Enhanced Engagement in Fragile Statesby the African Development Bank

"Building today, a better Africa tomorrow"

Annual MDBs Meeting on Debt Issues11-12 July, 2007Washington, DC

Fragile States: Issues for Consideration ...

Africa on the move: A window of Opportunity State of Fragility in a Continuum

Framework for Effective Engagement in Fragile States

Exit, Quality Management & Funding

Conclusion & Issues for further Consideration

Africa on the Move… but Challenges Persist

a unique opportunity

to make a collective

push

Improved growth and

performance in Africa

Dividends of debt relief

beginning to flow

Increased focus of the

global development community on Africa

Consensus that MDG

targets will not be met

Consensus on the need to

focus on results

BeninBurkina FasoCameroonEthiopiaGhanaMadagascarMalawiMaliMauritaniaMozambiqueNigerRwandaSao Tomé & PrincipeSenegal Sierra LeoneTanzaniaUgandaZambia

Completion Point

BurundiChadDem.Rep.CongoCongoGambiaGuineaGuinea Bissau

CARComorosCôte d’IvoireEritreaLiberiaSomaliaSudanTogo

Decision Point Pre-Decision Point

Chart 1: RMCs by HIPC Status

18 7 8

18 RMCs at Completion Point – Mid May 0718 RMCs at Completion Point – Mid May 07

Expected dates for HIPC Decision & Completion Points ...

Beneficiary Countries Decision Point Completion Point

Interim CountriesGambia 30-Sep-07Burundi 30-Mar-08Chad 30-Jun-08DRC 30-Jun-08Guinea 30-Aug-08Congo, Rep. of 31-Dec-09Guinea Bissau 30-Jun-10

Pre-decision Point CountriesCAR 30-Sep-07 31-Dec-09Liberia 30-Sep-07 30-Sep-10Comoros 30-Mar-08 30-Sep-10Côte d'Ivoire 30-Jun-08 30-Dec-10Sudan 31-Dec-08 31-Dec-11Togo 31-Dec-08 31-Dec-11Eritrea 30-Mar-09 30-Mar-12Somalia 30-Sep-13 30-Sep-16

DSF/DSA Classification of RMCs as at end-May 2007 ...

Distribution in 2007

1114

16

11

26

21 20

16

35 4

9

0

5

10

15

20

25

30

2004 2005 2006 2007

Num

ber

of R

MC

s

Classification of RMCs

Loans OnlyGrants OnlyLoan/Grant Combination

State of Fragility in a Continuum …

Development Challenges in Fragile States ...

Key attributes of main focus: post-crisis/transition states

Poor governance structures, political instability and corruption

Severely degraded institutional and administrative capacity

Physical infrastructure badly deteriorated or non-functioning, and social services are minimal or non-existent

Economic activity substantially contracted, and human develop ment indicators dropped from already low levels

Negative regional spill-over effects often large, with traditional commercial links severed or badly disrupted

.

Limited Current Support to Fragile States …

PCEF contribution in 2006 is only about 2.4% of total allocation

with without diff.AfDB FL-DSA Final

Poor Policy : CPIA < 3.251 Burundi 3.11 Red Red Red 35.6 26.6 9.0 2 Sierra Leone 3.03 Red Red 35.1 22.1 13.1 3 Congo, Rep. Of 2.88 Red Red 17.3 12.1 5.2 4 Congo DRC 2.83 Red Red 237.7 217.0 20.7 5 Eritrea 2.83 Red Red 21.2 18.9 2.3 6 Angola 2.73 Red Yellow Yellow 35.1 27.6 7.5 7 Sudan 2.62 Red Red 48.1 39.3 8.8 8 Liberia 2.54 Red Red 9.4 8.6 0.8

9 CAR 2.47 Red Red Red 9.8 8.8 1.0

Total 449.4 380.9 68.5

Overall PCEF premium 2.37%

2006 ADF-X Final Country Allocations (with & without PCEF)(UA millions)

PCEF Beneficiary Countries

2005 CPIA DSF Traffic Light Ranking

2006 ADF-X Allocation with & without PCEF

Proposed Framework for More Effective Engagement in Fragile States ...

Provision of supplemental resources (i.e. beyond current ADF allocation) primarily for priority infrastructure investments and capacity building

Supplemental funding committed up-front for three years, and on grant terms, and Funds specifically dedicated from Bank’s ADF-X1 resources ● Potential support for up to 2 ADF cycles, with exit expected after no more than 6 years

Eligibility criteria for supplemental support ...

Supplemental Resource PoolSupplemental Resource Pool Eligibility and EngagementEligibility and Engagement

Supplemental Resource Pool (Fragile States Facility) to fund Incremental Assistance in Specific Cases

Eligibility Thresholds: •Peace and Security

• Unmet Needs

Eligibility Thresholds: •Peace and Security

• Unmet Needs

to fund incremental assistance in specific cases

based on limited number of threshold indicators

UA 330 m

UA 33 m

Additional allocations for operations in selected post-crisis cases

Selective capacity building support in other fragile circumstances

Engagement Threshold: Country Commitment

Engagement Threshold: Country Commitment

• Supplemental allocations to be anchored in known PBA determined amounts• Countries continue to receive annual PBA under ADF-11• Supplemental funding of 2X a baseline PBA from ADF-10• Funding provided up-front for 3 years, on grant terms

• Supplemental allocations to be anchored in known PBA determined amounts• Countries continue to receive annual PBA under ADF-11• Supplemental funding of 2X a baseline PBA from ADF-10• Funding provided up-front for 3 years, on grant terms

Monitoring and Exit, Quality Management and Funding Mechanism

• Regular performance assessment and expected exit after 6 years• Annual CPIA exercise under ADF-11 PBA.• At close of 3 years, assessment of progress relative to initial commitments• Subject to progress & funding, possible renewal for final 3 years

• Reduction of delivery bottlenecks• Variety of improvements underway Bank-wide• Rapid response template built on already approved measures

• Funds mainly derived from dedicated ADF-11 pool• Possible financing options remain• Preferred option: separate Fragile States Facility (FSF) including the PCCF

QualityQuality

FundingFunding

ExitExit

• Selection mechanism and initial pool of prospective beneficiaries

• Allocation mechanism: amounts; terms; caps; PBA carve-out, exit

• Supplemental pool for capacity building support in wider group of Fragile States

• Track record with PCEF and other efforts to date

• Implications for Post Conflict Country Facility

• Relative merits of financing alternatives

• How to treat / finance possible additional eligible countries

Conclusions & Issues for further Consideration …

Thank You

For Your Attention

"Building today, a better Africa tomorrow"