Draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2023
Draft African Development Bank (Sixteenth Replenishment of the African Development Fund) Order 2023
(Limited Text - Ministerial Extracts only)
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The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)
I beg to move,
That the Committee has considered the draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2023.
The Chair
With this it will be convenient to consider the draft African Development Bank (Sixteenth Replenishment of the African Development Fund) Order 2023.
Mr Mitchell
I believe that this is the first time we have served together in a Committee such as this, Mr Vickers, and it is an enormous pleasure. The Opposition spokesman, the hon. Member for Birmingham, Edgbaston, and I have served together on many occasions; it is a pleasure to see her in her seat as well.
The orders, which were laid before the House on 23 and 22 May, will permit the British Government to make financial contributions to the African Development Fund up to the stated values for the purpose of core replenishment of the fund and contribution to the multilateral debt relief initiative. The African Development Fund—ADF for short—is an arm of the African Development Bank Group, which is the largest development finance institution focused solely on Africa.
As the Committee will be aware, the bank is a major source of funding for economic, social and institutional development across the continent, providing concessional loans and grants to the 37 poorest and most vulnerable countries in Africa. It is 60% owned by African countries, 80% staffed by nationals of African countries, and highly trusted across the region. It promotes green and inclusive growth and supports development in five focus areas, from infrastructure to industrialisation, food supplies and quality of life.
The bank is an important partner for UK international development. By spreading opportunities in African countries, it helps make the UK more secure and more prosperous. That is why we have purchased additional shares to increase our shareholding in the bank from 1.7% to 1.8%. We are also providing the bank with guarantees to release $3 billion of additional climate finance across the continent. At the bank’s recent annual meeting in Sharm El Sheikh in Egypt, I launched projects in Senegal and Egypt, which are the first to be supported by the guarantees.
I turn now to the African Development Bank (Sixteenth Replenishment of the African Development Fund) Order 2023. The ADF is replenished by donors every three years. The 16th round of replenishment negotiations took place last year, with pledges made in December. The British Government pledged to provide £650 million to the ADF over three years, including £450 million to the core budget. The order allows for the provision of the core funding by the United Kingdom.
Forty per cent of our core pledge will be used to tackle climate change. We also pledged a further £200 million to the climate action window, which will be used entirely to help countries to adapt to climate change. Overall, that will represent a slight increase on our previous contribution and will make us the largest contributor to the 16th replenishment. That reflects our assessment that the ADF represents excellent value for money for British taxpayers.
For example, the African Development Fund is ranked second in the Centre for Global Development’s quality of official development assistance report. The total value of the 16th replenishment is $8.9 billion—up from $7.4 billion for the previous round. That is an act of global solidarity with the poorest African countries to help cushion them from a series of crises, including a food crisis driven by the impact of Russia’s illegal war and a climate crisis that is unleashing increasingly frequent and severe extreme weather on African countries, alongside the challenges of recovery from the pandemic.
The ADF works to respond to such crises with urgency and in a way that is tailored towards the needs of different communities. For example, to respond to the food crisis, the bank approved a $1.5 billion emergency food production facility last year, which supported 20 million African smallholders and farmers by providing them with certified seeds and access to fertilisers. This supported the production of 38 million tonnes of food and helped to avert a looming food crisis on the continent.
The UK Government used the replenishment negotiations to secure commitments from the bank that will advance a number of our development priorities. The bank made commitments to support African countries to develop long-term strategies to tackle climate change, empower women, strengthen food security, tackle fragility, improve debt management and mobilise private sector investment.
The 16th replenishment is expected to deliver new or improved electricity connections for more than 19 million people, advances in agriculture for more than 24 million people, new or improved access to water sanitation for more than 32 million people, access to transport for over 14 million people and it is also expected to create 2.4 million new jobs, including more than 1 million new jobs for women.
We also welcome the agreement by the bank’s governors in May to make changes to the ADF articles of agreement that will enable it to borrow from capital markets. The UK has been supportive of the bank taking this step for several years, which could release $25 billion of additional financing for ADF countries over the next 15 years. That is very much in the spirt of the Bridgetown initiative.
I turn now to the draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2023, which permits the British Government to provide an additional £56 million between 2023 and 2035 to support the ADF’s participation in the multilateral debt relief initiative, or MRDI. The UK Government played a leading role in establishing the MDRI in 2005 through their G8 presidency. The initiative enabled the African Development Bank and the World Bank to cancel debts owed by some of the poorest countries by committing donors to compensate them for losses. This order will enable the current Government to continue to make good on that commitment.
To conclude, the African Development Bank Group is one of our closest and most important partners. The financial contributions covered by the two orders are an important part of this country’s commitment to the poorest people in Africa. The orders will deliver UK international development and foreign policy objectives in some of the world’s poorest countries and bring opportunity to tens of millions of people. That is not just in their interests. It is also in the UK’s national interest, because greater opportunities in African countries reduce customers for people traffickers while creating more customers for UK exporters.
I commend the two orders to the Committee.
Mr Mitchell
I am extremely grateful to the Committee for its comments, and I will try to respond. The hon. Member for Birmingham, Edgbaston set out an analysis of the crisis that has struck Africa and the reasons for it. Across the Committee there will be complete agreement with her analysis, which was correct. She rightly pointed out that following a period from 1990 to 2020, under all three major parties, there was tremendous progress under British leadership particularly in the eradication of the extremes of poverty. There has probably been no period in human history when so much poverty alleviation has taken place so successfully. Of course, a lot of it was due to progress made in China and India. As she said, since 2020 those advances have been under threat due to the covid epidemic, the appalling aggression of Russia in Ukraine and the effect that that has had on inflation, standards of living and food flowing into Africa—in particular, to places of great shortage. We would all agree with that analysis.
The hon. Member for Birmingham, Edgbaston then made the point about Publish What You Fund and the high accolade that it has given to the work of the African Development Bank, which is, in part, the answer to the question of my near neighbour, the hon. Member for Birmingham, Perry Barr. There is a clearly a strong Birmingham-Sutton Coldfield element to this debate. The clear benefits were set out by Publish What You Fund.
On the level of funding, the ODA budget is immensely constrained. The hon. Member for Birmingham, Edgbaston and I both know that the budget could be spent many times over—and spent extremely well. The replenishment was for £650 million; we would have liked to have spent more, but we have to balance it with other funding. We have spent £1 billion supporting the global fund, which is outstandingly good expenditure. We settled on £650 million in this case, which is a little up from last time, when the figure was £633 million. I assure her that the money will be very well spent.
The hon. Lady referred to the letter written last week by my former colleague in the Foreign Office, Lord Goldsmith. Of course, I will not be drawn on any of that, except to say that those of us who know the Prime Minister well know that he is incredibly interested in the science and activity around climate change, and is very committed to that agenda. The hon. Lady asked about the Prime Minister’s attendance at the summit. It is true that he was not able to attend; he sent me instead, and I hope the Committee will accept that. I could only be a very poor reflection of him, but I did my best at the summit, and Britain was able to lead on the climate-resilient debt clauses, which will make such a difference to countries caught up in tragedy or crisis. Say disaster or covid struck the Government of Ghana, and that they really needed liquidity in order to help their people, and then had to pay off the capital and interest of loans. The climate-resilience debt clauses mean that they would get a two-year break to help them cope with the crisis. That is added on to the end of the loan. That is being done now by UK Export Finance, and it was the big British contribution to the summit; I think it will be powerful.
The hon. Lady asked me about SDR. We are engaged with the Treasury in a serious discussion on whether we can do more on SDRs. She is right in saying that the African Development Bank is a good potential vehicle for that. All I can say to her is that discussions are ongoing. Our colleagues in the Treasury are being very helpful, and we hope that the matter will move forward, though I point out that at the spring meetings of the IMF and the World Bank, my right hon. Friend the Chancellor of the Exchequer announced that Britain would use $5.3 billion of SDR through the two particularly important pro-poor IMF funds. That was the British announcement.
The hon. Lady asked me about accountability, and my hon. Friend the Member for Congleton raised the same point. The accountability of the African Development Bank is absolutely excellent. Our performance tranche was fully disbursed at the mid-term review. We do not have a performance tranche for this replenishment, but that reflects our experience, which is that the other controls are absolutely adequate to ensure value for money for the British taxpayer. The hon. Member for Birmingham, Edgbaston, will recall that—quite apart from our having officials who are based in Abidjan at the headquarters of the bank, and who regularly visit experts on all these matters—I am the British governor of the African Development Bank, and I can tell her and my hon. Friend the Member for Congleton that I keep a sharp eye on the interests of British taxpayers in this matter.
Finally, the hon. Member for Birmingham, Edgbaston mentioned the deal done on Zambian debt. I completely agree with what she said. Zambia has had to wait far too long for relief from those debts. Finally, the Chinese were persuaded to join in the international settlement. I had a WhatsApp message from the President of Zambia at the end of last week, thanking Britain so much for our engagement and assistance in the negotiations, which, as I say, went on for far too long. The African Development Fund is a vital source of finance and hope for the poorest and most vulnerable countries and people in Africa. I hope and trust that the Committee will support the orders.
Question put and agreed to.
Draft African Development Bank (Sixteenth Replenishment of the African Development Fund) Order 2023
Resolved,
That the Committee has considered the draft African Development Bank (Sixteenth Replenishment of the African Development Fund) Order 2023.—(Mr. Mitchell.)