Debt Consolidation Loan

Cheaper loans for African reformers

Rabat - The African Development Bank (AfDB) planned to grant cheaper loans this year to African countries that had made significant progress on reforms, the bank's chief said on Tuesday.

"We feel these countries are in a new phase after the major reforms launched in the mid-1990s," said AfDB president Omar Kabbaj.

"So it's time for them to move to a higher level of co-operation with us."

The programme, which would be examined by the bank's board in the next few weeks, targets countries such as Egypt, Mauritius, Morocco, Namibia, South Africa and Tunisia.

It would abolish some fees and reduce AfDB's margins on loans. This could boost the bank's competitiveness in markets that had improved their credit worthiness and were better at financing their development, Kabbaj said.

"We will also grant loans in local currencies," he said, to help reduce public and private operators' exposure to foreign exchange fluctuations and boost local money markets.

Encouraged by reforms and timelines in reimbursing debts and executing projects, AfDB had picked Morocco as the second country, after South Africa, in which it raised funds on the local market, Kabbaj said.

"We don't know how much funds will be raised here in total, but we think of a first operation soon of between 1 billion and 1.5 billion dirhams [R743 million and R1.11 billion], depending on the needs and the market."

Since the Moroccan dirham was not convertible, AfDB would immediately swap raised cash in major currencies when the funds were for outside Morocco.

If the loans went to local projects, the bank would swap them back into dirhams.

For other African countries, mainly highly indebted poor ones, AfDB would continue to help development initiatives, either under the New Partnership for Africa's Development or by the Group of Seven (G7) wealthy countries.

Donor states, however, needed to give more to help develop infrastructure and widen access to drinking water in rural areas in these countries, Kabbaj said.

Africa badly needed help to encourage reforms yet it was getting less fresh cash, despite pledges by the world.

At $24.7 billion (R154.5 billion) in 2003, the level of international aid to the continent was only slightly above its 1990 level.

"The problem we're facing now is that this figure must be doubled to $50 billion and there were pledges to do this" at an aid summit in Monterrey, Mexico in 2002, Kabbaj said.

He did not comment on the US rejection of a debt relief plan led by Britain at a G7 meeting last weekend.

"We're very worried but gained much comfort by what France and [UK finance minister Gordon] Brown ... are doing to try to meet these expectations and respect commitments made, but it's not easy," he said.

The bank's shareholders include Africa's 53 nations and 24 donor countries.

Source : Business Report - Johannesburg,South Africa