AfDB's equity participations to hit 10 to 15 per cent, sources say
APA-Dakar (Senegal) The equity participation of the African Development Bank (AfDB) is expected to move from 10 to 15 percent of its capital, a reliable source told APA on Thursday.
This expected rise is part of a proposal by the AfDB Board of Directors submitted as a resolution project to the Board of Governors which is expected to endorse the decision.
If the measure becomes effective, the rise in the equity participation will match with the AfDB medium-term strategy approved by the Board of Directors in December 2008.
The aim of this measure is to optimise more efficiently the Bank’s capital in order to carry out its development mission, according to a memorandum submitted to the Board of Governors which is one of the Bank’s highest decision-making bodies.
The rationale behind the modification of the aggregate limit is the need for considering the rise in the exposure to equity participations, the memorandum reports, quoting the agreement establishing the Bank.
This agreement provides that the outstanding equity participations shall be paid by ordinary capital resources of the Bank and shall not exceed a percentage of the total amount of the share capital to be released and set by the Board of Governors as the “sole relevant body”.
The risky nature of equity participations is the reason given by the AfDB leadership to explain the proposed modification of the aggregate limit, amidst a context of scarcity of “resources available in the continent compared to the high demand”.
The AfDB 44th Annual Meetings which opened Sunday in the Senegalese capital, rounds up on Thursday with the possible adoption of an agenda for action aimed at leapfrogging over the current global crisis which “the attendant shockwaves” are rocking the economies of 53 member states holding 60 percent of the Bank Group’s shares.