May 19, 2005
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Statement by Bobby Pittman Deputy Assistant Secretary of the U.S. Treasury At the Annual Meeting of the African Development Bank Group

President Kabbaj, ladies and gentlemen, it is an honor for me to be here in Abuja for the Annual Meeting of the African Development Bank and I extend my deepest thanks to our Nigerian hosts.  

Prospects for Africa

We meet in Abuja at a very positive point in Africa's history.  Sub-Saharan Africa's economic growth reached 5% in 2004, an 8-year high, and inflation is at historical lows, finishing the year in the single digits for the first time in over a quarter of a century. Improved fiscal policies in many African countries played an important role in this welcome economic performance.  A favorable external environment as well as higher commodity prices also helped.  For example, several net oil exporters, applying fiscal rules, saved a significant portion of their oil revenues, marking a break with past practices of running pro-cyclical fiscal policies during times of high oil prices.  At the same time, many net oil importers allowed increases in international oil prices to flow through to domestic oil prices rather than increasing generalized government subsidies, while others also allowed their exchange rates to absorb the oil price shock.

Looking ahead, those policies, combined with more sustainable debt burdens, mean that many African countries are probably in a better position than before to weather economic downturns.  In fact, many oil exporters could further increase their ability to withstand future negative shocks by using oil savings to repay debt.  It is also desirable for central banks to nip in the bud inflationary pressures that may be building from recent supply-side price shocks.  Quick action would serve to limit inflation volatility and build central bank credibility; thereby supporting the confidence of private-sector investors and consumers, the main economic agents for achieving long run growth and poverty reduction in Africa. 

The U.S. as Partner

The U.S. is helping to stimulate Africa's growth and increase economic resilience, particularly in those countries that are pursuing good policies.  The Millennium Challenge Account is a prime example of our commitment.  The MCA's goal is to reduce poverty through growth.  But even outside of MCA, the US has tripled its assistance to Africa since 2000 to more than $3 billion last year.  As a result, the US share of Africa's total assistance from donor countries has doubled over this same period, now reaching more than 20%.  African countries have also been the primary beneficiaries of the President's $15 billion program to fight HIV/AIDS.   We also believe 100% forgiveness of both bilateral and IDA and ADF debt for the poorest countries - as well as grants going forward - are needed to end the cycle of "lend and forgive" once and for all. 

In addition, the Africa Growth and Opportunity Act (AGOA) -  which is designed to spur economic development and expedite the integration of African economies into the world trading system -  has led to significant increases in trade volumes between the United States and AGOA-eligible countries.  The AGOA Forum in Dakar, Senegal, this July, will allow the U.S. and African officials as well as members of the private sector and civil society to discuss how African countries can further tap the benefits of AGOA. 

The Next Era for the African Development Bank

The African Bank has a critical role to play to help countries grow faster and become more flexible through greater private sector investment. We see many opportunities for the Bank to enhance its effectiveness as the leading development finance institution in Africa.

First, the recently concluded AfDF-10 agreement recognizes that private sector development is critical for accelerating economic growth and urges the Fund to place a high priority in this area.  Thus, we ask the Bank's next President to be creative and aggressive in identifying opportunities to support and advance Africa's private sector, including through increasing the availability of finance to the unbanked.  In that vein, we very much look forward to considering the Bank's updated micro-finance strategy and any other initiatives the Bank can undertake to strengthen Africa's financial sector. 

In addition, the AfDF-10 agreement acknowledged that excessive debt burdens only harm growth prospect and as a result, the AfDF will only extend grants to those countries already facing such debt burdens, namely two-thirds of the AfDF countries.  We trust that the AfDF will work closely with IDA in implementing this new debt sustainability framework. 

We are also pleased by the Bank's recent steps to fight corruption and enhance transparency.   The Bank must be a role model to its clients in this arena, particularly by proactively sharing the Bank's proposals, decisions, and progress toward achieving results.  We are pleased by the Bank's proposal to establish an Anti-Fraud and Corruption Unit and Whistleblower system, and urge that it be fully operational by the end of 2005. 

We all agree that the African Bank is uniquely placed to support regional integration in Africa and NEPAD.  Project development facilities - like the NEPAD Infrastructure Project Preparation Special Fund under consideration at the Bank – can fill a large void in helping to guide potential projects through the critical preparation stage.  That said, such facilities are necessary, but not sufficient.  African countries themselves need to prioritize their infrastructure needs to ensure that limited capacity, time, and financing are put toward projects that have the greatest impact.  

More broadly, we would like to see the Bank become an institution truly driven by results.  While the Bank has made some progress, it has not been nearly as timely or as demonstrable as it should be.  The Bank needs to proceed with results-based country strategies and implement its internal results management system to ensure that staff and management are working toward the same measure of success, rather than on approval volumes or internal processes and procedures. 

Conclusion

In conclusion, I would like to thank President Kabbaj for his steady and firm leadership through the most difficult era ever to face a multilateral development institution.  Thanks to his tireless efforts to regain the Bank's financial strength, the Bank stands ready to move ahead in ways that we could not have imagined ten years ago.  We look forward to working closely with the Bank's new President and our fellow shareholders to ensure that the Bank can better meet the needs and aspirations of the African people