W/Bank Blames AfDB Over Nigeria, S/Africa Debt Woes

In what observers see as a thumbs down for Akinwumi Adesina’s African Development Bank, (AfDB), the World Bank has attributed the worsening debt burden being experienced by Nigeria and South Africa to the poor lending policy of the development Bank (AfDB).
The bank also accused the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) of helping to worsen the debt burden of some other countries including Pakistan.
David Malpass, president of the World Bank said the three financial institutions lend too quickly to heavily indebted countries and in the process helping worsen already-challenging debt situations.
Malpass, who spoke at a World Bank-International Monetary Fund (IMF) debt forum in Washington noted that the three development banks were contributing to debt problems through their lending policies.
“We have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official export credit agencies, have a tendency to lend too quickly and to add to the debt problem of the countries,” Malpass said.
He said the Asian Development Bank was “pushing billions of dollars” into a fiscally challenging situation in Pakistan while the AfDB was doing the same in Nigeria and South Africa.
Malpass said there needed to be more coordination among international financial institutions to coordinate lending and maintain high standards of transparency.
“And so we have a very real problem of the IFIs themselves adding to the debt burden and, and there’s pressure then I think on the IMF to sort through it and look at the best interest for the country,” he said.
A spokesman for the Asian Development Bank could not immediately be reached for comment.
The Manila-based development lender in December approved $1.3 billion in loans for Pakistan, including $1 billion for immediate budget support to shore up the country’s public finances and $300 million to help reform the country’s energy sector.
The loans came as the country is struggling with billions of dollars in debt to China from Belt and Road infrastructure projects, which helped cause Pakistan to turn to the IMF for a $6 billion loan programme in 2019.
Although China often gets blamed for burdening some developing economies through Belt and Road, Malpass said the country was looking for ways to bring its debt contracts in line with international norms.
One way to do this is to improve transparency in lending contracts, to eliminate non-disclosure clauses that have hidden liens and contingent liabilities that could hamper economic growth.
In an interview, Malpass cited liens against Angola’s oil revenues associated with Chinese debt that were hidden by non-disclosure agreements, convenient for politicians and contractors.
“Let the people of the country see what the terms of the debt are as their government makes commitments,” Malpass said.
The World Bank’s fund for the poorest countries, the International Development Association, is implementing a new set of lending rules on July 1 as it unlocks a new round of funding expected to make some $85 billion in loans and grants available.
These are aimed at setting new standards for transparency and require coordination with other multilateral lenders working with the same country.