African DFIs Ponder over $2 Trillion Infrastructure Deficit amid Macro-economic Constraints
African Development Finance Institutions (DFIs) have held their 48th Ordinary General Assembly in Accra to explore ways of raising suitable development funding to support the growth of their respective countries and the continent as a whole.
With the hike in inflation across Africa, and Ghana leading with a rate of 23.6%, the cost of doing business and financing development projects has not just skyrocketed but also halted various initiatives for growth and development.
Speaking at the 48th Annual General Meeting of the Association of African Development Finance Institutions, Chief Executive of the National Investment Bank, Samuel Sarpong said the bank is repositioning its priorities to focus more on private sector funding moving forward.
“NIB was set up in 1963 as the premier DFI in Ghana with the mandate of supporting industrialization. NIB set up over 100 companies. Over the years the lack of access to long-term funding led the authorities to make the decision to allow NIB to undertake commercial banking.”
“NIB is presently being transformed back to its original mandate under the direction of my Board of Directors who are present with us today. Unlocking innovative resources for the bank is key to this transformation,” he added.
Deputy Finance Minister John Kumah emphasized the importance of the yet-to-be-launched Development Bank Ghana in restoring economic growth and improving structural resilience.
He stated the bank will be based on new thinking of development finance, which reflects lessons from past experiences and current international best practices of corporate governance and sound business operations.
“The DBG is expected to be a financially sustainable institution that is able to raise long-term funds from the domestic and international capital markets and from international financial institutions, based on its own balance sheet. Its mandate is to provide financing and credit enhancement to targeted sectors and clients in manufacturing, agribusiness, SMEs, and high-value services to effectively contribute to economic transformation as envisaged in the Ghana Beyond Aid Agenda,” John Kumah revealed.
COVID-19 unleashed multiple shocks on the global economy, bringing several economies to a synchronized standstill that triggered a sizable economic contraction in 2020. The global response to the pandemic was massive and swift, comprising fiscal and monetary policies, and macroprudential measures to moderate the devastating effects.
On the way forward, the Governor of the Central Bank, Dr. Ernest Addison posited that DFIs have a unique opportunity to be proactive and effective in the financial ecosystem, especially in Africa.
“In total, it is estimated that developing countries will need to invest more than $2 trillion a year in infrastructure just to keep pace with projected GDP growth over the next 15 years. These are huge investment requirements given the resource constraints of many developing countries. To close this financing gap, governments in developing countries can partner DFIs to unlock private-sector infrastructure financing at a large scale”, he said.
This year’s General Assembly offers a unique opportunity to identify challenges relating to resource mobilization, and device solutions for raising suitable development funding to support the growth of our respective countries and the continent as a whole.
This, as directly linked with this year’s theme – “Unlocking Innovative Resources for Development Finance: Agenda for African DFIs” requires that African economies adopt the most pioneering financing instruments available to us to drive continental growth.