Ruto pushes for bigger regional banks' role in mobilizing African capital

 

President William Ruto at the Borgo Egnazia Resort in Apulia City for the 2024 G7 summit. [PCS]

President William Ruto has called for expanding the mandate and financial muscles of regional lenders to help mobilise more domestic resources for development across the continent.

Addressing Afreximbank's annual meetings, via video link, Ruto backed the upgrading of the pan-African lender’s status within the new Africa Club Alliance to drive coordination on mobilising capital across the continent.

In February this year, a group of leading African multilateral development banks and finance institutions launched the Alliance of African Multilateral Financial Institutions, known as the Africa Club.

The alliance was established under the auspices of the African Union Commission to foster greater collaboration and coordination on issues including debt management, restructuring negotiations, and advising governments on borrowing conditions aligned with development priorities.

As founding members, the alliance includes pan-African organisations such as the Afreximbank, Africa Finance Corporation, Trade and Development Bank Group, and regional insurers covering trade, investment and risks.

"Afreximbank should play a leading facilitation role in this mission," Ruto said, arguing a "critical level" of investment was needed to catalyze Africa's industrialization.

Ruto proposed that African central banks commit up to 30 per cent of their over $1 trillion in total reserves to Afreximbank and other regional institutions.

This, he said, could see hundreds of billions more mobilized domestically to finance priorities like green infrastructure projects.

“To release more African resources, for investment in African development, I propose that African -central banks and governments commit 30 per cent of their reserves to the Afreximbank and other African Development Banks,” said Ruto.

President Ruto also voiced support for Afreximbank President Benedict Oramah's call to triple the bank's capital to $100 billion to boost its financing capacity.

Analysts said boosting Afreximbank in line with Ruto's recommendations would position it as a heavyweight able to scale up support across the continent.

“What we need to do is to make the bank bigger and bigger. We have an efficient way of getting internal capital. The bank should be a 100-billion-dollar bank,” said Oramah.

As a leading voice on Pan-African cooperation, observers say Ruto seeks to empower bodies advancing financial autonomy while coordinating multi-country efforts.

If realized, the initiatives could see the continent's largest development lenders scaled up significantly to drive an industrial transformation agenda backed by domestic African resources.

Barbados Prime Minister Mia Motley voiced support for recommendations by Ruto on steps African central banks could take internally.

By championing African solutions and championing greater autonomy over resources, she said Ruto sought to empower institutions advancing Africa's economic sovereignty.

President Ruto’s push reflects a vision of Pan-African banks playing a central role in financing Africa's development ambitions from within, said Prime Minister Motley.

Analysts said boosting Afreximbank's financial firepower through higher capital contributions would allow it to scale up support for infrastructure and trade projects.

With total African reserves now exceeding $1 trillion according to Afreximbank estimates, Ruto's proposal if implemented could see hundreds of billions more for priority areas.

The comments signal a push to empower Pan-African institutions like Afreximbank that can help drive an economic transformation agenda using domestically mobilised funds.

Experts viewed the drive to bolster African multilateral banks as timely given the current global economic and debt challenges facing the continent.

Last month in Nairobi, President Ruto announced that Kenya will increase its shareholding in three key African financial institutions, including the African Development Bank, by $100 million as a show of confidence in efforts to solve the continent’s problems.

President Ruto said at the time during the opening ceremony of the AfDB annual meetings in Nairobi that the extra capital injection would also go to the Cairo-headquartered African Export-Import and the Bujumbura-based TDB.

The new investments are meant as a show of confidence in the institutions to help mobilise more financing from within and beyond the continent, according to Dr Ruto.

According to analysts, African multilateral development finance institutions (DFIs) can play a pivotal role in helping governments address sovereign debt vulnerabilities through innovative financing mechanisms, capacity-building support and best-practice debt policies.

By acting as a coordinator, experts say the Africa Club has the potential to provide strategic guidance to members and governments in areas such as accessing international capital markets, while also promoting sustainability standards.

This could pave the way for a more resilient and prosperous future for African economies through regionally-led solutions, observers noted. The alliance seeks to bolster the collective influence and impact of Africa's continental financial institutions.