campaigns.

Cleverly also assisted in the launch of the first construction phase of the Nairobi Railway City project, backed by an $97m loan from UK Export Finance and designed by UK-based engineering firm Atkins.

Ahead of the Railway City ceremony, presided over by Kenyan President William Ruto, the UK’s development finance institution British International Investment (BII) signed a $75m risk-sharing agreement with the African Guarantee Fund (AGF), expected to facilitate up to 17,300 loans to small and medium enterprises across Africa.