Order Code RS22690
July 6, 2007
The African Development Bank Group
Martin A. Weiss
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
The African Development Bank (AfDB) Group is a regional development bank
currently based in Tunis, Tunisia. It comprises three lending facilities: the market rate
facility, the AfDB; a concessional lending facility, the African Development Fund; and
a trust fund established by Nigeria to lend to low-income African countries. The Bank
has 53 African members, as well as 24 non-regional members, including the United
States. This report, which incorporates material originally written by Raymond W.
Copson, will be updated as events warrant.
The African Development Bank (AfDB) Group is a regional development bank
(RDB) “dedicated to combating poverty and improving the lives of people of the
continent.”1 In February 2003, the Bank temporarily relocated to Tunis, Tunisia from its
permanent location in Abidjan, Côte d’Ivoire due to political instability in that country.
At its February 2007 annual meetings, the AfDB decided to operate from its temporary
relocation site in Tunis until summer 2008.
Structure. The AfDB Group comprises three lending facilities:
! The African Development Bank (the Bank), created in 1964, is a
regional development bank that provides grants, loans and technical
assistance. It seeks to promote sustainable economic growth and reduce
poverty in the Bank’s 53 African member countries.2 The Bank also
participates in a wide variety of international programs including the
Heavily Indebted Poor Country (HIPC) Debt Relief Initiative, the more
comprehensive Multilateral Debt Relief Initiative (MDRI), and the New
1 More information is available at the Bank’s website: [https://www.afdb.org].
2 Like the market rate facilities of the World Bank and the other RDBs, AfDB’s funds are raised
on the international capital markets and then re-lent at a small premium to member countries.
Countries borrow from the World Bank and the RDBs for a variety of reasons including their
extensive technical assistance and advisory capability.

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Partnership for Africa’s Development (NEPAD).3 As of May 2007, total
subscribed capital is U.S. $33 billion.
! The African Development Fund (AfDF, the Fund) is a concessional
lending/grant making facility for low-income African member countries
created in 1972. There are currently 38 AfDF borrower countries. The
AfDF is primarily financed by 24 non-regional countries including the
United States, Canada, and several European and Asian countries. Every
three years, donors agree on a replenishment agreement for the next three
fiscal years. In March 2007, negotiations began for the eleventh
replenishment of AfDF resources (AfDF-VI) that will provide financing
for 2008 to 2011.
! The Nigeria Trust Fund is a fund, created by Nigeria in 1976, to
provide financing on terms between those of the AfDB and the AfDF to
low-income regional member countries. As of December 31, 2005, total
Trust Fund resources amounted to almost $600 million. Following the
end of the Trust Fund’s thirty year term in April 2006, the Nigerian
government has requested that the Bank Group begin winding down the
Trust Fund’s operations.
For FY2008, the Bush Administration requested $2.0 million to clear the outstanding
arrears on U.S. payments to purchase shares of the most recent global capital increase
(GCI) of AfDB resources in 1998. For the AfDF, the Bush Administration requested
$135.7 million for the final installment of a three-year commitment under the agreement
for the tenth replenishment of the AfDF (AfDF-10) and $4.9 million to pay a portion of
outstanding U.S. arrears to the AfDF. The U.S. total three-year commitment for AfDF-10
is $407 million, which contributes to a $5.4 billion total replenishment.
Background. The Bank was founded in 1964 as an exclusively African institution.
Most African countries had just become independent amid great optimism about the
continent’s economic prospects. However, poor African economic performance during
the Bank’s early years soon made it clear that an exclusively African membership would
be unable to achieve a level of creditworthiness for AfDB bonds sufficient to generate
adequate resources. Consequently, in 1973, the United States and other donor countries
from outside Africa were invited to join the Bank’s concessional lending facility, the
AfDF. The non-concessional lending facility, the AfDB, was still restricted to African
countries. The United States declined to join the AfDF until 1976. For several years,
Canada was the largest donor country.
In 1980, the AfDB opened itself to membership by countries outside Africa. Today,
the Bank has 53 African members, including both the North African and the sub-Saharan
countries, and 24 non-regional members. The latter include all of the major donors of
3 For more information, see: CRS Report RL33073: Debt Relief for Heavily Indebted Poor
Countries: Issues for Congress
, by Martin Weiss; CRS Report RS22534: The Multilateral Debt
Relief Initiative
; and CRS Report RS21353: New Partnership for Africa’s Development
(NEPAD)
, by Nicolas Cook.

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development aid to Africa. The Fund has 27 contributing members, including 25 non-
African countries and South Africa.
Voting. In the AfDB Group, every member state is represented on the Board of
Governors, typically by the state’s finance minister. The Board of Governors is the
highest decision-making body. Day-to-day management of the AfDB Group is handled
by the Boards of Directors. The Board of Directors (also known as the Executive Board)
of the AfDB is composed of 18 Executive Directors (EDs). Twelve members are elected
by the Governors of regional countries and six by the Governors of non-regional member
countries. Directors are elected for three years terms that are renewable once.
The Board of Directors of the AfDF is composed of twelve EDs. Non-regional
donor nations select six EDs. Thus, while African EDs hold a majority of the votes on
the AfDB board, 12 of 18 (60%), in the AfDF, voting is evenly split between the six
African and six non-African EDs.
Composition of the AfDB Group Executive Boards
Total Number of EDs
Number of African EDs
Number of Non-African EDs
AfDB
18
12 (60%)
6 (40%)
AfDF
12
6 (50%)
6 (50%)
Members’ voting power within the AfDB and AfDF Boards of Directors is largely
determined by the size of their contribution to the Bank’s financial resources. In the
AfDB, Nigeria is the largest shareholder, with 8.76% of the vote on the Executive Board.
In the AfDF, the United States is the largest country shareholder, with 6.5% of the vote,
followed by Japan, with 6.8%. Executive Directors, with the exception of the United
States, represent more than one country on each Board. However, unlike at the World
Bank, where U.S. voting power exceeds 16% and is much larger than any other ED and
can thus veto major reforms, each ED at the AfDB Group has roughly equal voting
weight.
Crisis in the Mid-1990s and U.S. Funding. In the mid-1990s, the African
Development Bank faced what has been called a “mid-life crisis,” after non-regional
members lost confidence in its lending policies and management practices. Many African
countries had experienced severe economic and budgetary problems for years, resulting
in part from inappropriate economic policies and also from external factors, including
high oil prices and low prices for their commodity exports. African countries were
becoming increasingly uncreditworthy; yet the AfDB had continued to extend non-
concessional loans to them. By 1994, AfDB arrears had reached $700 million, twice their
level in 1992.4 Short of resources, the AfDB Group made virtually no loans in 1994.
In April 1995, the U.S. General Accounting Office issued a report that called the
Bank “solvent but vulnerable” and criticized an AfDB governance system that allowed
4 E. Philip English and Harris M. Mule, The African Development Bank (Boulder, Colorado:
Lynne Rienner, 1995), p.29.

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borrowers to control decision-making.5 From 1993 to1999, the United States made
almost no contributions to the AfDB Group. In the mid-1990s, the United States led
other non-regional members in a decision to suspend negotiations on a new AfDF
replenishment for the AfDF until the Bank agreed to sweeping institutional reforms.
Congress rescinded half of the FY1995 appropriation for the AfDF.
In August 1995, after nine rounds of voting, Bank members elected Omar Kabbaj,
a Moroccan financial official who advocated management and fiscal reforms at the Bank.
In May 2000, Kabbaj was unanimously re-elected for a second five-year term. During his
tenure, Kabbaj won widespread praise from financial analysts and non-regional
governments for his success in implementing promised reforms. Non-regional
endorsement of Kabbaj’s reform agenda came at the May 1998 annual meeting, when the
Board of Govenors agreed to the fifth general capital increase (GCI-V) of the AfDB,
representing a 35% boost in the Bank’s resources. The increase will, if fully funded,
increase the non-regional share in the Bank’s capital from 33% to 40%, thus giving non-
regional members 40% of the votes on the Bank’s Board of Governors.6 Moreover, at the
insistence of the non-regional members, decisions on Bank operations are to be taken by
a 66% majority, while “crucial” decisions (such as increasing the AfDB quota) would
require the approval of 70% of shareholders.7 Thus, there would have to be at least some
non-regional support for major Bank actions. These modifications to the Bank’s “African
character” were initially opposed by some regional members, but eventually won enough
support from regional member nations to pass. U.S. contributions to the African
Development Fund resumed in FY1998, and the funding levels in recent years have made
the Fund a small, but important component of the overall U.S. economic assistance
program for Africa.
In 2003, the U.S. Office of Management and Budget (OMB) completed a Program
Assessment Rating Tool (PART) examination of the AfDF.8 While OMB gave the Fund
high scores in Program Management (100%) and Program Purpose and Design (80%),
lower scores were recorded for Strategic Planning (63%) and Program Results (33%),
leading to a total program score of 59% and an overall rating of “Results Not
Demonstrated.” The U.S. Department of the Treasury points out in its FY2008 budget
request, however, that the PART evaluation was completed prior to the Bank’s
introduction of a new results measurement framework, which incorporates into all country
strategy papers and projects indicators to better measure results. Improvement of weak
systems for measuring the effectiveness of MDB projects has been a core focus of the
Bush Administration’s multilateral development bank (MDB) reform agenda.9
5 Multilateral Development Banks: Financial Condition of the African Development Bank
(GAO/NSIAD-95-143BR).
6 While most analysts agree that the reforms introduced by Kabbaj were successful, not all donors
have completed their contributions to GCI-V. As of the end of AfDB Group FY 2006, arrears
to the Bank were around $4,783,680.
7 Africa Research Bulletin, Economic Series, May-June, 1998, p.13455-13456.
8 For more information on the OMB PART program, see:
[http://www.whitehouse.gov/omb/part/].
9 Statement of Assistant Secretary Clay Lowery before the Senate Foreign Relations Committee
(continued...)


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The AfDB Group’s Role. The African Development Bank Group is one of many
development agencies active in Africa, and it loans smaller amounts than the World Bank
and the major bilateral donors. In 2004, the AfDB group provided 6% of total foreign aid
to Africa ($1.9 billion out of $30.4 billion, see table). Furthermore, the Bank has long
been considered to be the least capable of the regional development banks.
Total Aid to Africa, 2004 (U.S. $ in billions)
T h e f u t u r e
effectiveness of the AfDB
largely rests on its ability
to delineate its role in a
c r o w d e d a i d f i e l d
populated by larger
multilateral donors, the
United Nations and the
World Bank, regional
donors such as the
European Union and the
bilateral programs of the
major donors
In order to define a clearer AfDB mission, in October 2006, current AfDB Group
President Donald Kabaruka appointed an eminent persons group to advise him on the
Bank’s future. The group, chaired by former Mozambican President Juaquim Chissano
and former Canadian Prime Minister Paul Martin, is scheduled to issue its final report in
fall 2007. An interim report was released at the 2007 Shanghai meeting, which discussed
the panel’s preliminary observation that the Bank’s limited resources are stretched too
thin, and that the Bank needs to better focus its efforts on “core areas to demonstrate
excellence and deliver results.”10 The panel commends the Bank for moving in this
direction by increasing its work in recent years in areas where it has proven expertise,
primarily infrastructure construction (including transportation, water, and energy
services), while leaving other issues, such as HIV/AIDS policy to the World Bank or
single sector funds such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria.
A further complication is the temporary status of the Bank’s headquarters. Although
legally based in Abidjan, Côte d’Ivoire, civil war in that country prompted the Bank to
temporarily move its headquarters to Tunis, Tunisia in 2003. Lack of a final settlement
of the Ivorian political crisis has to date prevented the Bank from returning to its
permanent location. At the same time, while the Tunisian government would reportedly
be happy to have the Bank permanently relocate to Tunis, the Ivorian government has
blocked the move. Until a settlement is reached on the Bank’s permanent home,
continued tension will likely make staff recruitment more challenging given the wealth
of alternative opportunities for well-trained development economists.
9 (...continued)
on the Multilateral Development Banks and the Fight Against Corruption, March 28, 2006.
10 Preliminary Observations of the African Development Bank High Level Panel, 2007 African
Development Bank Annual Meeting, Shanghai, China, May 16-17, 2007.

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Lastly, some observers question if there is a need for a regional development bank
for Africa, or if the United States should contribute to such an institution. In their view,
the United States might better focus its funding on bilateral assistance programs, or
perhaps the World Bank’s concessional aid facility, the International Development
Agency (IDA), where U.S. influence as a shareholder is greater than at the AfDB. In
2006, IDA committed $3.5 billion in loans and $1.1 billion in grants to Africa, a doubling
of aid from 2000 levels. At the same time, the AfDB Group approved a total of $1.4
billion in loans, grants, and investments. Advocates of a continued role for the AfDB
group argue that even though it cannot match other donors in the sum of total loans
provided, the AfDB, “Africa’s Bank,” with an African president, has a unique
understanding of African needs. They contend that African governments more readily
accept the Bank’s advice. They also argue that it is useful for the United States to be seen
in Africa as a supporter of a homegrown African development institution. Others
contend, though, that non-regional aid donors can be just as effective as a local institution.
Furthermore, they may be less susceptible to corruption and nepotism, charges that have
plagued the AfDB group in the past.
China and Africa. Many in the international aid community are concerned that
new Chinese assistance may undermine various ongoing Western and MDB initiatives
including poor country debt relief and environmental and social safeguards. Estimates
of Chinese financial aid to Africa for 2005 are around $1.5 to $2 billion.11 In May 2007,
China hosted the 2007 AfDB Group meeting in Shanghai. This followed on the heels of
the November 2006 China Africa Summit, where China announced its intention to double
aid to Africa by 2009 and provide $2 billion in preferential credits.
China and other emerging creditors are increasingly providing development
assistance without the environmental and anti-corruption standards that are a requirement
for borrowing from the multilateral institutions. Furthermore, the terms of new Chinese
assistance is often opaque, and assistance is reportedly commingled among various
instruments including non-concessional lending and resource-linked bonds, for example.
Policy experts at the MDBs argue that if new Chinese assistance is non-concessional,
short-term, and at rates that poor countries cannot afford over the long-term, China may
undermine recent decreases in African indebtedness produced by Western donor-financed
debt relief agreements. By contrast, African policy makers have consistently expressed
their appreciation for Chinese assistance, which they see as less conditional, less onerous,
and at lower rates than MDB or Western aid. In many cases, China can build roads and
large-scale infrastructure more cheaply than MDB or Western donors, and African policy-
makers appreciate the lack of political, social, or economic conditions attached to Chinese
loans. Some scholars argue that concerns raised by the MDBs and Western donors
represent primarily “China bashing” and fears that as China plays a more prominent role
in Africa, Western influence will decrease.12 Regardless of political intentions, little is
known about the structure and terms of new Chinese lending, and engagement and better
cooperation with China will likely be a challenge facing the AfDB, as it struggles to help
overcome the larger structural and socio-economic impediments to African development.
11 Carol Lancaster, “The Chinese Aid System,” Center for Global Development, June 2007.
12 See the report of the University of Oxford/Cornell University Conference, New Directions in
Development Assistance
, June 11-12, 2007, pp. 22-27. The report is available at:
[http://www.globaleconomicgovernance.org/docs/Conference%20Report.pdf].