African countries need access to concessional finance that transcends financial returns as the continent grapples with the impact of climate change, mounting geopolitical tensions and other lingering global issues. 

For a long time, activities of the World Bank, the International Monetary Fund (IMF), and other multilateral lenders in Africa have generated questions about the impact of economic reforms on democratisation and economic growth.

The Bretton Woods Institutions strongly believe that economic growth contributes significantly to poverty alleviation efforts and hence generates improvements in living standards, particularly in developing countries, including those in Africa. 

The continent is bouncing back after being hard hit by the recent polycrisis.  Africa will soon have the world’s largest workforce. By 2050, one in four people will be African – and the continent will be home to a third of the world’s youth. With the youngest population, rapidly growing cities, abundant natural resources, and a strong entrepreneurial spirit, Africa stands ready to achieve its potential. This requires investment.

The continent has long been vulnerable within the multilateral system owing to a pattern of destabilising forces and policies. Recently, the developed world embraced industrial policy in response to the escalating climate crisis and volatility of global supply chains. 

Additionally, financial repression, as well as chronic technological deficit, has further curtailed African countries’ economic development and limited their participation in global value chains to providing raw materials. The colonial model of resource extraction has been very costly for Africa, inevitably shrinking the continent’s share of global trade and exacerbating Africa’s exposure to global volatility and recurring balance-of-payment crises. 

According to the World Bank, Africa’s share of world trade has declined steadily over the past few decades, falling from about five percent in the 1970s to less than three percent in 2022. This is even though Africa accounts for about 17 percent of the global population and is home to more than 60 percent of the world’s extremely poor, which could rise to 90 percent by 2030. By contrast, Asian countries have capitalised on labour-intensive, export-led development models to narrow the income gap with advanced economies and lift their people out of poverty.

IDA Summit

On April 29, 19 African Heads of State assembled in Nairobi for the World Bank’s International Development Association (IDA) Summit and appealed for access to concessional finance that “transcends financial returns”.

During the summit, there were calls to audit the intentions of the World Bank loans to ensure that they are for prosperity rather than profiteering. “What loans are we getting as Africa? Is the World Bank giving us loans for private sector-led growth or to be more dependent?” Uganda’s President Yoweri Museveni asked. 

Mr Museveni said that the main reason there is no growth in Africa is that the growth factors are neither funded nor understood. “Those who want to help Africa should fund our transport systems, electricity, raw material processing, and import substitution. Why are we being funded to import and hold seminars in the name of capacity building?” 

“I, therefore, challenge my African brothers to think about the haemorrhage of Africa. Our populations are increasing, but our economies are stunted. The IDA should tell us why they are funding the modern slavery of Africans, and we should address issues like why Africa is producing what it does not consume and consuming what it does not produce,” President Museveni said.

Many African countries’ reliance on imported manufactured goods has left them importing more while exporting less. Their balance of payments deficit has worsened, and their foreign debt burdens have become unsustainable. 

President Museveni emphasised the importance of socio-economic transformation and the need for loans that propel prosperity. He attributed the current crisis in Africa to persistent philosophical, ideological, and strategic economic mistakes that have been in place since the 1960s and advocated for a paradigm shift towards socio-economic transformation and the need to transcend mere quantitative growth and focus on achieving qualitative change.

President Museveni reiterated his call for Africa to stop exporting its raw materials and instead add value at the source to steer development. 

World Bank Group President Ajay Banga stressed the need for unwavering global support, particularly from IDA, as Africa charts its course toward a prosperous and progressive future. 

“We are united by a shared vision for the future of Africa – a continent rich in diversity, culture, and potential, thanks to its young people and natural resources. These are the ingredients that can power our future,” said Banga. 

The World Bank Group President added that IDA has been a steadfast partner in Africa’s development journey, and the summit symbolized their collective commitment to accelerating progress. “This will require more from IDA, more from the World Bank Group, more from governments, and more from the private sector,” he said. 

IDA is a development finance institution which offers concessional loans and grants to low-income countries. IDA is a World Bank Group member headquartered in Washington, DC in the United States.

Kenya’s President William Ruto underscored the continent’s urgency for change and its desire to capitalise on this pivotal moment of opportunity. President Ruto passionately advocated for stronger donor contributions to IDA21, emphasising its role in driving transformative change not just in Africa but around the world.

“Our people and we, the leaders of Africa, are impatient for change, and we want to transform the continent at this moment of tremendous opportunities,” he said and added, “IDA has been and must remain a dependable development partner for Africa, and we urge stronger donor contributions to IDA21 so that together we can drive transformational impact not only for a better Africa but also for a better world.” 

According to the World Bank, IDA’s country-driven model has tangible results that make a real impact. In the most recent IDA20 cycle, each $1.00 of donor contributions enabled $3.50 of impact. As a result of IDA support, between 2012 and 2023, 1.18 billion people around the world received essential health services, 117 million people gained access to improved water services, and 92 million people obtained new or improved electricity services. 

Presently, IDA operates projects in 75 countries, with a substantial 39 of those located in African countries. This widespread presence underscores the organisation’s dedication to addressing the diverse range of development needs across Africa.

The Nairobi summit served as a platform for African leaders to discuss strategies for maximising the impact of IDA funding, ensuring that it is effectively utilised to drive sustainable economic growth, reduce poverty, and improve the lives of millions of people across Africa.