AfDB calls for reform of global financial architecture

Dr Akinwumi Adesina
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Dr Akinwumi Adesina

By Collins Nweze

African Development Bank Group (AfDB) has called for an overhaul of the global financial architecture to transform African economies. In its African Economic Outlook 2024, the AfDB suggested that Africa should be given a greater voice in multilateral development banks and international financial institutions, which should reflect9 the continent’s growing share of global gross domestic product and rich natural resources. President, African Development Bank (AfDB), Dr Akinwumi Adesina, said Africa needs to be given a fair chance in the global financial system. “Let’s be clear. By seeking to transform the global financial architecture, Africa is just asking for a fair share of access and availability of resources to build on our vast economic opportunities,” Adesina said.

The report highlights the glaring inadequacies of the current global financial system in closing Africa’s financing gap for structural transformation, estimated at $402.2 billion annually between now and 2030. To rectify these disparities, the report proposes a bold agenda for reforming the global financial architecture, including five key areas of leveraging private sector financing, simplifying the global climate finance architecture, reforming multilateral development banks, streamlining debt resolution mechanisms and enhancing domestic resource mobilisation.

The African Economic Outlook advocates for greater private sector participation to complement public investments, particularly in areas with high social returns such as climate action and human capital development. The report also calls for streamlining the global climate finance architecture to enhance coordination and facilitate access for African countries, which are disproportionately affected by climate change.

The report urges Multilateral Development Banks (MDBs) to revise their business models to provide long-term concessional financing at scale, to developing countries, bolstering their capital positions, channelling a portion of International Monetary Fund’s (IMF) Special Drawing Rights (SDRs) to MDBs and ensuring a healthy replenishment of the concessional windows of the African Development Bank and the World Bank—the African Development Fund and the International Development Association. Recognizing the slow and cumbersome nature of existing debt resolution mechanisms, the African Economic Outlook advocates for reforms to expedite debt workouts and ensure sustainable debt management, including innovative market-based solutions like “Brady bonds,” debt relief for climate purposes, and sovereign debt authority systems.

The report emphasizes the importance of strengthening domestic revenue mobilization through improved tax policies, enhancing efficiency in government revenue collection and utilization, combating illicit financial flows and tax avoidance, and leveraging Africa’s abundant natural resources. “Domestic resource mobilization is good, but so is the prudent use of such resources. Countries should therefore strengthen capacity to improve public finance management,” the report stated.

Every year, the African Economic Outlook report provides timely evidence and analysis crucial for African policymakers, empowering them to make informed decisions. African Development Bank Group (AfDB) has called for an overhaul of the global financial architecture to transform African economies. In its African Economic Outlook 2024, the AfDB outlined that Africa should be given a greater voice in multilateral development banks and international financial institutions, reflecting the continent’s growing share of global gross domestic product and rich natural resources.

President, African Development Bank (AfDB), Dr Akinwumi Adesina, said Africa needs to be given a fair chance in the global financial system. “Let’s be clear. By seeking to transform the global financial architecture, Africa is just asking for a fair share of access and availability of resources to build on our vast economic opportunities,” Adesina said. The report highlights the glaring inadequacies of the current global financial system in closing Africa’s financing gap for structural transformation, estimated at $402.2 billion annually between now and 2030. To rectify these disparities, the report proposes a bold agenda for reforming the global financial architecture, including five key areas of leveraging private sector financing, simplifying the global climate finance architecture, reforming multilateral development banks, streamlining debt resolution mechanisms and enhancing domestic resource mobilisation.

The African Economic Outlook advocates for greater private sector participation to complement public investments, particularly in areas with high social returns such as climate action and human capital development. The report also calls for streamlining the global climate finance architecture to enhance coordination and facilitate access for African countries, which are disproportionately affected by climate change.

The report urges MDBs to revise their business models to provide long-term concessional financing at scale, to developing countries, bolstering their capital positions, channelling a portion of IMF’s Special Drawing Rights (SDRs) to MDBs and ensuring a healthy replenishment of the concessional windows of the African Development Bank and the World Bank—the African Development Fund and the International Development Association. Recognizing the slow and cumbersome nature of existing debt resolution mechanisms, the African Economic Outlook advocates for reforms to expedite debt workouts and ensure sustainable debt management, including innovative market-based solutions like “Brady bonds,” debt relief for climate purposes, and sovereign debt authority systems.

The report emphasizes the importance of strengthening domestic revenue mobilization through improved tax policies, enhancing efficiency in government revenue collection and utilization, combating illicit financial flows and tax avoidance, and leveraging Africa’s abundant natural resources. “Domestic resource mobilization is good, but so is the prudent use of such resources. Countries should therefore strengthen capacity to improve public finance management,” the report stated. Every year, the African Economic Outlook report provides timely evidence and analysis crucial for African policymakers, empowering them to make informed decisions.

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