← This Week in Global Development
This Week in Global Development
A new era at the African Development Bank, and Trump’s rescission package
00:23:48
This week, Akinwumi Adesina https://www.devex.com/news/the-bow-tie-bows-out-adesina-s-10-years-at-afdb-110719#Echobox=1756730008 as the chief of the https://www.devex.com/organizations/african-development-bank-afdb-19838 after a 10-year tenure. He was...
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- [00:00]
A
FOREIGN My name is David Ainsworth and you're listening to this week in Global Development, hosted by myself, Dimitri Kamba and Adva Saldingham. I'm joined by Ayan at Mercy, a global development reporter, and by Michael Igoe, our senior reporter. And this week we're going to be talking a little bit about the new head of the African Development bank. And we're going to be talking once again, unsurprisingly about Donald Trump. And this week the subject is what is a pocket rescission and why does it matter to you? So Aina, if it, if it's all right, I'll turn to you first if you want to just kind of fill us in. There've been some momentous changes this week at the aftb. So what's the big news?
- [00:43]
B
Yes, indeed, big news this week. So on September 1st, we had City Old TA's first day as president. And so this marked the end of the 10 years of Akimumi Adesina as President of the AfDB. And he was really a president that sort of became synonymous with the institution. He had really big ambitions. He tripled the bank's capital from just under a hundred billion to over 300 billion in his 10 years in office. He launched big projects like Mission 300, which aims to electrify 300 million Africans in a pretty cutting edge partnership with the World Bank. There hasn't been a partnership quite like that before between the two institutions. Institutions. And you know, he's referred to as Africa's optimist in chief and so had these really, really big ambitions and really met them in a lot of ways. Of course there were some shortcomings in some other ways. We had some things like desert to power, which was this also pretty ambitious project to bring electricity to the Sahel, which, you know, five years in is only about 3% completion. So in part because people said that it lacked some implementation guidelines, also in part because of unavoidable circumstances like things like Covid. And there were also some shortcomings when it came to things like decentralization. The FTB still remains really a bank that's in Abidjan, although it's been on Adesina's agenda and his objectives to start decentralizing it more towards the region. So this is kind of like broad view of how the bank's been doing. But overall, you know, people really, really adored Adesina. He had really glowing farewells from African leaders, from people like Ajay Banga, the president of the World bank as well. So it's it's pretty big shoes for Sidi Ult Tahu to step into. He's an economist and former minister from Mauritania and before this he was also working at a multilateral bank. And the thing that's really interesting about Sidi Ulta, I think there's many things, but one of them is that he has a lot of experience with the Arab League. So the bank that he was working at before Bedeah used to be based in Khartoum. I mean, technically still is, but because of the conflict had to temporarily moved to Saudi. But basically it's backed by the Arab League and it's an Arab League backed bank for African Development. And so his, his victory in the AfDB elections, according to many analysts, was kind of an acknowledgment that this might be the direction that we're pivoting to, or countries like, you know, uae, Saudi, et cetera, which are really increasing their, their, their investments in places like Africa. And this is happening as obviously the US is retreating. And so, you know, his victory, someone who has worked so closely with these countries, seems really to be a nod in the direction of, you know, we're going to be shifting towards new non traditional donors for Africa and especially for the African Development Bank.
- [03:40]
A
Okay, that's really interesting. You've written a little bit about that, I think. I don't want to put you on the spot there, but this, with this kind of growth of the Gulf States as a force in Africa, do you think that's something that we're going to continue to see?
- [03:51]
B
Yeah, I definitely do think that traditionally these donors, you know, the Gulf states, they've been really important in their own neighborhood. You know, huge amount of money has gone to places like the Middle east, to Asia, but we're increasingly seeing a lot of investment, a lot of donations as well to the continent. And also this also comes as a really complex thing. You know, the conflict in Sudan, for example, in which many people accuse the UAE of backing the rsf, which is one of the fighting parties of the conflict. And so this is, you know, they're, they're putting in a lot more money, but also it's coming at a cost according to some. So, and there's obviously a lot of resources right in Sudan. It's a lot about gold and also about fertile farmland. We have some agricultural interests in other places too, reportedly in places like Ethiopia. So I think we can expect to see a lot more interest, a lot more investment, the shape of which is kind of yet to be determined.
- [04:50]
A
Jump in, Michael, if you have anything that you want to add on this.
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C
No, I would just note, I think it's a fascinating case study of exactly what INAT is describing, which is sort of how the centers of power and global development are shifting in front of our eyes in really rapid ways and in ways that play out in terms of personnel and leadership appointments. We think about these things at such abstract geopolitical levels, but then they're actually reflected in the choice and appointment of somebody to lead an institution like the African Development Bank. I think it's just a really interesting example of how sort of like, the landscape of global development is shifting so quickly right now.
- [05:28]
A
I think that is really interesting, isn't it? Like, we're seeing, we've got anger coming up in the next couple of weeks, and it's such an increasingly multipolar world. We're seeing the BRICS powers kind of flex their muscles, seeing the Gulf States really flex their muscles, and a lot of them are kind of getting in on the act as international donors as a way of kind of saying, hey, we're on the scene now. We are also in a position to come in and make investments in your country and you don't have to look to the global north anymore. And just at exactly the same time that we're seeing the United States and Europe kind of taking a step back.
- [06:02]
C
And I mean, it's worth, I think, acknowledging, regardless of how you feel about it, that that's actually one of sort of the stated goals and ambitions of the Trump administration is to sort of compel other countries to step up and provide more, you know, financing for, for global development projects and not for countries not to be so reliant on, on US Official development assistance. So, you know, maybe, I don't know, there are a lot of ways to interpret those trends, I suppose that is absolutely fascinating.
- [06:32]
A
And I know you, you, you wrote a bit as well about. We're going off stated topic here, but I think this is interesting. You wrote a little bit as well about the reaction of Africans to the withdrawal of United States aid. And a lot of them were like, you, you, you wrote this great qu. Crime from Kenyatta.
- [06:50]
B
Yes, from the former president of Kenya, Uhuru Kenyatta. Yeah. I mean, it's been a mixed bag. Right. So I think there was obviously the shock at the beginning, but there's also quite a lot of pragmatism, like from someone like Kenyatta that's saying, of course this was kind of happening, or of course this could happen. You know, people, American presidents are beholden to American voters, they're not beholden to you. So that's the kind of context which he was like, why are you crying? People here? And you know, some people. I spoke to someone who works at the Minist Interior in Somalia who is also saying, you know, this is really necessary. We've been really dependent on aid. We've been locked in this aid trap and we need something to kind of shake us out of it. And this is one of the most aid dependent countries in the world. Right. This is someone from, from the country of Somalia. So there's, there is a fear in, in some ways an immediate fear, but people really do think medium to long term. It's kind of for the best that the US is stepping back. But I mean, everyone kind of wishes someone had given them a little bit.
- [07:48]
A
Of the time, I think. Yeah. The way that they did it was possibly suboptimal, it was not up. But there was a general kind of sort of sang froid really like. And I had a really interesting conversation last week during Pro Week with Daganali from Modesto, a Kenyan nonprofit, who was saying, really, you guys have lost a lot of moral authority in a lot of different ways. You've really not kind of you think that you're the good guys, but the Africans aren't so sure. Just. And she said, I think ODA is on a very fast path to death. I'm not sure I completely buy that. I think there may have been a little bit of hyperbole in there, but really interesting to get that perspective. Anyway, let's jump back to what we're supposed to be talking about, which is city altar. So tell us a bit about the guy who's taking over and what he said he wants to do and what the challenges are that are kind of facing him.
- [08:36]
B
Yeah, so he did set out kind of his first 100 day priorities that he would focus on. One of them was, you know, first of all going to listen to all of the staff and the partners and do that as a number one priority. And he wants to also prioritize speeding up some reforms and cutting bureaucracy and also expanded finance for jobs with a focus on women and youth. And he has stated that his number one priority as president is job creation, which makes a lot of sense. Right. It's a really young continent and, you know, we need jobs here. One of his biggest tests is actually going to come pretty soon and that's in the replenishment of the adf and that's the concessional window of, of the African Development Bank. And so this is for the lowest income African countries. And Adesina really expanded it during his tenure. It reached a record 8.9 billion at ADF 16. And so we're actually going to start the process of the first meetings that Cedi Ulta will be attending in relation to ADF 17 will be in October and people will start making pledges in December. So it's a pretty immediate test. Adesina before leaving had said that we should aim for 25 billion for replenishment, which is obviously much bigger than his 8.9 that he raised last. So this is a really big ambition. But at the same time, in the past couple of months senior AFDP people have said, you know, maybe we have to tone down that ambition a bit, just realistically, because one of the biggest donors to, to the ADF is of course the United States, which said that they would be taking out their $500 million that they, that they had given last year. So these are kind of the major questions and the extent to which he's really able to capitalize, tap into these new non traditional donors like the Gulf, which we'll see probably maybe the first examples we'll be seeing is like in the commitments that they make towards the ADF in the next couple of months, 25 billion.
- [10:24]
A
That is what the British at least call a hospital pass. And if the same vocabulary kind of transfers over to other countries, Michael will make fun of me again for using ridiculous Britishism. It's a.
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C
Who just lost half of our listeners?
- [10:38]
A
Well, it should be the same in the NFL, right click. It's a rugby term for a pass that you receive and then immediately an extremely large guy jumps on top of you whilst you're sitting in the air and you find yourself lying on your back with your legs up in the air going, help. What just happened to me? It's a pass.
- [10:53]
C
No, that one does actually translate. Yeah.
- [10:55]
A
In any case, when, when somebody says, hey, I'm off now, bye, you've got to raise 25 billion, that would be a definition of what we would call a hospital pass, I think, like difficult setting up unrealistic expectations for your successor and then leaving.
- [11:09]
B
Indeed. I will say though, you know, there's been so much innovation at the time of Agona as well. African Development bank was actually the first multilateral development bank to issue hybrid capital. And so this was $750 million worth, which is really expanding its potential lending capacity. So I think we'll be seeing a lot more of that kind of following the footsteps in terms of innovation, like how do we tap into to markets, more capital markets. So that also in another sense he's really set him up for exploration in terms of new ways to raise money.
- [11:41]
A
I think one last thing on this is I'm really fascinated by the shift towards strengthening of African institutions in general. We're seeing the African Union take a bigger and bigger kind of stake in African affairs. We're seeing the AFDB kind of stepping up a little bit. It's obviously extremely challenging for 54 very diverse African nations to try and speak with one voice. But there does seem to be a little bit more willingness to do that. Would you say? Is that the theme you're seeing here?
- [12:07]
B
Yeah, I mean, so I'm actually going tomorrow to the African Climate Summit in Addis, which is the second time that one of these has happened. And the first one was in Nairobi two years ago. And so this is a really interesting platform conference where African countries, and this is all kind of organized by the African Union are coming together to formally put together like the African position ahead of something like cop. And so this is really powerful, you know, like I don't think we would have seen quite this level of coordination before. I think, you know, you know, on. On another side though, one thing that I thought was really interesting was a lot of analysts had kind of expressed some frustration that there hadn't been better coordination between African countries in the context of things like, like U.S. tariffs. Right. And the. What seems like the non renewal of agoa. This seemed. And people had kind of repeated to me saying these are the times where we needed someone coordinating an African response. Like there's many countries, big countries, big economies that we all could have been on one page. And so you know, who should have been doing this, who should have been coordinating this? Some people said the AfDB should have played a bigger role in doing things like this. But I think in terms of coordination, we definitely have a lot more expectations. But also on the flip side, South Africa is now taking on the presidency of the G20. So maybe this is a role that that country can step into.
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A
Yeah, I've been fascinated by the role that global south countries have taken as leaders of the G20 in the last couple of years and the development priorities they've put forward.
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C
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- [14:20]
A
Well, I'd love to carry on talking about this, but there is one other major topic on the news this week. Michael, I don't know if you have any last words or thoughts on the AU and aftb, feel free to share them. But otherwise, could you kind of lead us onto the topic of rescissions and what's just happened there and kind of run run us through the decision last week and why that's been such a big deal?
- [14:40]
C
Yeah, absolutely. So Speaking of the U.S. pullback of funds, this is not in the past tense. We're still seeing renewed efforts to effectuate that agenda. So on Friday, the White House submitted to Congress another rescissions proposal. And folks probably recall the sort of battle that took place over the summer over the first rescissions proposal, which mostly targeted foreign aid to the tune of about 8 billion. It also included included funding for like, public broadcasting in the US which strangely for the domestic audience, sort of got more attention than the foreign aid piece, even though the foreign aid piece was so much bigger. But anyway, we saw that unfold over the summer. The White House was successful in securing congressional approval to claw back funds that Congress had already appropriated for foreign aid. There was some negotiation there where lawmakers were successful in kind of winning a symbolic victory to pull PEPFAR funding out of that package. I've had some conversations since then that sort of cast a little bit of doubt on that because I guess the sort of level that a rescission operates is not that specific. It's just general accounts. So to say that you're protecting one specific subset of that, it's not, it's not really clear how that would happen. Anyway, fast forward to last week. Friday, of course, it's always a Friday. The White House submitted another rescissions proposal to Congress. This time it was like $4.9 billion. And again entirely, well, and this time entirely focused on foreign aid. So that's kind of a new thing. Like rescissions happen all the time. It's just sort of a budget technicality that exists to sort of, you know, do some last minute accounting in the budget process. But this idea that you would go after one particular sector like foreign aid and do so with so much money at stake, like billions of dollars, is a new thing. So that's, first of all, what's different. And then the second thing that's different with this, this second rescissions proposal is the timing of it. So the fiscal year in the United States runs through September. So the end of the fiscal year is the end of September, which means that we're, we're rapidly approaching that date. And the way a rescissions proposal works is that it effectively freezes the funds in question for 45 days, during which Congress has the opportunity to consider the proposal and either approve or deny it. So by, by making a, by issuing a rescissions proposal so close to the end of the fiscal year, the White House is essentially tying up those funds for a length of time that will cause them to be unusable through the end of the fiscal year. And all or most of the funds in question this time will expire when that date hits. So it's, this is what's called being called a pocket rescission. And basically it's a way to claw back the funds by submitting a rescissions proposal. But it doesn't even matter if it gets approved or not, because the funds are going to expire when the fiscal year ends. So this is something that's been kind of floated a few times before. It's the first time it's actually been done since 1977 during the Carter administration. Administration. In the interim, the Government Accountability Office determined that it was illegal because it essentially removes the power of the purse, the power over budgets from Congress and hands it to the executive branch and lets them sort of circumvent that constitutional authority. But Trump's budget director, who is a fellow by the name of Russell Vogt, who many, I think are probably becoming very familiar with, has been sort of looking for an opportunity to test that legal argument and has determined that foreign aid is the place to do that. So in this effort to sort of amass more budget authority for the White House to sort of change the balance of power between the legislative and executive branch when it comes to federal spending, foreign aid has emerged as kind of the, the experiment, the proving ground for that theory or that, that constitutional argument. So that's what we're seeing play out right now.
- [18:44]
A
And you talk about seeing that play out, nobody really quite knows how it is going to play out. There's going to be some fighting about it in Congress. There'll be some argument. It's not clear whether there's some indication, I think, that they're not going to be as divided as cleanly along Party lines on this, as they may have been on most other issues. But then potentially, I don't know whether this could be challenged in the courts. What are the kind of next steps now that, that this pocket resistance has gone in?
- [19:09]
C
Yes, wide range of possibilities. So in contrast to the like, in retrospect, the first rescissions thing looks kind of straightforward. Right? Because it was a rescissions proposal, there was some negotiation, Congress ended up approving it, and it was all sort of related to a debate about whether you want to spend on foreign aid or not. That was sort of. Those were sort of the contours of the argument at that time. This time is different because of this pocket rescissions element, which is much more of a constitutional question then a question about sort of foreign aid policy. So you're right, Dave. Like, we've already seen kind of the shape of the argument shift a little bit, where last time it was a debate over, you know, should we spend foreign aid funds or not, Is this a thing that the US Needs to be doing? Now it's more of an argument over is this legal? Is the White House making a power grab? Is this in violation of the Constitution? And some of the early reactions that we've seen from lawmakers, including one influential Republican, Susan Collins, who is the chair of the extremely powerful Appropriations Committee, those have been about the constitutionality question and have, you know, raised concerns about that. She actually called it this an illegal move. So I do think we're going to see a different sort of resistance this time, less a debate about foreign aid, more a debate about constitutional separation of powers. And, you know, if the past is any history, like, it's hard not to conclude that the development community sort of lost the debate over foreign aid during the first rescissions proposal. A debate that's more about, you know, legal issues and Congress's authority might, you know, have a little bit more of a chance of swaying in the positive direction for the aid community this time. So it all remains to be seen. I do think it's going to go to the courts and, you know, raises this big question of, like, how and when and will the US Congress sort of start to push back on some of these things that we're seeing from the administration. And I think that's the question that's kind of, kind of sort of characterize the next 12 months or so.
- [21:05]
A
Okay, very briefly, because we, we're, we're running very low on time, but can you just kind of summarize for us the, the broader kind of considerations that we're facing right now with it. We're approaching another debate over the US Budget. We may see more pocket rescissions, as I understand it. That's not ruled out if this one's successful. But then there seems to be quite a large amount of money that there's up for grabs in the next few weeks in the budget debates. Obviously, foreign aid is very low down the totem pole when it comes to actually, they're debating hundreds of things and foreign aid is just one of them. But it's by no means clear that the White House is going to successfully push through its reductions in aid. But then it's by no means clear what happens afterwards if it doesn't succeed.
- [21:48]
C
Yeah, that's right. So we've got some reporting coming out on this. So whether the rescission happens or not, the State Department, which now controls foreign aid spending, has a super short timeline to push out the remaining foreign assistance funds that are due to expire by the end of the fiscal year. It's common that you would see a buildup of funding towards the end of the fiscal year and then a big rush to try to get it out the door. But the pace of spending from the State Department because of the massive disruption that we've had this year because of the administration's sort of apparent lack of desire to spend foreign assistance funds, has just been much, much slower and created a big, you know, multi billion dollar buildup of funds that will go back to the treasury if they're not spent by September 30th. You know, I've talked to Hill staffers about this who say they're not getting the congressional notifications that would tell you that the, the administration plans to spend the money. They haven't heard a strategy for spending it. They're really in the dark about this. So we've got like, you know, three weeks for several billion dollars to either get spent or to expire unless Congress takes some sort of action. And it's not entirely clear to me what the options are there, but I suspect we'll hear about that as well.
- [22:57]
A
So everything is up in the air. Nobody understands what's going to happen. Everything is completely uncertain. Very much a picture of foreign aid, foreign assistance. Under the Trump administration, more things change, the more they stay the same.
- [23:10]
C
And we're just about to start negotiating the next budget, so that'll happen in the next couple of weeks as well. So, yes, everything is sort of colliding at once.
- [23:19]
A
Yes. No clarity whatsoever on that either that we can expect. Right. We're gonna have to wrap it up there short and sweet this week. Thank you very much to both of you, to Michael and to Iron Out. That was absolutely fascinating, as always. And we'll see you all next week.