Improving infrastructure finance for Low-Income Countries: recommendations for the ADF

Improving infrastructure finance for Low-Income Countries: recommendations for the ADF

Low-income countries (LICs) in sub-Saharan Africa face a substantial infrastructure-financing gap. multi-lateral development banks (MLDBs) have traditionally played an important role in mobilising finance for infrastructure in LIcs, but their funding alone cannot match demand. the african development Bank’s (AfDB) concessional window, the african development fund (ADF), is a key infrastructure financier for african LICs, and comprises 37 regional member countries (RMCs), including emerging markets and fragile states. however, in recent years the ADF has faced funding and technical constraints.

This policy brief, based on a discussion paper, outlines the ADF’s role in providing infrastructure financing to LIcs and the challenges that countries face in accessing these funds. It also examines the changing context confronting LIcs as they weigh their infrastructure demands against the requirement to maintain sustainable debt levels. Lastly, the brief explores the challenges and opportunities of mobilising additional finance for LICs.

Policy recommendations:

  • in order to target growing international concerns around debt sustainability, the ADF should increase its efforts to work with countries in understanding and managing their debt levels
  • the ADF should continue to streamline its approval and implementation processes, targeting national capacity bottlenecks as early as possible and ensuring the continuity of AfDB officials from the appraisal to monitoring stages
  • the ADF should direct efforts towards increasing LIC awareness and understanding of its private finance mobilisation tools through greater promotion and dissemination of information, and should increase technical support and training for PPPs. It should place greater focus on measuring the developmental impacts of projects, especially where the private sector is involved
  • project preparation requires more ADF funding, and the ADF’s PPF should explore cost recovery mechanisms to ensure sustainability. LIC governments should create better co-ordination and unified support around proposed projects to decrease risks
  • LICs should be assisted in accessing the non-concessional ADB funds available to them
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