African Development Bank says debt sanctions are tough

31 May 2001, AFP

The African Development Bank (ADB) said Thursday in Valencia, Spain, that its policies toward countries with debt arrears were the toughest of multilateral lenders.

At the end of the bank's annual meeting in the Mediterranean port city, ADB President Omar Kabbaj said Africa's premier development bank "had the toughest set of sanctions" against countries that failed to service their debt on time.

The two-day meeting, the first ever outside the African continent, was attended by government officials, bankers and business people from 70 countries. Talks focussed on the debt burden, and ways to reduce poverty and encourage economic growth.

In a press conference, Kabbaj said the bank had devoted much attention to the "rise in arrears" among African nations, citing Ivory Coast and Zimbabwe as the latest offenders. But he said the ADB's policy was to slap sanctions on such countries within 30 days, instead of 45 to 60 days as practiced by other lenders such as the World Bank.

Kabbaj, a Moroccan, also said that once the sanctions were applied, "other disbursements and assistance, except for grants, stop." The ADB chief, who is known to be fiscally conservative, said the ADB had an agreement with the International Monetary Fund (IMF) under which the Washington-based financial institution would also freeze loans to African nations once they are in default with the ADB.

Kabbaj said 95 percent of the countries with debt arreas are involved in wars or civil strife.

While singling out Ivory Coast and Zimbabwe for their debt default -- both countries have faced serious political and economic crises for two years -- he said Angola and Gabon had managed to clear their arrears.

At the end of 2000, Ivory Coast owed the ADB 22 million dollars, and Zimbabwe owed the bank 25 million dollars.

The Democratic Republic of Congo (DRC), whose debt arrears are "enormous" delegates said here, owes the ADB 460 million dollars, most of which was accumulated under the late dictator Mobutu Sese Seko, during the 1980s and 1990s.

The continent as a whole faces a staggering 334-billion-dollar debt, which has forced many governments to pay more on servicing the burden than they do on health care or education.

Burundi's debt service amounts to 95 percent of its export earnings, and debt payments by Rwanda and Sierra Leone -- both countries caught up in regional conflicts -- eat up 41 percent of export revenue, according to the World Bank.

Zambia's case is often cited by critics of multilateral lenders, who are often accused of gouging the poor.

The country, in which four-fifths of the population live below the poverty line, paid 137 million dollars in debt service to international creditors in 1999, while the AIDS crisis there reached epic proportions.

The ADB, whose headquarters is in Abidjan, began operating in 1966 and counts 53 African members and 24 non-African nations. Japan and the United States are the bank's biggest non-African stakeholders.

Under Kabbaj, who became head of the bank in 1995, the ADB has pursued stricter lending policies than the previous adminstration.

The fiscal tightening has drawn criticism from several sub-Saharan nations but has pleased non-African shareholders.

The bank has also been accused of granting more money to South Africa and richer nations in north Africa at the expense of others.