Highlights of Year 2005 Positive economic outlook and indicators - - PowerPoint PPT Presentation

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Highlights of Year 2005

• Positive economic outlook and indicators for Africa
• G8 adopts the Multilateral Debt Relief Initiative
• Mr. Donald Kaberuka assumes office as the seventh elected

President of the Bank Group in September

• Constitution of a Presidential Task Force on Institutional Reform
• Bank policies and mix of products are amended to better address the

needs of member countries

• Launch of first Botswana Pula denominated bond under the local

currency initiative

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Table of Contents

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African Economic Outlook Bank Financial Profile

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Capital Market Activities

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Bank Group’s Activities and Road Ahead

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The combination of the positive economic outlook and greater attention from the international community should result in progress towards achieving the Millennium Development Goals in Africa 1

African Economic Outlook

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3.5% 4.0% 4.9% 5.2% 4.6% 3% 4% 4% 5% 5% 6% 2001 2002 2003 2004 2005

Drivers

Macroeconomic stability – Debt relief – Continued global expansion

Africa’s 2005 real GDP growth rate exceeded 4.5% for the third consecutive year

18 countries achieved GDP growth rates above 5 % Average per region Central Africa: 4.8% North Africa: 4.8% East Africa: 5.6% Southern Africa: 5.0% West Africa: 4.4%

Real GDP Growth

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• 5%
• 2%

1% 4% 7% 10% 13% 2001 2002 2003 2004 2005

Significant improvement in terms of trade and export growth lead to two consecutive years of current account surplus for the first time in two decades.

• 2.0%
• 1.5%
• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 2001 2002 2003 2004 2005

Terms of Trade Current account as a % of GDP

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Improved export performance and debt relief measures have contributed to a steady decline in debt service

53.3% 52.9% 48.3% 42.4% 35.7%

30% 40% 50% 60% 2001 2002 2003 2004 2005

17.8% 14.9% 13.8% 12.0% 10.6%

10% 15% 20% 2001 2002 2003 2004 2005 Debt Service Ratio Debt / GDP

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Sound macroeconomic policies and strengthened economic management are yielding result which will allow countries to pursue second-generation reforms, such as privatization and public sector reforms.

7% 8% 9% 10% 11% 12% 2001 2002 2003 2004 2005

• 3%
• 2%
• 1%

0% 1% 2% 3% 2001 2002 2003 2004 2005

Inflation Fiscal balance as % of GDP

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G8 SUMMIT ON POVERTY

Fight against disease and hunger: Bono, Clinton & Gates Commission for Africa

1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria and other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development

Multilateral Debt Relief Initiative Still, only few African countries will achieve the MDGs by 2015 even if all existing commitments to increase aid are honoured. African Infrastructure Consortium

In 2005, the spotlight of world development agenda was firmly on Africa

Millennium Development Goals

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Bank Group’s Activities and Road Ahead

In 2005, the Bank continued to build on its achievements and to reposition itself for greater effectiveness and efficiency in the delivery of its mandate

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 Access to ADB window  Access to ADF window  Access to ADB and ADF windows

Providing impetus to Africa’s development through the three windows of the ADB Group

Bank Group Vision

“The African Development Bank is the premier financial development institution of Africa dedicated to combating poverty and improving the lives of the people of the continent and engaged in the task of mobilizing resources toward the economic and social progress of its regional member countries”

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The Bank Group’s coverage of regions and sectors is well diversified

Since inception, over 3,100 approvals amounting to UA 38.6 billion (US$ 55.2 billion) as at 31 December 2005

Central Africa 11.9% Southern Africa 13.3% Multiregion 3.1% North Africa 32.7% West Africa 24.2% East Africa 14.8%

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The Bank Group’s approvals reflect customized assistance

24 out of 33 eligible African countries already benefit from debt relief under enhanced HIPC initiative

In UA million

US$ 3.3 billion US$ 4.3 billion US$ 2.6 billion US$ 2.8 billion US$ 3.0 billion

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The Bank’s Middle Income Countries Initiative in 2005 further increased the attractiveness of the ADB window

COMPETITIVE PRICING

Commitment fees eliminated for new sovereign guaranteed loans Lending spread decreased from 0.5% to 0.4% Market risk premium eliminated for fixed rate loans

ENVIRONMENTAL IMPACT TECHNICAL ASSISTANCE

MIC Trust Fund amount increased from UA 1 million (US$ 1.43 million) to UA 16 million (US$ 22.87 million) Ceiling per project raised to UA 600,000 (US$ 857,562) from UA 100,000 (US$ 142,927) Loan-processing procedures streamlined

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Manufacturing 0.90% Others 1.00% Oil & Gas 13.90% Infrastructure 12.20% Infrastructure Funds 8.70% Finance 55.20% Mining 6.10% Tourism 2.00%

192 199 164 180 241 270 306 255 257 206

50 100 150 200 250 300 350 2001 2002 2003 2004 2005

Approvals in UA million Approvals in US$ million

Development of a vibrant and competitive private sector across Africa is a strategic priority for the Bank

Loans 30.0% Private & Quasi- Equity 0.8% Equity Funds 9.3% Guarantee 0.7% Lines of Credit 53.6% Enclave Projects 5.6%

Sector Distribution Product Type Private sector strategy focus on

• Creating a conducive business environment
• Strengthening financial systems
• Improving infrastructure through Public-Private

Partnerships

• Promoting development of trade and

small-and-medium scale enterprises

Cumulative approvals: UA 1.17 billion (US$ 1.67 billion)

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ADF addresses the needs of low-income countries

• ADF borrowers offered the flexibility to select the currency of their

choice

Policy Update 2005 Activities Highlights

• Project lending prioritized agriculture and rural development, transport,

social sectors and multi-sector activities which account for 84.2% of ADF loan approvals in 2005

• 2005 grant approvals benefited 18 countries and almost doubled to UA

415 million (US$ 593 million) from UA 214 million (US$ 332 million) in 2004

• 2005 grant operations focused on water and sanitation, agriculture and

rural development, the social sector and transportation

Approvals

• UA 16.26 billion (US$ 23.24 billion) of assistance provided at end-2005

through ten replenishments of ADF

• Total approvals Increased to UA 1.42 billion (US$ 2.03 billion) in 2005

from UA 1.26 billion US$ 1.96 billion) in 2004

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Through co-financing and partnership, the Bank Group enhances the resources and expertise mobilised for Africa

• From 1967 to 2005, the Bank

participated in 852 co-financing operations, amounting to UA 84.2 billion (US$ 120.4 billion).

• In 2005, 19 operations for UA

3.2 billion (US$ 4.6 billion) were co-financed compared to 31 operations for UA 2.9 billion (US$ 4.4 billion) in 2004. 47.7% 6.7% 18.6% 0.6% 9.5% 1.2% 15.7% Multisector Energy Sector Environment Finance Transportation Agricultural Sector Social Sector

Sector Distribution in 2005

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The Multilateral Debt Relief Initiative launched in 2005 aims to complement the HIPC debt relief process

• HIPC debt relief is projected to substantially lower debt stocks

and debt ratios for most HIPC beneficiaries

• 14 countries had reached completion point at end - 2005, 11 are

at decision point and 7 are at pre-decision point

• The G8 Summit in July 2005 proposed that the ADF, IDA and IMF provide

100% irrevocable debt stock cancellation for countries that reach the completion point under the enhanced HIPC initiative

• 33 of the 42 eligible countries are in Africa
• Underlying Principles: Irrevocability and additionality of debt relief as well as

preservation of the financial integrity of ADF and IDA

• Based on debt outstanding and disbursed at December 31, 2004, as the cut-
• ff date, and January 1, 2006, as the implementation date, the cost of

canceling the ADF debt of the 33 potential beneficiaries, after HIPC relief, is estimated at UA 5.84 billion (US$9.06 billion) in nominal terms.

• Donors will make new contributions to match, “dollar-for-dollar”,

foregone principal and service charge payments based on an agreed burden sharing Heavily Indebted Poor Countries Initiative Multilateral Debt Relief Initiative

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The Bank Group continues to champion vital initiatives on the continent

Global statistics initiative to meet the demand for reliable regular and comparable data, and to strengthen statistical capacity in the continent leading to increased investor confidence and private capital flows. In 2005, under the supervision of the Bank, 48 RMCs started monthly data collection, providing the Bank with the monthly price data of available goods and services for 853 products. Conceived by the Bank to assist countries emerging from conflicts to clear their arrears, re-engage with development partners and become fully reintegrated in the international

• community. At end 2005, the arrears of Burundi and the Republic of Congo have been cleared

through this facility. Bank selected in 2005 to host the Secretariat of the African Infrastructure Consortium for which NEPAD is lead infrastructure agency. Took part in all support missions in 2004 and 2005 to launch APRM in nine countries and the actual peer review missions in Ghana, Rwanda and Kenya. Rural Water Supply and Sanitation Initiative: (RWSSI) was launched by the Bank in 2004 to provide safe water and basic sanitation to 80% of the rural populations in Africa by 2015. It is a USD 14.2 billion initiative to be financed by ADF, donors, government resources and

• beneficiaries. At end 2005, 8 RWSSI programs and 2 studies were approved.

African Water Facility: This USD 600 million facility seeks to strengthen water resource management in the continent. At end 2005, donor countries had pledged EUR 9.9 million in financial support. The Bank has committed EUR 1.8 million over 3 years.

Post-Conflict Country Facility Water Initiatives

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Strengthen the Bank’s operations with renewed country focus and greater delegation to regional offices Adapt the Bank’s structure to enable it to fulfill its mandate better Invest in Bank Staff and improve business and administration processes Deepen the Bank’s research capacity TASK FORCE ON INSTITUTIONAL REFORM

The Bank continues to build on the strong foundation laid by past reforms to serve its regional members more effectively

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The Bank’s decentralization process is well under way

Algeria Angola Burkina Faso Cameroon Chad DRC Ghana Kenya Malawi Morocco Rwanda Sierra Leone Sudan Zambia

Offices Logistically Operational

Egypt Ethiopia Gabon Nigeria Madagascar Mali Mozambique Senegal Tanzania Uganda

Offices Planned/ Work-in Progress

• 25 Offices to be established before the end
• f 2006
• Countries covered would represent approx. 89% of

the Bank’s current portfolio

• Strengthening institutional capabilities, ensuring

greater development and making the Bank more client-responsive

• Field offices expected to strengthen country

dialogue, country portfolio performance and project implementation

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The Bank’s robust financial position bolsters its ability to deliver on its development mandate Bank Financial Profile

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The Bank enjoys strong shareholder support for its development mandate

Netherlands Norway Portugal Spain Sweden Switzerland UK Canada USA

Europe 21%

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central Afr. Rep. Chad Comoros Congo Côte d’Ivoire

• D. R. Congo

Djibouti Egypt Equatorial Namibia Niger Nigeria Rwanda

• S. Tome &

Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Africa 60% Americas 11%

Austria Belgium Denmark Finland France Germany Italy

Middle East 0.7%

Kuwait Saudi Arabia India Japan

Asia 7.3%

China Korea Argentina Brazil Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Libya Madagascar Malawi Mali Mauritania Mauritius Morocco Mozambique

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The ADB’s strong financial condition protects its bondholders

* Not restated. The Bank defines “usable capital” as the sum of paid-in capital, reserves, and callable capital of countries rated double-A and above

Leverage

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Growing reserves and stable earnings enhance the Bank’s risk bearing capacity…

221 144 178 189 125 1,508 1,465 1,266 2,266 2,187

2001* 2002* 2003* 2004** 2005

Net Income Total Reserves In UA million * These figures have not been restated. Net income figures exclude the IAS 39 adjustment. **The total amount transferred to reserves on 1 January 2005 due to the application

• f the IFRS changes was UA 700.18 million.

2005 Net income US$ 316 million Reserves US$ 3,239 million

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… allowing the Bank to allocate significant amounts from income …

In millions * Subject to approval by Board of Governors Income Allocation

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… to development initiatives.

Income Allocations in UA Millions

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The Bank’s exceptional risk bearing capacity reinforces its ability to

• perate in a challenging environment

1,948 1,983 2,023 2,066 2,112 2,187 2,266 1,266 1,507 1,465 494 469 491

1,000 2,000 3,000 4,000 5,000

2001 2002 2003 2004 2005

Paid-in capital Reserves Loan loss provisions

Uses of risk capital

In UA million

Based on the effects of the revised IFRS, effective 1 January 2005, the nature of loan loss provisions has changed from ‘general’ to ‘specific’; accordingly, loan loss provisions represent a reduction in the exposure to the relevant country, not a source

• f risk capital. Therefore, the main components of the Total Risk Capital are Paid-in Capital and Reserves.

Unused risk capital 49% Sovereign portfolio 45% Treasury 2% Non-sovereign portfolio 4%

As of 31 December 2005 2005 Risk capital Paid-in capital: US 3,018 million Reserves: US$ 3,239 million Risk capital

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In its peer group, the Bank’s risk bearing capacity is unsurpassed …

101% 89% 44% 50%

0% 20% 40% 60% 80% 100% 120%

AfDB AsDB IADB IBRD

Usable capital / Risk assets Source: Moody’s. Moody’s define usable capital as “all capital related payments plus reserves and unallocated net income.” Risk assets are defined as loans to countries considered below investment grade by Moody’s. All data is as of 31 December 2004, except for the IBRD’s, which is as of 30 June 2004.

Capital Adequacy Ratio

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… and the Bank’s concentration risk is the lowest

86% 165% 191% 137%

0% 50% 100% 150% 200% 250%

ADB AsDB IADB IBRD

5 largest exposures to equity

Source: Fitch All data is as of 31 December 2004, except for the IBRD’s, which is as of 30 June 2004.

Concentration Ratio

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Aaa/AAA Aaa/AAA Aaa/AAA AAA/Aaa Aaa/AAA AfDB ADB EBRD IBRD IADB AfDB’s financial ratios compare favourably with those of peers

Provisions for losses + adjusted shareholders equity + AAA callable capital / Disbursed loans, equity investments & guarantees (%) Gross debt / Adjusted shareholders equity (%) Operating income / Average assets (%) Liquid assets / Total assets (%)

166 186 216 281 260 2.2 0.8 1.3 0.6 1.3 173 128 147 112 118 45 27 38 13 20

Source: Standard & Poor’s All data is as of 31 December 2004, except for the IBRD’s, which is as of FY 2005.

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CAPITAL MARKET ACTIVITIES

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The Bank is a flexible and responsive issuer in the capital markets

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The Bank’s borrowing strategy enables it to provide cost-effective resources to African countries

ZAR 1.6% USD 44.2% BWP 0.6% CAD 11.0% CHF 2.6% JPY 30.9% GBP 1.0% AUD 2.9% EUR 5.0% HKD 0.1% SEK 0.0%

 Public bond issues in the Global, Euro and

domestic markets

 Private placements including structured

notes

 Loans  Unlimited Global Debt Issuance Facility  Euro 1 billion Commercial Paper

UA 5,940 million (US$ 8,490 million) as of 31 December 2005

 Raise cost effective resources to on-lend to

clients

 Flexible in order to address investor needs  Responsive to market trends  Develop and nurture a well diversified investor

base

 Maintain a regular presence in the public

international markets

Public Issues 51.5% Private Placements 24.4% Uridashi 21.9% Loans 2.3%

Instruments and debt programs Funding Strategy Currency distribution and structure of the outstanding portfolio

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The Bank maintains a constant presence in the global debt market

Americas 43% Europe 1 5% Asia 40% Middle East & Africa 2%

2003 – USD 1,000 million Global – 3.25% due 2008 2004 – USD 500 million Global – 3.75% due 2010 2005 – USD 500 million Global – 4.50% due 2009

Fund M anagers 27% Corporates 1 % Central Banks 48% Pension Funds 5% Insurance Companies 8% Banks 1 1 %

Investors – by Type Investors – by Geography

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Funding Strategy for 2006 leverages on the achievements of 2005

• Dollar global benchmark bond issue
• Uridashi Issue (targeted at Japanese

investors)

• Botswana Pula Issue
• Private Placement

2005 UA 545 million (US$ 779 million) raised through:

• Continue to expand the Bank’s global

investor base

• Remain responsive and flexible in order

to address investor needs

• Address strategic issues in domestic and

public markets

• Sustain activity in private placements
• Issue bonds denominated in African

currencies 2006 borrowing program Has a ceiling of UA 850 million (US$ 1.2 billion)

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Building on success in African currencies

The Bank is monitoring issuance possibilities in several other African currencies

IFR Comments

• “ … the transaction … represented the first true

Eurobond in the currency….”

• “… good demand from European institutions

with the paper quickly sold out, primarily on the back of the chunky 10% coupon and the positive economic story that has emerged from Botswana since independence in 1966.”

EUROWEEK Comments

• “AfDB defies pessimists to launch clearable

pula Eurobond”

• “The African Development Bank … priced the

first Botswana pula Eurobond that will be fully clearable in the currency.”

IFR Comments

• “The African Development Bank (AfDB) last

week

• pened

the door to the Tanzanian shilling market with a US$10m

• ne-year

currency-linked bond …”

EUROWEEK Comments

• “AfDB introduces new market with synthetic

Tanzanian shilling bond”

• “The African Development Bank has become

the first supranational borrower to issue a bond linked to the Tanzanian shilling”

BOTSWANA PULA ISSUE BWP 300 million 10% due 12 January 2007 TANZANIAN SHILLING ISSUE USD 10 million linked to TZS 11.8% due 20 February 2007

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The Bank enjoys the highest credit rating

Strong Support from Member Countries Healthy Capital Position Excellent Liquidity Preferred Creditor Status Prudent Financial Management Franchise Value Quality of Management

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APPENDIX

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ADB: Summary financial information

In UA million

Net Income Reserves Paid in Capital***

net of CEAS

Subscribed Capital Approvals Assets

2001 2002 2003 2004 2005

987 1,068 746 1,520 869 8,873 8,197 10,034 10,792 11,601 21,491 21,510 21,564 21,597 21,636 1,770 1,803 1,866 1,920 1,967 1,266 1,465 1,508 2,187** 2,266 125* 189* 178* 144 221

* These figures have not been restated. Net income figures exclude the IAS 39 adjustment. **The total amount transferred to reserves on 1 January 2005 due to the application of the IFRS changes was UA 700.18 million. ***Paid-in Capital excludes non-convertible currencies and non-negotiable notes

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ADB: Statement of income and expenses (UA million)

YEARS ENDED 31 DECEMBER 2005 2004 2003 2002 2001 OPERATIONAL INCOME AND EXPENSES Income from loans 324.23 323.11 325.46 414.82 447.82 Income from investments 155.37 123.57 99.77 74.01 121.32 Total operational income 479.60 446.68 425.23 488.83 569.14 Interest and amortized issuance costs (217.12) (197.08) (219.59) (258.69) (349.45) Unrealized loss/(gains) fair valued borrowings and related derivatives (30.77) (7.70) (81.65) 37.20 82.30 Unrealized gain/(loss) derivatives on non fair valued borrowings 7.22 (10.35) Provision for loan losses 13.85 (53.86) 21.51 (3.49) (53.80) Net operational income 252.78 177.69 145.51 263.86 248.20 OTHER EXPENSES, net Administration expenses 155.69 142.20 109.32 81.82 73.99 Management fees (114.02) (104.59) (77.55) (59.50) (52.19) Administration expenses - net (41.67) (37.61) (45.14) (32.27) (30.35) Other income 15.72 7.40 2.61 1.25 1.40 Depreciation (7.10) (6.42) (5.57) (5.51) (5.88) Provision for equity investments 0.75 3.31 (1.68) (0.06) (5.62) Loss/(gain) on exchange (0.74) (0.84) 0.98 (1.20) (0.09) Translation gains and losses 1.58 Total other expenses, net (31.46) (34.16) (48.80) (37.79) (40.54) Net income 221.32 143.53 96.71 226.07 207.66

2004 has been restated

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ADB: Balance sheet highlights (UA million)

YEARS ENDED 31 DECEMBER 2005 2004 2003 2002 2001 ASSETS Due from banks 70.34 43.80 66.54 89.18 92.97 Demand obligations 3.80 3.91 3.80 6.83 27.94 Investments 5,155.05 4,435.42 4,135.88 1,972.62 2,071.26 Derivative asset 285.93 274.79 253.90 149.11 135.77 Non-negotiable instruments 25.90 31.18 41.81 57.48 62.78 Accounts receivable 556.38 397.48 203.91 265.18 333.24 Outstanding loans 5,512.44 5,640.43 5,612.24 5,967.66 6,465.81 Accumulated provision for loan losses (194.61) (213.59) (469.09) (491.66) (494.17) Equity participations, net 168.70 160.60 164.22 163.84 159.56 Other assets 16.98 18.14 21.34 16.69 18.38 11,600.91 10,792.16 10,034.55 8,196.93 8,873.54 LIABILITIES, CAPITAL & RESERVES Accounts payable 498.22 377.17 194.77 232.34 382.98 Securities sold under agreements to repurchase and payable for cash collateral received 466.96 9.30 113.91 0.00 Derivative liability 317.25 513.89 396.09 61.83 64.81 Borrowings and embedded derivatives 5,940.40 5,638.89 5,799.11 4,455.04 5,211.28 Capital 2,263.45 2,213.51 2,168.50 2,125.07 2,077.80 Cumulative exchange adjustment

• n subscriptions

(151.76) (147.20) (145.33) (141.99) (129.61) Reserves 2,266.39 2,186.61 1,959.21 1,919.47 1,715.41 Cumulative currency translation adjustment reserve

• (451.71)

(454.83) (449.13) 11,600.91 10,792.16 10,034.55 8,196.93 8,873.54

2004 has been restated

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