African Development Bank's concessional lending arm raises record $11B

The African Development Fund, the concessional lending arm of the African Development Bank, has secured a record $11 billion for its 17th replenishment cycle amid mounting pressure on development budgets in many donor countries. The ADF-17 raise, mobilized from 43 partners, including governments and multilateral development banks, this week in London, marks the largest replenishment in the fund’s history. It is a notable increase from the $8.9 billion secured under ADF-16, which was finalized in December 2022. Expectations for the latest three-year cycle had once been far higher — with the bank previously floating ambitions of reaching $25 billion — before a wave of foreign aid cuts and policy shifts, including changes in the U.S. development priorities. Resources mobilized under ADF-17 will support 37 low-income and fragile African countries. The fund said it will focus on expanding access to energy, strengthening food systems and food security, investing in human capital, advancing regional integration and trade, and building resilient infrastructure. “This is not just a replenishment,” AfDB President Sidi Ould Tah said in a statement on Tuesday. “It is a turning point. In one of the most difficult global environments for development finance, our partners chose ambition over retrenchment, and investment over inertia,” said Tah, who became president in September. Beyond the headline figure, a key outcome of the replenishment is a governance shift that will allow ADF to raise additional resources by borrowing on capital markets. The approval of this option means the fund can issue bonds to investors, similar to the model used by the World Bank’s concessional lending arm for the poorest countries, the International Development Association. AfDB’s move could unlock up to $5 billion per three-year replenishment cycle. “The innovations we have collectively endorsed, particularly the market borrowing option, will define the next generation of the fund, enabling greater leverage, stronger financial sustainability, and a step-change in impact driven by financial innovation,” Tah said. The outcome has drawn attention, given the broader context of shrinking aid budgets across many traditional donor countries. “This is quite remarkable as a result, given the significant budget cuts in many large donor countries, including the largest ones to the ADF,” said Annalisa Prizzon, a principal research fellow at ODI Global. A full breakdown of country-level contributions has not yet been published, and the African Development Bank did not immediately respond to questions about individual pledges. However, some donor commitments were announced ahead of the replenishment meeting. Denmark previously said it would increase its ADF contribution by 40%, while Norway indicated it would raise its contribution by roughly 10%. The U.S. has historically been a major contributor to ADF, though it’s not yet known whether or how much it pledged to ADF-17. A new era? One of the most striking shifts in this replenishment cycle came from within the continent itself. African countries pledged a total of $182.7 million to ADF-17, representing a fivefold increase compared to the previous replenishment. Nineteen countries contributed for the first time, alongside long-standing regional donors. First-time contributors are: Benin, Cameroon, Chad, the Republic of Congo, Côte d’Ivoire, Djibouti, Ethiopia, Gambia, Ghana, Guinea, Kenya, Liberia, Madagascar, Mauritania, Niger, Sierra Leone, Sudan, Zambia, and Zimbabwe. “It gives a very good signal that the African Development Fund is their own bank,” Prizzon said. The increase in African contributions comes as the client governments’ satisfaction with the African Development Bank is on the rise. An ODI survey of multilateral development bank clients found the AfDB ranked among the most effective MDBs across several performance metrics, reinforcing its standing as a preferred partner for financing development on the continent. Earlier this year, the U.S. government said it would cut its $555 million contribution to the African Development Fund, heightening concerns about how the AfDB’s concessional arm would navigate a tightening global aid environment. Against that backdrop, one of the most notable signals to emerge from the ADF-17 replenishment was the growing role of nontraditional development finance partners, particularly from the Middle East. The Arab Bank for Economic Development in Africa, or BADEA, pledged $800 million to the fund. Tah is the previous president of the Khartoum-based institution. In addition, the OPEC Fund for International Development said it would commit up to $2 billion to ADF-17. Tah’s background at BADEA had been widely viewed as a strategic asset ahead of the replenishment. Before his election, he served as president of the Arab League–backed bank, where he nearly doubled its assets and expanded its footprint across Africa. That experience, alongside his long-standing relationships across the Arab development finance ecosystem, had fueled expectations that he could help broaden ADF’s donor base at a time when Western donors are slashing budgets. The scale of the commitments from BADEA and OPEC Fund suggests those expectations may be beginning to take shape, offering early signs that new partners could help offset pressures created by reduced participation from some traditional donors. These announcements from OPEC Fund and BADEA are also a signal of growing MDB cooperation, observers say. “It’s a very kind of good example of MDBs working as a system and leveraging each other’s strengths and resources,” said Prizzon, noting that the ADF-17 pledging meeting itself was hosted at the European Bank for Reconstruction and Development. The setting, she said, underscored how development finance institutions are increasingly coordinating across regions and mandates. In addition, Tah said he plans to convene development finance institutions, export credit agencies, institutional investors, and African partners on Wednesday to explore new approaches to financing and doing business in Africa.