Positioning African Public Development Banks for the Post COVID-19 recovery

Abstract

Public Development Banks(PDB) are vital partners in providing development financing to support investments in sectors that would otherwise not attract private investment. These resources are even more important during periods of economic crises such as the 2008/2009 financial crisis and the current COVID-19 pandemic which has been shrunk the fiscal space of most developing countries. Despite their challenges most notably in the areas of financial resources and capital Africa’s PDBs have provided some of the needed resources to mitigate the socioeconomic effects of the pandemic. To ensure their continued contribution to the recovery process in the short to medium-term, there is need for PDBs to be recapitalized and to have more flexible mandates that allow them to finance the transformation of African economies as promoted under Afreximbank’s strategic plan to mitigate the exposure of the region to recurrent adverse commodity terms of trade shocks and global volatility. Recapitalization will also enable these PDBs to implement countercyclical measures especially in times of economic crisis like the current one. This paper examines the role that PDBs in Africa play in supporting the continent’s development priorities and its response to the pandemic. There are approximately 95 PDBs in Africa representing 21 percent of all PDBs. However, due to their relatively small size, African PDBs account for only 2% of total PDB assets. In contrast, China accounts for 32 percent.