The African Development Bank’s Support to Post- Conflict States BY SUNITA PITAMBER onflict and fragility are considered to pose a major challenge to Africa’s growth prospects. While the continent has seen rapid positive economic growth over the last few years, Cthere is strong evidence that this has not resulted in inclusive economic and social trans- formation. The High Level Panel on Fragile States, established by President of the African Development Bank (AfDB), Donald Kaberuka, and chaired by H. E. President Ellen Johnson Sirleaf of Liberia, indicates that, “Africa is changing at an extraordinary speed.” New and emerging challenges posed by rapid urbanization, youth unemployment, lack of private sector development, and pressures on natural resources, amongst others, continue to create pockets of fragility and conflict. This article outlines the AfDB’s support in some of the countries affected by fragility and conflict. It will further clarify the evolution of the Bank’s approach to capture some of the most pressing emerging needs. The argument is organized in four sections: 1) the background and context of the Bank’s support for post-conflict countries: 2) the tools used to address fragility and post-conflict reconstruction and development in the Mano River Union, Somalia and the DRC: 3) lessons learned from these previous experiences: and 4) new areas in which ways of providing such support are being developed. Background and Context The origin of the AfDB’s support for the stabilization of post-conflict countries goes back more than a decade. While the Bank has responded to fragile and conflict-affected situations in Regional Member Countries (RMCs) since its inception, it was initially noted that the very institutional and policy weaknesses that characterize post-conflict countries had constrained the Bank’s ability to effectively assist these countries. Operations in post-conflict countries had been sharply reduced or stopped in the context of unstable political and economic environments and recurring conflict, as well as the increasing Dr. Sunita Pitamber is Head of the Fragile States Unit at the African Development Bank. PRISM 5, NO. 2 FEATURES | 107 PITAMBER weight given to demonstrated country perfor- In 2001, the AfDB initiated support in the mance as a basis for allocating resources. form of debt sustainability by establishing the However, by the early 2000s the Bank recog- Post-Conflict Country Facility (PCCF) that nized the limitations of the approach of con- constituted a very specific instrument for tinued disengagement, and realized that sim- arrears clearance. This was mainly a financial ply withdrawing from these difficult instrument that provided an incentive to the environments until they righted themselves country and other donors to clear the debt of would only increase costs and risks in the long certain post-conflict countries under a strategic run. In addition, the significant negative spill- partnership where the Bank would put in a over effects on better performing neighboring certain amount towards the arrears clearance, countries were increasing the risk of regional as would interested donors, and the country fragility. itself would contribute a certain amount, Moreover, the buildup of large arrears to which could be as little as one U.S. dollar. The the Bank by these countries was itself a con- Bank, through the PCCF, cleared the arrears for straint to further engagement even when there the Democratic Republic of Congo (DRC) in was a peace agreement. In response, the Bank 2002, and Liberia and Comoros in 2007, has progressively and significantly strength- respectively. ened its engagement in post-conflict countries In 2008, the Board of Directors approved with much more targeted, refined and innova- a new Bank strategy for enhanced engagement tive approaches that seek to overcome the in fragile states (SEEFS). This was another existing weak institutional and governance major strategic innovation in the Bank’s environments in these countries. approach to address the development chal- lenges of fragile and conflict-affected countries Women work at a small business in Côte d’Ivoire 108 | FEATURES PRISM 5, NO. 2 THE AFRICAN DEVELOPMENT BANK’S SUPPORT TO POST CONFLICT STATES (FCS) and placed it within an overall opera- a technical assistant was recruited to help tional and financial framework. the Minister of Finance with the numerous tasks needed in his office. In Liberia, the Innovations under the SEEFS recruitment of technical assistants in the The central element of the Bank’s operational taxation department helped to train the approach in FCS under the SEEFS has been to local staff in improving taxation reporting provide a distinct framework, concretized and collection systems which resulted in the through the dedicated Fragile States Facility country mobilizing USD 1 million in 2011, (FSF). The approach has aimed at providing simply by auditing tax returns and ensuring effective and sustained support that is more that tax claims were appropriately filed. integrated, more flexible and more closely Similarly, in Guinea the technical capacity coordinated with other development partners support delivered through the African Legal than are other Bank operations. Facility enabled the authorities to renegoti- The new strategy allowed the Bank to ate some of the older extractive industries engage in fragile states which were under sanc- contracts which resulted in huge windfalls tions, provide early and targeted support for to the country. In Togo, as another example, key technical assistance, judicious use of devel- funds were provided to recruit an indepen- opment budget support in circumstances dent auditing firm to audit the backlog of six where it might not otherwise be available as an key ministries, which resulted in the unlock- instrument of assistance, more flexible pro- ing of about USD 20 million in budget sup- curement rules in select circumstances, and port from other donors. support via a dedicated Fragile States Unit ■■ Development support: The investment (OSFU). support provided by the Facility, in the form ■■ The Fragility Continuum: the SEEFS of grants, helped stabilize salaries and the opened the way for the Bank to engage in payroll as well as urgently-needed infrastruc- countries affected by fragility and conflict ture development. For example, Cote immediately, even as peace was being nego- D’Ivoire, the DRC, Liberia and Sierra Leone tiated. Early engagement was seen as critical received budget support programs in the to mitigating the active conflict and provid- early stages of peace that helped those coun- ing the government legitimacy for continued tries to further stabilize their economies. peace and stability. Other support such as to the agricultural sec- ■■ Technical Capacity Building: The dedi- tor as well as to water supply and sanitation cated resources available for capacity-build- infrastructure rehabilitation, was key to pro- ing under the fragile states facility are con- viding food security and basic services. sidered very valuable by the eligible ■■ Arrears Clearance: The Bank’s leadership countries. This new instrument allowed in providing a platform for arrears clearance countries to use (as grants) as little as USD for Liberia, DRC and the Comoros was 50,000 up to a maximum of their allocation another critical element for the respective (sometimes as high as USD 12 million) to countries’ debt sustainability, which also fill critical technical and institutional capac- enabled a more conducive investment ity gaps. For example, in the case of Somalia PRISM 5, NO. 2 FEATURES | 109 PITAMBER environment for other donors as well as for The FSF was designed to provide opera- the private sector. tional support through three windows (or “Pillars”) which differentiate between fragile Innovative Funding Mechanisms states: Pillar I for countries that have severe The Bank has made further efforts to support needs due to conflict or other crises and that urgently needed services even in situations of have demonstrated a commitment to consoli- ongoing democratic consultation processes. In date peace and security; Pillar II for countries 2010, in a bid to support priority recovery that also i) have additional financial require- activities of the Government of Zimbabwe, a ments stemming from the accumulation of group of donors decided to create the arrears to the Bank (and other institutions) Zimbabwe Multi-Donor Trust Fund (the Zim- and ii) are potentially eligible for debt relief Fund), as a successor to the Zimbabwe under the Heavily Indebted Poor Countries Programmatic Multi-Donor Trust Fund (Zim- (HIPC) Initiative; and Pillar III, to provide lim- MDTF). The African Development Bank was ited and targeted support in a broader range of designated to manage the Zim-Fund with the fragile situations, including countries at risk of endorsement of the Government, the Donor drifting into conflict or crisis in areas that Community and the United Nations at their could “not be adequately addressed through meetings in Harare and Washington in 2010. traditional projects and instruments,” includ- The purpose of the Zim-Fund is to con- ing secondments for capacity building, small tribute to early recovery and development grants to non-sovereigns for service delivery, efforts in Zimbabwe by mobilizing donor and knowledge-building and dialogue. resources and promoting donor coordination The allocation of FSF resources represents in the country, in support of such efforts. The a substantial addition to what was provided thematic scope of the Zim-Fund initially through the Bank’s regular performance-based focuses on infrastructure investments in water allocation process (PBA). Resources allocated and sanitation, and energy. An independent to the 12 Pillar I countries represent an 89 per- fund management firm has been recruited to cent addition to what was provided through oversee all day-to-day activities related to the the regular performance-based allocation pro- fund while an independent procurement man- cess (PBA).1 For Pillar II, no resources would agement firm conducts all procurement activi- have been possible without the arrears clear- ties.