ADF Deputies met in Abidjan, Côte d’Ivoire, from 11 to 13 November 2015, for the African Development Fund (ADF-13) Mid-Term Review. They were joined by Governors/representatives from Côte d’Ivoire, Ghana and Malawi and observers from International Financial Institutions. The meeting was chaired by Mr. Richard Manning, the ADF Coordinator.

The ADB Group President, Dr Akinwumi Adesina, opened the meeting and thanked donors for their strong support to Africa through the ADF. The President recognised the role of the Fund in delivering in a difficult context, particularly the Ebola Crisis and the Bank’s return to Abidjan. He highlighted the critical contribution of the Fund to the priorities of the Ten Year Strategy. In accordance with this strategic framework, President Adesina shared his vision of the High Fives, through which the Bank would deliver outcomes in the priority areas of energy, agriculture, regional integration, industrialisation and enhancing the quality of life of Africans. He stated that the Bank Group, in partnership with others, should lead in delivering the SDGs in Africa and to do this, he emphasised the need for the Bank to be efficient and nimble. The President also shared his intention to set up a high-level panel to promote the private sector in Africa, including in ADF-eligible countries.

Participants commended Management for the timeliness and quality of the papers prepared for the Mid-Term Review. They welcomed the frank and open discussions on both the Fund’s achievements and challenges, as well as on proposals to better implement its strategic priorities. Participants further urged the Fund to continue to observe selectivity and prioritization in its interventions, while acting as a catalyst to leverage additional resources.
IDEV Evaluation of GCI-6, ADF-12 and ADF-13. The evaluation confirmed that the Bank Group is on track with required reforms. However, IDEV found that it could do more to resource emerging initiatives, implement them effectively, and bring them to their full conclusion. Thus, it recommended that the Bank Group:
i. focuses on fewer and more strategic commitments, with realistic timelines and estimated costs for delivery;
ii. enhances monitoring and managerial accountability for implementation of all commitments, not only for one-off deliveries;
iii. simplifies the ADF replenishment process; and
iv. seeks early Board ownership of commitments.

Participants welcomed the Evaluation, and agreed that for ADF-14, recommendations/commitments should be strategic and streamlined. They agreed that a partnership between Deputies, Board, and Management was needed and shared IDEV’s emphasis on the importance of implementing policies and strategies.

ADF-13 Operational Priorities. Participants recognised that the Bank is on track in delivering its commitments under ADF-13. This was particularly praiseworthy in light of the move from Tunis to Abidjan. However, participants also noted (i) the lower disbursement rate, and (ii) slow uptake of the innovative financing instruments (partial credit guarantee, partial risk guarantee). Despite the delay in its establishment, Management assured participants that the Private Sector Credit Enhancement Facility was now fully operational and finding strong demand. Participants encouraged Management to pay close attention to the debt sustainability of Regional Member Countries (RMCs). In addition, participants requested a dedicated ADF results framework, noting that the Annual Development Effectiveness Report covered the Bank Group. Management agreed to present a report on results attributable to ADF-11, 12 and, to the extent possible, ADF-13, for the first replenishment meeting. Participants agreed that there was still room to strengthen the Bank’s capacity to effectively deliver results on the ground without compromising quality. They requested the Bank Group plays a key role in climate financing – the President confirmed that energy and climate finance was at the top of his agenda. As regards governance, participants emphasised the critical role of the Fund in supporting RMCs through policy based financing and urged the Fund to promote domestic resource mobilisation, taxation and to enhance public financial management. They further noted that the Fund should play an increased role in curtailing the flow of illicit finance from and money laundering on the continent.

Institutional Effectiveness. Participants noted that almost all commitments have been met and the return to Abidjan has been well-managed. Some participants requested completion of the independent skills audit and new compensation framework and noted that culture change would require sustained support from top management and the Board. On decentralisation, participants noted progress and requested information on outcomes achieved and costs to date. The President highlighted that work on a new business model was well advanced and that it would be supported by a new organizational structure and culture based on skills, delivery and appropriate incentives. While participants encourage the Bank to strengthen its capacity, concerns were expressed about cost-efficiency, and the need to achieve a consensus on the 2016 budget. Management committed to squeezing out all efficiencies noting also the reality that Abidjan structurally has a higher cost base than Tunis.

Gender. Participants welcomed the significant progress in gender advocacy and mainstreaming gender in the Bank’s operations and since the appointment of the Special Envoy on Gender. Participants stressed the need for (i) continuing to mainstream gender across the Bank and (ii) strengthening the Bank’s capacity to promote an institutional gender culture. They were also encouraged by examples of gender-sensitive operations, but sought more attention to data and gender-disaggregation of expenditures.

Fragility. Participants welcomed the responsiveness of the Transition Support Facility (TSF) to crises such as Ebola. They recognized its added-value in country specific situations (as highlighted in Mali and Sierra Leone) with some terming the performance as worthy of a “center of excellence”. They recommended that the Bank Group should seek to do more in applying private sector-dedicated instruments in these situations. In addition, participants agreed with Management’s proposal to maintain the remaining Pillar II resources through for possible arrears clearance for Somalia, Sudan or Zimbabwe on a first-come-first-served basis. While Management’s assessment was that Zimbabwe was, based on currently available information, the most likely to come first, one Deputy differed with such assessment of readiness. Management advised that the issuance of Article 4 by IMF would be the trigger to move forward on Zimbabwe.

Performance-based Allocation. One Deputy proposed adding a fragility component to the PBA. Some other Deputies acknowledged the existence of the TSF as an acceptable alternative solution. The general sense of the meeting was not to re-open this matter in ADF-14, given the extensive discussions of the PBA that took place during the ADF-13 negotiations. However, it was agreed that an updated PBA simulation would be provided at the first replenishment meeting as a basis for determining any further action.

ADF Working Group Report. Participants welcomed the report of the ADF Working Group on innovative instruments, and noted the potential impact on the Advanced Commitment Capacity. Management will submit in-depth analysis on the three options (ie. concessional development loans, buy-down mechanism, and bridge loans) before the first ADF-14 replenishment meeting.
Management agreed on a joint paper with the World Bank on the division of responsibilities between ADF and IDA. Participants were briefly updated on progress of implementation of the “ADF Policy Innovation Lab”, an initiative financed by the Bill and Melinda Gates Foundation.

ADF-14 replenishment. Participants agreed to maintain a three-year cycle for ADF-14 and to discuss the possibility of moving to a four-year cycle thereafter. There was brainstorming on priorities and deliverables for ADF-14 with one participant pithily stating “What? How? And how much?”. The Coordinator concluded that three replenishment meetings would be held, in early March, June and September 2016, with the first two taking place in Abidjan. The Coordinator agreed to circulate a proposed agenda, taking into account the orientations shared by Deputies, including IDEV’s recommendation for greater focus.

Other Matters: Switzerland confirmed its voluntary increase in its contribution to the ADF by 21 million Swiss Francs (US $21.2 million).

1.ADF Deputies and observers from international development institutions, bilateral agencies, AfDB Board members and AfDB Management met in Tunis, Tunisia from 12 to 14 June 2013 to discuss the thirteenth replenishment of the African Development Fund (ADF-13). They were joined in their discussions by the Minister of Economic Infrastructure from Côte d'Ivoire and the Deputy Ministers of Finance of Ghana and Malawi. The meeting was chaired by Mr. Richard Manning and this Chair’s Summary is issued under his responsibility.

2.Opening the meeting, President Kaberuka underlined the role of the ADF in promoting high quality, sustainable growth to support Africa’s structural transformation in the context of the Bank Group Strategy for 2013-2022. He emphasized the accomplishments of the Bank Group, which have been achieved despite the substantial challenges at the global and regional level. The President highlighted that the roadmaps on the return to the Bank’s headquarters in Abidjan and on decentralization are key priorities going forward, as well as the wider ongoing reform process to enhance institutional efficiency, effectiveness, accountability and empowerment of staff. He also pointed out that the Bank had developed from being a small and very centralized organization to a larger and more complex one. He referred to the importance in this context of the new Delegation of Authority Matrix, enhanced accountability and the planned introduction of performance contracts. Recalling Management’s ambitions for Africa and the institution, he urged the donors to keep the Fund strong whilst acknowledging the difficult fiscal environment, arguing that it is now more necessary than ever as Africa confronts the challenges of transformation. Management is making substantial efforts to attract new members, both African and non-African, and to leverage the scarce ADF resources. He outlined the thinking behind the Africa 50 Fund, stressing that it did not involve new set-asides, and was intended to be complementary to other innovative financial instruments. The President stressed the need to conclude the replenishment process on time in order to avoid a hiatus between the start of the financial year and the entry into force of ADF-13.

3.The Deputy Minister of Finance from Malawi acknowledged the substantial support from the ADF and commended its responsiveness in face of a very difficult macro-economic environment. He recalled that the ADF’s operations, particularly in the area of infrastructure, are helping to stimulate trade, increase food production, improve sanitation facilities, access to clean water and support income-generating activities. He underlined that the Bank Group’s new country strategy for Malawi is fully aligned to the government’s own national development strategy, focusing on regional integration and mainstreaming gender as well as green and inclusive growth. He encouraged Deputies’ support for a continuation of such efficient use of ADF resources.

4.The Deputy Minister of Finance and Economic Planning from Ghana pointed to the clear development results on the continent achieved by the ADF, and expressed that this is the time to keep the Fund strong, to stay the course and not to contemplate weakening it. He emphasized that as African countries progress in their development, their needs become different, and the Bank Group should respond to this accordingly with innovative instruments, advice and technical support, especially in areas of skills development. He urged the Deputies to continue to support the ADF so that the Fund can continue to support fragile states, low-income countries and emerging middle-income countries in the most appropriate way.

5.The Minister of Economic Infrastructure of Côte d’Ivoire shared his experience of the ADB, based on its closer knowledge of the continent and ability to leverage private sector financing, showing responsiveness to countries’ needs by being willing to take risks that other institutions would not take. He also highlighted that fragile states are disproportionately affected by delays to project implementation, often due to procurement, and face greater challenges of human capacity, and stressed the importance of understanding the regional effect of conflict and fragility. He emphasized that the Bank’s decentralization was helping to improve effectiveness, but urged the Bank to further develop its instruments, services and competences to continue to serve clients who are in transition.

6.Participants welcomed Egypt’s expressed intention to remain a donor in ADF-13, and Libya’s announcement of a contribution of approx. USD 37 million to ADF-13.

7.Participants recognized the AfDB Group’s sole focus on Africa and that it is a trusted partner for African countries, supported by its ambitious program of decentralization to bring it closer to its clients. They welcomed the strong focus on regional integration and the unique convening and brokering role the Bank Group has shown that it can play. Some Deputies felt that the AfDB Group could be more explicit about its role in policy dialogue, particularly in the area of governance, and called for a more consistent and prominent treatment of the issue of gender. Several Deputies requested further information on a new strategic framework and action plan for gender equality, and on the Gender Special Envoy.

8. Participants welcomed the ADF-13 operational priorities and areas of special focus, which are derived from the Bank Group Strategy for 2013-2022. They encouraged the Bank Group to expand its role in the area of domestic resource mobilization and natural resource management in Africa. Some participants also emphasized actions to tackle issues of illicit financial flows (including both pull and push factors). If addressed, these would all offer a strong potential for enabling Africa to increasingly finance its own development. Deputies urged Management to quantify the impact of ADF inves

Institutional effectiveness and efficiency
9. Participants commended Management for the efforts being made to further strengthen institutional effectiveness and efficiency, and stressed the need to carry these forward into execution. They encouraged Management to ensure a smooth and well-managed process in implementing the Roadmap for the Return to Abidjan, and stressed the importance of continued pursuit of value for money and efficient use of budgetary resources.

10. Accountability and results culture: Participants underscored the importance of a true results culture at all levels of the institution. They welcomed the Bank’s initiative to strengthen performance management at senior management level, which would have strong cascading effect throughout the institution. They noted that good people management and career development are vital in attracting and retaining high-quality staff. The progress that has been made in reducing vacancy rates should be sustained.

11. Initiatives/Reform matrix: : While expressing appreciation for the matrix summarizing the Bank’s modernization agenda, participants emphasized the importance of prioritizing and properly sequencing the reforms and initiatives, whilst ensuring the linkage to the Bank’s Results Measurement Framework, and against the background of the return of the Bank to its headquarters in Abidjan. In response to requests from Deputies, Management will provide clarification on the linkage between the listed initiatives and the work currently being undertaken by McKinsey, as well as an updated matrix (highlighting strategically important activities, key deliverables and midterm targets), for the third replenishment meeting, with a view also to providing a basis for monitoring of progress at the next MTR.

12.Delivery and portfolio performance: Participants acknowledged the importance of decentralization and effective delegation of authority for efficient delivery of services. RMC participants stressed that country presence has led to greater responsiveness of the Bank, smoother implementation of projects and faster disbursement, but it was noted that the time taken from approval to first disbursement was still significant. Participants noted the Bank’s increased efforts towards greater use of country systems and intensive support for capacity building. They stressed the need to strike the right balance in applying flexible and adaptable approaches in Bank’s business processes/procedures in the context of fragile states, while managing fiduciary and other risks. Participants also highlighted the importance of closer engagement with non-state stakeholders at the country level, which is an essential part of the Bank’s work in the area of governance and accountability.

13.Gender:Participants expressed appreciation for the greater coverage of gender issues in the documentation, and for the appointment of a Gender Special Envoy (who might usefully attend the next Deputies’ meeting). They stressed the need to complete the gender strategy and action plan expeditiously for discussion at the Board in September. Some considered that the target for increasing female representation in senior management positions was very unambitious, and encouraged Management to reconsider it.

Presentation from independent evaluation department (OPEV)
14. Participants welcomed a presentation from the Director of the independent evaluation department (OPEV) and commended the work achieved. Several Deputies encouraged greater use of impact evaluation. A number of Deputies also called for further strengthening the independence and effectiveness of the evaluation function, including through independent management of financial and human resources by the Evaluation Department. Emphasizing the role of “knowledge takers”, Deputies encouraged the Bank to better follow up on key recommendations made by OPEV and to ensure that evaluation knowledge is fully included in its efforts to become a “knowledge bank”.

15. Participants encouraged OPEV to undertake a broader evaluation study of the African Development Bank, in line with a number of studies recently completed by sister institutions that were named in OPEV’s presentation. It was agreed that OPEV will submit a concept note with options outlining the scope, timing and methodology of such a study, which will be submitted to the Committee on Development Effectiveness (CODE) of the Board of Directors.

Results Measurement Framework (RMF)
16. Participants commended the new draft Results Measurement Framework and the reforms undertaken to better report and manage for results. They welcomed the greater focus on inclusive growth, green growth and gender, while encouraging Management to work closely with other institutions to strengthen the metrics in these areas. Deputies made specific suggestions for the inclusion of indicators covering a range of areas including governance, fragile states, transparency, water, malnutrition prevalence, and inclusive growth, and emphasized the need to pay special attention to indicators of green growth including, for example, measures of CO2 emissions. One Deputy asked for further disaggregation of outputs. At the same time some Deputies cautioned against diminishing the value of the RMF as a management tool by adding too many new indicators.

17. Underlining the importance of keeping a focused and limited set of indicators for the RMF, and agreeing with Deputies that the cost of any system must be kept under control, Management agreed to circulate by the end of June 2013 a matrix providing definitions and the rationale for the indicators suggested in the new RMF, giving Deputies an opportunity to provide further comments. Management also agreed to present a final draft of the RMF to CODE ahead of the third ADF-13 replenishment meeting, before presentation to the Board in October

Fragile States
18. Participants reiterated their support for the Fund’s sustained and deeper engagement in Fragile States to preserve the gains made, while stressing the need for additional improvements in delivery and management of assistance. They strongly endorsed the importance given to this issue in the Bank Group’s Strategy for 2013-2022, and urged Management to expedite the work of the High Level Panel on Fragile States so as to ensure that its work can inform the drafting process of the new AfDB strategy on Fragile States and that preliminary recommendations feed into the third ADF-13 replenishment meeting.

19. Bank Group’s effectiveness in fragile states:
Participants supported the strategic directions and welcomed the participation by two such Resident Representatives in the meeting. operational focus outlined by Management, and urged for a greater attention to private sector development, youth and inclusiveness. They underscored that the AfDB has the opportunity to enhance the effectiveness of its assistance to fragile states by leading innovative solutions in addressing regional implications of fragility; deepening “continuum” approaches to tackling fragility; improving donor coordination and exploring a “single desk” approach on a pilot basis; exploring options to improve procedural efficiency and flexibilities in business processes; building long-term capacity; and better supporting countries in arrears. In this context several Deputies referred to the New Deal for Engagement in Fragile States and asked for strong coordination with the International Dialogue on Peace- and State-building. Furthermore, Deputies stressed the importance of ensuring that the Bank could deploy high-quality staff in Fragile States, and welcomed the participation by two such Resident Representatives in the meeting.

20. Proposed adjustments: Participants broadly supported Management’s proposals to improve the flexibility, responsiveness and effectiveness of the ADF operational and resource allocation framework to fragile states and implementation of the FSF. While calling for additional clarification in some areas, to be included in a short note for the third replenishment meeting, they endorsed Management’s proposals to:

21. Citing the importance of respecting the Bank’s Sanctions Policy, many Deputies expressed reservations on the proposal to allow exceptional access to a country’s PBA in situations of emerging needs or changing circumstances (and where the country does not have Pillar I resources). It was pointed out by the Minister from Côte d’Ivoire that the inability of the Bank to provide more than technical assistance to such countries could pose real problems. Management will provide additional clarification and assessment criteria on the proposal, for further discussion during the third meeting.

22. FSF resource envelope: Participants agreed that the overall size of the FSF resource envelope as well the final amount for each pillar should be discussed during the last meeting, while underscoring their commitment for sustained and predictable support for eligible countries. Some Deputies expressed concern about the potential size of the allocation to the FSF.

ADF-13 financing framework and capacity
23. In response to Management’s proposals, Participants provided the following guidance:

24. It was agreed that the technical gap would more appropriately be discussed at the next replenishment meeting. Several Deputies asked for a further and more conservative Replenishment Scenario, for example one that would take constant nominal donor contributions as a basis. I gave it as my opinion that in order to avoid self-fulfilling prophecies and recognizing that actual contributions were bound to deviate from any scenario, a preferable alternative would be to assume as a first approximation that if resources fell below the present low scenario, all allocations expressed in nominal terms should be reduced in proportion to the shortfall. Clearly this will be a focus of our next meeting, when the real level of resources available will be a good deal clearer and necessary trade-offs can be discussed against that background.

Innovative Finance Instruments
25. Participants expressed broad support in principle for introducing the two innovative instruments proposed, the Partial Credit Guarantee and the Private Sector Facility, in ADF-13, subject to more detailed proposals being elaborated, presented to and approved by the Board of Directors. The proposals should address the following issues, among others:

26. There was an informal briefing on the Africa50Fund, which received strong support from the Deputy Ministers from Ghana and Malawi and the Minister from Côte d'Ivoire, who highlighted the huge infrastructure needs of the continent and the imperative of attracting long-term investment. 6 Most of the Deputies who spoke supported the general concept, while requesting further details, clarification, elaboration and justification. Some questioned the appropriateness of using ADF resources for the Africa50Fund. Several Deputies underscored the time likely to be needed to implement the proposal given the number of pending questions, and the need to take account of constraints faced by other such funds.

Resource Allocation
27. Participants welcomed the quality and technical detail of Management’s proposals concerning the Performance-Based Allocation (PBA) system. A large majority of Deputies agreed that the minimum allocation should be increased to UA 15 million per cycle. A few Deputies expressed their desire to see a lower increase in the minimum allocation (in line with IDA-17’s which was raised to UA 12 million per cycle). I concluded that we should go ahead on the basis of Management’s proposal.

28. Mixed views were expressed on the proposed addition of a Cluster E to the Country Policy and Institutional Assessment and inclusion of the Africa Infrastructure Development Index in the PBA formula. Some Deputies expressed reluctance to modify the PBA formula, and expressed concern at perceived complexity and about changing the balance between the needs and performance components of the formula, Others supported the proposed measures to promote stronger alignment of the PBA system with the ADF’s operational priorities, particularly its focus on infrastructure, as set out in the Strategy for 2013-2022. It was agreed, in the absence of consensus, that Management will continue the discussions with Deputies on a bilateral basis and will present at the third replenishment meeting a proposal which should have a reasonable chance of being accepted.

29. Participants took note of the two scenarios proposed for the Fragile States Facility. Given Deputies’ agreement to the proposed modified phase-out discounts and top-up multiplier, in principle the lower scenario should be used for modelling the uses of the Replenishment. It was agreed to decide the final size of the facility (and, as noted above, the operational features of the proposed unallocated element of Pillar 1) during the third meeting.

30. Deputies agreed to Management’s proposals to (i) allow FSF Pillar I allocations to leverage Regional Operations envelope funding and (ii) offer a differentiated multiplier of 2 times for the countries eligible for FSF Pillar I, versus 1.5 times for other ADF recipients. Recalling the existing demand from beneficiary countries, several Deputies supported a strong RO envelope. Deputies also expressed general support for pursuing greater leverage of policy reforms through the RO incentive mechanism on a pilot basis in ADF-13. Concerning countries with small PBA allocations, Deputies agreed to require a contribution of at least 40 percent of project costs up to 10 percent of their PBA for each regional project undertaken.

31. Participants supported the allocation of UA 165 million from ADF-13 resources to the Private Sector Facility, subject to the Board agreeing to the introduction of this instrument. The final amount will be agreed with respect to the global amount of set-asides.

32. The disposition of unused ADF-12 resources as well as the final allocation of ADF-13 resources between the PBA and the set asides will be decided at the final replenishment meeting.

Draft Deputies’ Report
33. Following reflection of the discussions during the second replenishment meeting, a revised Draft Deputies Report will be circulated to Deputies in 3-4 weeks, i.e. by mid-July for their detailed comments.

34. Participants made some initial suggestions on points to be included in the Report, as follows: MDG shortfalls, gender equality, institutional effectiveness (including a monitorable action matrix), policy design, the Fund’s role in natural resource management, governance and accountability, domestic resource mobilization, better definitions for inclusive and green growth (linked to the Ten Year Strategy), the recommendations from the High Level Panel on Fragile States, the role of OPEV and the reports to be produced in time for the ADF-13 MTR. In addition, the next steps to 7 be undertaken by the Bank Group in the process of developing the innovative financing instruments should be included.

Next Meeting
35. It was confirmed that the next meeting would be held on 25-26 September 2013, probably in Tunis.

1. ADF Deputies and observers from international development institutions, bilateral agencies, AfDB Board members and AfDB Management met in Tunis, Tunisia on 21-22 February 2013 to discuss the thirteenth replenishment of the African Development Fund (ADF-13). They were joined in their discussions by the Governor from Cote dIvoire, and the Deputy Director from the Kenya Ministry of Finance, representing the Governor from Kenya. The President of Liberia, the Honourable Mrs JohnsonSirleaf also addressed the meeting. The meeting was chaired by Mr. Richard Manning and this Chair’s Summary is issued under his responsibility.

2. Opening the meeting, President Kaberuka called on donors to sustain the momentum of growth and poverty reduction in Africa through a Replenishment that would advance the transformation of Africa as envisioned by the Bank Group’s draft Long Term Strategy. He underlined the special emphasis the Bank Group has placed on fragile states and gender equality going into ADF-13, and announced that he would be appointing a Special Envoy for Gender. He called for a constructive discussion on the ADF resource allocation system while ensuring responsiveness to the diverse and evolving needs of Africa’s low-income countries. President Kaberuka highlighted the Bank’s strong commitments and continued efforts to strengthen institutional effectiveness, efficiency and results.

3. President Sirleaf spoke both as President of Liberia and as chair of the Bank’s newly established High-Level Panel on Fragile States. She commended the Bank for its responsiveness in addressing the needs and special circumstances of her country, where she asserted that its support had ‘made a critical difference’, and of other fragile states, while arguing for even greater attention to regional dimensions of conflict, better coordination between donors and stronger leadership of the Bank, making a case for specific action in the Mano River Union, and for further adapting mechanisms of financing. She mentioned in particular seven challenges: donor coordination, addressing the roots of fragility, regional dimensions of fragility, regional programming, adapting financing modalities, building up local capacities, and increasing responsiveness and accountability.

ADF-13 Strategic direction and operational priorities
4. Drawing on President Sirleaf’s introductory remarks and on specific examples where the Bank had facilitated and contributed to strategic advances, particularly at regional level, Management underlined the unique role of the Bank as a trusted partner to the continent and the ADF’s achievement of development results. Noting the significance of this, Participants commented in particular on the following points:

Institutional effectiveness and results
5. Participants recognized important reforms that have been undertaken in recent years, improvements particularly striking to those who had been Deputies in earlier Replenishments. They however urged the Bank to make further progress in the areas of:

Fragile states
6. In line with President Sirleaf’s speech, Participants welcomed AfDB’s enhanced support since 2008 and the need for sustained and deeper engagement so as not to lose the gains made. They stressed the importance of the Fragile States Facility (FSF) and encouraged additional improvements in management and delivery of assistance to fragile states. Management provided an update on actions taken in recent months, including the relocation of the Fragile States Unit to the office of the First Vice President and Chief Operating Officer, and the devolving of FSF Pillar III operational activity to the various country teams.

Performance-Based Allocation (PBA)
7. Participants welcomed Management’s efforts to improve the PBA system, acknowledged that the evolution of ADF’s clients was a strong rationale for revising it, and recalled previous agreements that performance must remain central to ADF’s resource allocation. They emphasized that any changes to the system be as simple, transparent and comprehensible as possible, and built on sound and accessible data, and evidence of the links between proposed indicators and poverty reduction and growth. Some deputies recommended that reform should result in a reduction of the complexity of the formula. They urged consultations with other MDBs during PBA revision, and that the Bank’s system should remain coherent with that of other MDBs (in particular IDA’s), while not necessarily identical to them.

Financial capacity and ADF-13 financing framework
8. Responding to the series of proposals presented to them in two financial papers, Deputies provided the following guidance:

Next Meeting
9. It was confirmed that the next meeting would be held in Tunis on 13-14 June 2013.

ADF Deputies and observers from International Development Institutions met in Praia, Cape Verde, on 12-14 September 2012 to conduct the mid-term review (MTR) of the 12th Replenishment of the African Development Fund (ADF-12). They were joined by the Ministers of Finance of Cote d’Ivoire, Ghana, Kenya and Malawi as participants in the review. Participants thanked the Government of Cape Verde for its warm hospitality. The meeting was chaired by Mr. Geoffrey Lamb and this Chair’s Summary is issued under his responsibility. The Cape Verde Minister of Finance, the Honorable Cristina Duarte, opened the meeting. She welcomed holding the meeting in Cape Verde as recognition of the country’s development achievements, and noted the sustained support of the ADF. She underscored good governance, visionary leadership and investing in human capacity as key elements of Cape Verde’s sustained development progress. Opening the discussions, President Kaberuka said that Africa is in a new, dynamic phase; Cape Verde’s transformation from less than USD 200 GDP per capita to a middle income country was a fitting illustration of the possibilities. He thanked Donors for their continued support and trust in the African Development Bank, noting the importance of investing in African institutions. The Bank has delivered strongly during the financial crisis, and continues to be a reliable partner for African low-income countries going forward. The African Development Bank is the leading institution investing in regional integration, and a strong partner for fragile states. In recent years the Bank has become stronger, more effective and more efficient; yet much more remains to be done both in ensuring even greater institutional effectiveness and in helping Africa forge a more inclusive path to growth and a sustainable green econom

Implementation of ADF-12 core operational priorities
Participants commended the good progress at mid-term in implementing the key priorities of ADF-12. They noted that the Fund had exceeded expectations in certain areas, such as emergency response, and was successfully channeling resources to fragile states, regional integration, infrastructure development, and improving financial governance.

• On regional operations, they urged stronger follow-through to ensure that these investments, critical for growth, move ahead as quickly as possible and linkages to improving regional integration are much clearer. They commended the Dakar-Bamako highway as an example of the tangible, widespread benefits these operations could bring.
• On fragile states, Participants noted that the Bank should engage more deeply to understand the political economy of fragility case-by-case, be prepared to do more through the Fragile States Facility to build capacities and institutions, and to apply modalities that are best suited to address the unique challenges in such contexts. They noted that effective decentralization was central to meeting client expectations. Some cautioned against the difficulties of budget support operations in fragile states, but appreciated the strong endorsement of the Fund’s swift action to provide vital quick-disbursing support to consolidate peace in Cote d’Ivoire, as underlined by the Minister from Cote d’Ivoire in his interventions.
• While there was strong progress on a range of ADF-12 priorities, Participants stressed that the Fund needed to make decisive progress on gender equality and women empowerment, beyond mainstreaming gender in its operations, a critical aspect of a more inclusive growth.

Institutional effectiveness and results
Participants noted greater institutional effectiveness on the part of the Bank, while recognizing there was much more to do and requesting an over-arching change management plan including clearer timelines. Decentralization has been energetically implemented, with a presence of the Bank currently in 34 countries, including several fragile states. They urged fuller progress on empowering field office decisionmaking and building field capacities to contribute more effectively to countries’ policy dialogue. There was strong endorsement of the Bank’s results framework, and its intentions to move beyond measuring results to managing for results. They welcomed fundamental changes being introduced in the management of the Bank’s human resources, and a reduction in current vacancies, though they noted continuing concerns about people management approaches, retention and career incentives. Participants urged further measures to improve budget utilization and enhance procurement and disbursement efficiency which are necessary for reducing costly delays. They also welcomed the recognition by Bank senior management that a critical requirement for all these changes to work was further shifts of the Bank’s organisational culture led by members of the senior management.

4. President Kaberuka and Participants thanked the Government of South Africa for its warm hospitality and excellent arrangements. Participants commended Management for the generally high quality of the documents and preparations, which facilitated fruitful discussions. The meeting was chaired by Geoffrey Lamb and this Chair’s summary is issued under his responsibility.

Resource allocation
On the allocation of Fund resources, Participants stressed that performance should remain a fundamental criterion. They supported a review of the performance-based allocation (PBA) system, including the treatment of fragile states (including those in arrears), in preparation for ADF-13, with a range of views on some likely adjustments versus deeper reforms. They asked the Bank to provide simulations for different scenarios of potential changes. Participants stressed that the PBA system needed to be simpler and transparent to recipient countries and donors alike. Alignment with other multilateral development banks, particularly the International Development Association (IDA), was important, taking account of the differences between ADF’s and IDA’s operational priorities. Participants supported adjustments in costsharing arrangements of regional operations to encourage greater country contribution. Following a discussion on possible alternate uses, they agreed that ADF resources reserved for arrears clearance should be retained through the ADF-12, with a presumption that these resources could be rolled over into ADF-13 if necessary.

ADF financial sustainability and capacity
Participants expressed satisfaction with the soundness of the Fund’s financial management framework. They urged strong and creative focus on the mobilization of internal resources, and looked forward to the Bank developing a menu of innovative financing proposals, for consideration in ADF-13.

Preparations for ADF-13 replenishment discussions
Looking ahead to the ADF-13 discussions, Participants agreed to aim for an efficient process, in three replenishment meetings, beginning in February 2013. They welcomed the continuing participation and valuable contributions of African ministers in the discussions, and called also for wider consultation of ADF with African private sector and civil society voices in the replenishment process.

1. ADF Deputies and observers from international development institutions met in Abidjan, Côte d’Ivoire on May 26 and 27 to discuss the twelfth replenishment of the African Development Fund (ADF-12). They were joined in their discussions by Ministers and representatives of Burkina Faso, the Democratic Republic of Congo, Liberia and Uganda. President Kaberuka and participants thanked the Government of Côte d’Ivoire for its warm welcome. The meeting was chaired by Geoffrey Lamb and this Chair’s summary is issued under his responsibility.

2. The representative of the Government of Côte d’Ivoire opened the meeting by highlighting the importance of the ADF in the development of the continent’s poorest countries, and called for an ambitious replenishment to help beneficiaries in their development efforts and poverty reduction strategies.

3. The President of the African Development Bank (ADB), Dr. Donald Kaberuka, underlined the close connection between the ADF replenishment and the General Capital Increase for Africa’s development. He emphasized that performance based allocation (PBA) was the bedrock of ADF’s use of resources, and noted that special ADF funding for regional integration and fragile states was an essential complement, and not a competitor, to the core PBA. An important lesson from recent experience was that rapid availability of resources, including for arrears clearance, was critical as fragile states emerged from crisis and reengaged, with the support and endorsement of the international community. For Africa as a whole, the President stressed the fundamental importance of the private sector as the driver of growth, and drew attention to ADF’s proposals for innovative instruments to accelerate private investment in African economies. In closing, he drew attention to significant further decisions by ADF management to increase internally generated resources for ADF-12, and hoped this would encourage maximum efforts by donor governments.

Leveraging ADF Resources for Private Sector Development
4. Participants discussed potential new instruments to enhance private sector development in low income countries, and strongly endorsed the Fund’s engagement with the private sector and its exploration of innovative ways to encourage private investment. They agreed that a Partial Risk Guarantee (PRG) should be introduced during the ADF-12 period, with detailed proposals to be brought to the Board in due course. While not supporting the use of a specific allocation of ADF-12 resources for a First Loss Portfolio Guarantee (FLPG), Deputies requested that work on this and other innovative instruments should continue, and be brought forward to the appropriate decision making fora.

Results Measurement Framework
5. Participants welcomed the strengthened framework for measuring and tracking results, and the development of a “One Bank” framework to encapsulate both ADF and ADB, allowing for greater development impact on the ground. Participants encouraged Management to develop stretch targets and to propose an ADF-specific results matrix for incorporation in the ADF-12 Deputies’ Report.

Resource allocation framework for the ADF-12
6. Participants endorsed the adjustments to the framework to introduce modified lending terms for blend, gap and graduating countries, and to establish a graduation policy. A range of views were expressed on the precise dimensions and design of set-asides for ROs and fragile states; however, participants unequivocally stressed the underlying importance of performance based allocation as fundamental to ADF’s effectiveness. They noted that discussion of improvements to the PBA, including the possible introduction of vulnerability criteria, should continue and be reported on at mid-term review. They broadly endorsed modifications for the RO envelope and FSF as follows:

Institutional Capacity
7. Participants welcomed the candid update on Institutional Capacity. They encouraged Management to stay the course of reforms and pursue efforts towards enhanced delivery capacity and a strong internal culture of results. A number of participants stressed the importance of special attention to effectiveness of decentralization going forward.

ADF-12 Financing Framework
8. Participants broadly endorsed technical proposals regarding reference interest rates and the modeling of encashment, welcomed flexibility to meet individual countries’ budgetary cycles, and commended Management for the additional efforts made to increase internally generated resources for ADF-12.

9. Participants had a preliminary discussion of replenishment scenarios and financing challenges. They agreed that further work was needed on financing, with firm commitments to be reached at a final replenishment meeting, now envisaged for September 2010, in Tunis.

1. ADF Deputies and observers from international development institutions met in Cape Town, South Africa on 22-23 February 2010 to discuss the 12th replenishment of the African Development Fund (ADF-12). They were joined in their discussions by the Ministers of Finance of Burkina Faso, Liberia and Uganda.

2. In opening the meeting, the Minister of Finance of South Africa, the Rt. Hon. Pravin Gordhan, highlighted the challenges of the global economic context, the negative impact that the financial crisis has had on African growth and the fragility of recovery. He reminded participants of the importance of international solidarity in the face of the crisis and the need to fully incorporate Africa into the global economy as a pillar of future growth

3. Opening the discussions, the ADB President, Dr. Donald Kaberuka underlined the risks and uncertainty for Africa as a result of the global financial crisis. He highlighted that the Fund’s sizeable pipeline of potential projects for the ADF-12 period was a clear indication of Africa’s need for significant investment in order to further promote regional integration and adapt to climate change. He emphasized the leading role that the Fund has played in regional operations and highlighted the Fund’s support to fragile states and its selective use of budget support. Drawing on feedback from Deputies during the ADF-11 Mid-term Review, he reaffirmed Management’s determination to strengthen the current strategic focus and the need to consolidate, fine-tune and innovate within the Bank’s existing core pillars. President Kaberuka also reminded participants of the ongoing discussions regarding the General Capital Increase as an important complement to the ADF-12 replenishment.

4. President Kaberuka and Participants thanked the Government of South Africa for its warm hospitality and excellent arrangements. Participants commended Management for the generally high quality of the documents and preparations, which facilitated fruitful discussions. The meeting was chaired by Geoffrey Lamb and this Chair’s summary is issued under his responsibility.

ADF-12 Strategic Directions
5. Participants reaffirmed their support for the Fund’s existing strategic priorities as laid out in ADF- 12 Strategic Directions discussion paper: developing infrastructure, strengthening governance, promoting regional integration and supporting fragile States. They urged full attention, within these strategic priorities, to the key cross-cutting themes of private sector development, climate change adaptation and mitigation, food security and gender, and urged Management to mainstream these cross-cutting issues in the Fund’s strategies and operations during ADF-12.

6. Participants reaffirmed their commitment to support Africa’s development, particularly in light of the need to make progress towards the Millennium Development Goals. They acknowledged the important role that the Fund, as an African institution, plays in the aid architecture and their confidence in the Fund as a development partner. Several participants highlighted the challenging fiscal context donors faced in the ADF-12 replenishment, which would put even greater emphasis on strategic priorities and performance. They identified key variables that would influence the ADF-12 replenishment level, including efforts to mobilize internal resources and continued delivery on institutional reforms, particularly decentralization, and alignment and harmonization. Participants urged Management to put forward a results-based action plan that clearly links strategy, capacity and deliverables.

Regional Operations
7. Participants noted the Fund’s important role in integrating African economies and recognized its comparative advantage in delivering regional operations (ROs). Some participants suggested that the Bank could play an even greater role by leveraging its strength as a convener and champion of regional integration. Participants encouraged the Fund to: improve implementation and project management; develop appropriate internal capacity; continuously seek co-financing opportunities including private funds; incorporate lessons learned; and provide further analysis of the country demand for ROs. They encouraged the Bank to incorporate essential management, governance and regulatory aspects into . 2 “hard” regional integration projects and help build the capacity of regional economic communities. Participants reiterated the need for robust, transparent, performance-based prioritization criteria and welcomed management’s intent to revise the RO selection criteria and process. They reaffirmed their support of the cost-sharing principle among beneficiary countries and also encouraged the Bank to consider introducing new measures that could provide additional flexibility where relevant. They endorsed the proposed cap on regional public goods.

Policy-based Operations
8. Participants discussed the importance – and the challenges – of effective Policy Based Operations (PBOs) in ADF. They broadly endorsed Management’s approach to PBOs for ADF-12 and provided guidance on several aspects: the importance of measuring and demonstrating results; taking greater leadership; and the need for PBOs to be part of a package of support including analytical work, capacity building, forthright policy dialogue, sector/project support and partnership with other donors. They emphasized the importance of robust fiduciary arrangements and their effective implementation to reduce risks and ensure efficient and appropriate use of resources. Participants further highlighted the link between effective delivery of PBOs and appropriate levels of decentralization to ensure that the Fund has presence on the ground to engage effectively in policy dialogue.

Fragile States
9. Participants were encouraged by experience with the Fund’s Fragile States Facility (FSF), its achievements under ADF-11 and the proposals for ADF-12. They endorsed Management’s proposal to phase out enhanced support under the FSF but urged Management to ensure that the phase-out mechanism rewards performance and sufficiently accounts for the diversity of circumstances in fragile states as they transition to a more normal development trajectory. They emphasized the need to use PBOs in a highly selective manner in fragile states in conjunction with strong fiduciary controls and appropriate capacity building support. Decentralization and effective presence on the ground were highlighted as vital to successful engagement in fragile states. Participants requested greater clarity on Management’s proposals with respect to arrears clearance and expressed a preference to see arrears clearance treated within the FSF framework, but with careful design to avoid potential crowding out of other purposes

Resource Allocation
10. There was broad comfort with how the current split had worked between PBA-driven funds and those set aside for regional integration and support for fragile states, though some participants thought there was scope for expansion of set-asides, in particular for regional operations. Many emphasized the importance of maintaining and reinforcing links to performance throughout ADF portfolio. Participants questioned the value of establishing a crisis response facility. In that context, possible modifications to the current PBA formula, including measures to reduce volatility and the introduction of a variable to measure vulnerability were reviewed, but most participants did not encourage the introduction of new variables such as vulnerability in the PBA formula

Financing Framework for ADF-12 and Long-Term Financial Integrity of the Fund
11. Participants discussed Management’s proposals for the ADF-12 financing framework. They reiterated their confidence in the Fund as an important partner in Africa’s development, but underlined both fiscal pressures and competition for limited aid resources as factors weighing on the overall replenishment level. They asked Management to prepare additional scenarios for the overall replenishment level in the lower range, including scenarios interpolating between those presented and scenarios based on donor contribution levels as well as overall replenishment size. Participants strongly urged Management to explore further options to maximize internal resources available for ADF-12. Specifically, participants asked Management to consider: increasing net income transfers to the Fund from the Bank, including from arrears clearance reflows; adjusting cost-sharing arrangements between the Fund and the Bank; and establishing the Fund’s graduation policy, loan cancellation, loan pricing and conditions and liquidity policies. They endorsed Management’s proposals with respect to exchange rates (use of 6-month exchange rate ending 31 May 2010), the encashment schedule and the discount rate applied to accelerated encashment.

"Other Matters
12. Participants agreed to maintain an ambitious schedule to complete the replenishment, with the next meeting to take place in May 2010."

1. ADF Deputies and observers from International Development Institutions met in Helsinki, Finland, on 20-21 October 2009 to conduct the mid-term-review (MTR) of the 11th replenishment of the African Development Fund (ADF-11). They were joined by the Ministers of Finance of Burkina Faso, the Democratic Republic of Congo, Liberia and Uganda as participants in the review.

2. The Finland Minister of Foreign Trade and Development, the Hon. Paavo Vayrynen, opened the meeting. He highlighted the importance of ODA and Africa for the Government of Finland, which has recently adopted a new Strategic Framework Programme for Africa, with a particular focus on climate change and ecologically sustainable development. Minister Vayrynen also noted the key role played by the African Development Bank Group for the development of the continent and remarked that the MTR is an important step in the replenishment cycle. The ADB President, Dr. Donald Kaberuka, and Participants thanked the Government of Finland for its warm hospitality. The meeting was chaired by Mr. Geoffrey Lamb and this Chair’s summary is issued under his responsibility.

3. Opening the discussions, President Kaberuka highlighted the impact of the economic and financial crisis on African low income countries and pointed to the rapid support provided by the Fund as a response during the first half of the ADF-11 implementation. He reaffirmed Management’s determination to sustain and deepen operational performance and institutional reforms. The meeting broadly endorsed the implementation by Management of the commitments and priorities agreed for ADF- 11 and the progress achieved at mid term. Participants reaffirmed their support for the ADF-11 strategic priorities as further laid out in the Bank Group Medium Term Strategy: developing infrastructure, strengthening governance, promoting regional integration and supporting fragile States. They urged Management to sustain and accelerate improvements in delivery capacity, quality at entry, effectiveness and results, while mainstreaming gender and climate change in strategies and operations. Participants endorsed Management's Action plan for the remainder of ADF-11, while requiring additional attention to issues of decentralization, human resources and progress towards Paris declaration targets. Participants welcomed the quality and candor of management’s papers and preparations for the meeting, which facilitated an informed discussion of remaining challenges as well as accomplishments.

Implementation of ADF-11 Core Operational Priorities 4. The meeting expressed broad support to the Fund for responding quickly and flexibly to the food and financial crises, including through frontloading commitments and restructuring country portfolios. Participants welcomed the fact that ADF had nevertheless maintained its focus on core operational priorities and resource commitments laid down for ADF-11. Participants also supported the Bank’s greater role as Africa’s voice in regional and international discussions. The discussions focused on the following key issues:

Implementation of the ADF-11 Results Framework 5. Participants noted the Bank’s significant progress in the results management area. They welcomed the efforts of the Bank in developing and mainstreaming the results framework, including through the implementation of the Action Plan on Quality and Results. They emphasized the need for sustained effort and oversight to consolidate gains and instill a true results culture in the Bank. Representatives of RMCs pointed to encouraging enhancement of results in their countries, while noting the joint responsibility of recipient countries in the quest for results.

6. Participants discussed ideas for new indicators for sanitation, climate change, fragile states and gender and urged Management to continue efforts to build the statistical capacity in ADF countries to better measure for results.

Reporting on Institutional Capacity
7. Participants welcomed the improvement in the management and effectiveness of the institutional reform framework, and commended progress by Management to improve the institutional capacity of the Bank and Fund. They noted three particular areas of ongoing concern and noted that management was committing to strong focus and determination to address them.

Resource Allocation 8. Participants reaffirmed their support to the resource allocation framework of the Fund centered on performance. They welcomed the effective utilization of ADF-11 resources and took note of the serious commitment capacity constraints resulting from frontloading to deal with the crisis. While urging the Fund to make maximum efficient use of internal resources (including cancellable resources and net income contribution), some participants confirmed their intention to explore possibilities to advance the payment of the third installment of their subscriptions earlier in 2010.

9. Participants welcomed the effective working of the performance based allocation (PBA) system, while acknowledging that the volatility of allocations and country vulnerability were important issues to deal with going forward. Participants agreed to continue discussions on how to increase the relevance of the system while ensuring its robustness and predictability as part of ADF-12. Participants also reaffirmed the importance of the debt sustainability framework while expressing concerns about the continued debt vulnerability of many HIPC post completion point countries. They supported the Fund’s collaboration with other IFIs on debt and its increased engagement in debt management capacity building.

Launch of ADF-12 Replenishment Consultations 10. After formally concluding the ADF-11 MTR, Participants launched the ADF-12 replenishment process with a discussion focusing on strategic priorities, the Fund’s responsiveness and capacity as well as resources and their allocations. Participants reiterated their support for building the Bank as a strategic African Institution. They expressed support for consolidation and deepening of the current strategic priorities as a prime focus for ADF-12, but urged the Fund to be innovative and to integrate food security and climate change as cross cutting issues. They emphasized the importance for the Bank to continue its efforts to build its delivery capacity, with a particular focus on high quality, decentralization, human resources development, and aid effectiveness. Moving forward with this agenda, Participants thought clarity of ADF’s distinctive role would be enhanced and that this needed more effective communication. Management committed to come back to Participants on each of these issues in the course of the ADF- 12 consultations.

Other Matters Participants tentatively agreed that the next meeting would be held in Cape Town, South Africa on the week of 22 February 2010.

1. ADF Deputies, joined by Representatives of Regional Member Countries and International Development Institutions, met in London, United Kingdom, on 10-11 December 2007. The UK Development Minister, Shriti Vadera, welcomed the participants. She noted the distance Africa has to go to meet the MDGs, but that Africa’s recent performance provided a solid basis for increased progress. Baroness Vadera reiterated the UK pledge to double its contribution and urged donors to increase their support. Dr. Donald Kaberuka, President of the African Development Bank Group, also drew attention to the improved effectiveness of the ADB, and his personal commitment to implementation of reform and to achievement of better results. This was not simply a replenishment exercise but part of a longer term exercise. The meeting was chaired by Sven Sandström, who introduced the main subjects to be discussed.

2. Participants welcomed the quality of the documentation prepared for the meeting. They confirmed their strong commitment to support the further strengthening of ADF as a key African development institution, recognizing its central role in assisting its member countries in their efforts to accelerate growth and reduce poverty.

3. Participants supported the proposed results framework for ADF-11, emphasized the importance of accelerating implementation of the Bank’s results agenda and urged Management to report regularly to the Board of Directors on specific progress. Participants also supported the proposed adjustments to the PBA system aimed at simplifying and increasing the predictability of the allocation system, while preserving the critical linkages between allocation and performance.

4. The size, composition, financing and operational priorities of the Eleventh replenishment were agreed by the participants. They agreed on funding envelopes of 7.5% and 17.5% for fragile states and regional operations, respectively. They agreed to provide UA 3.54 billion in new donor resources that, when combined with internal resources of UA 2.06 billion, results in an overall funding level of UA 5.6 billion for the three year period 2008-2010. This represents an increase of 52% over the actual funding level during the previous replenishment period covering 2005-2007. This represents an unprecedented absolute increase in resources for the Fund. Donors also agreed to explore the possibility of making additional contributions.

5. Participants agreed on a final report on the replenishment which sets out commitments by Management and ADF Participants for the ADF-11 replenishment period, including with respect to financing, operational priorities and implementation. They asked the Bank Group Management to continue discussions with the ADF Board on the implementation of the commitments that were made during the consultations and asked to be kept informed. They agreed to meet again in about eighteen months to review progress in the implementation of the ADF-11 agreement.

6. Participants expressed their appreciation for the warm hospitality of the United Kingdom authorities and the excellent facilities provided for the meetings.

1. ADF Deputies, joined by Representatives of Regional Member Countries and International Development Institutions, met in Bamako, Mali, on 19-21 September 2007. The President of the Republic of Mali, H.E. Amadou Toumani Toure, opened the meeting. He highlighted the key role played by the African Development Bank Group in Mali’s development and its importance as an African development institution. The ADB President, Dr. Donald Kaberuka, thanked the Government of Mali for the warm hospitality extended to delegates and the strong support to the Fund demonstrated by the official opening of the meeting by President Toure. He emphasized the importance of devoting more resources to support fragile states and to regional operations, with benefits to the whole continent, and re-affirmed the Funds full commitment to results, while acknowledging the inadequacy of Management’s preparations for the meeting on this subject. Members of the High Level Panel also attended the meeting. The preliminary conclusions of the Panel were presented by President Chissano of Mozambique and were discussed with participants in plenary as well as bilaterally.

2. The meeting was chaired by Sven Sandström who summarized its overall objectives as (i) reaching closure on major policy issues, including the policy and financing frameworks for Fragile States, Regional Operations and Performance Based Allocations (PBA); (ii) narrowing the range of replenishment scenarios; (iii) providing guidance on the Deputies’ Report to enable Management to prepare an essentially final draft well before the London meeting in December and (iv) agreeing on any further analyses and information required by Deputies to reach a decision in principle on the size of their contributions by the time of the London meeting.

Fragile States and Regional Operations
3. Participants reiterated support for the special initiatives for enhanced engagement in fragile states and regional integration, while emphasizing the need to protect the centrality of the PBA mechanism. They agreed on key policy aspects of the two frameworks and emphasized the need for close coordination with other actors. They further requested that monitoring and evaluation frameworks be prepared before their December meeting and that implementation be discussed at the ADF-11 Mid-Term Review (MTR). Discussion of implementation should include the specific development impact of fragile states and regional operations interventions.

4. With regard to fragile states, participants specifically agreed on the list of states that currently meet the criteria of the framework. They agreed to eliminate minimum allocations from the base against which supplemental allocations would be calculated. They requested that the current PCCF and related policies be evaluated before the December meeting and that any agreed changes be reflected as the PCCF is folded into the new Fragile States Facility. They emphasized that specific contributions for arrears clearance from Bank net income should be considered in addition to the Bank’s overall contribution to the ADF-11 replenishment, in line with the approach under ADF-10.

5. With regard to regional operations, participants agreed that as a norm cost sharing out of country PBA allocations would be set at one third of project costs and that a cost-sharing cap would apply to small countries. They also discussed whether it might be possible for the Board to approve exceptions to the cost sharing norm for medium and large countries on a limited case by case basis provided that they meet specific criteria (such as the importance of the country in providing coastal access to land-locked countries). This question was not fully resolved, pending resolution of the larger question of the regional operations set-aside. Participants agreed not to have a separate set-aside for Regional Public Goods (RPGs). They requested a clearer definition of RPG activities to be undertaken, with specific examples. They emphasized that all regional operations, including those for RPGs, should be fully aligned with the strategic priorities agreed for ADF-11.

6. Participants discussed prospective funding envelopes for each of the two initiatives, and in particular their relationship to the volume of resources determined by country-level PBA, and agreed that further analyses and clarifications were required before reaching a final decision. Hence, staff will as soon as possible present analyses that demonstrate the impact of funding envelopes of 5-7% and 15-20% for fragile states and regional operations, respectively, on: (1) the share of the replenishment that will be directly determined by the PBA, the share that will be linked to the PBA, and the share that will be independent of the PBA, and (2) the absolute amount of resources that would be available for each of the two initiatives in each of the replenishment scenarios (and, in the case of regional operations, with and without the one third PBA country allocation). All analyses will make the relevant comparison to ADF-10.

Resource Allocation
7. Participants emphasized the importance of the PBA system remaining the key driver of allocations under ADF-11, as reflected in the discussion of set-asides for fragile states and regional operations. With regard to the PBA methodology itself, participants agreed to the proposed elimination of the “double counting” of governance in the formula, provided that the current weight of governance in the PBA system does not decrease, including the weight of the procurement element in the governance factor. They supported the proposal to address sequencing issues with regard to the CPIA exercise and DSF classification and agreed on the proposed revisions of the CPPR. A range of views were expressed on the proposal to hold population and income factors constant during the three-year replenishment cycle and alternative proposals were made by participants. Management will therefore carry out further analyses of options to address the volatility induced by swings in the population and income data, including the use of moving averages, and submit a revised proposal well before the December meeting.

Lending Scenarios and Financing Framework
8. Participants discussed the replenishment scenarios presented by Management. They confirmed their strong commitment to increasing aid to Africa and expressed their support for the Fund as a key vehicle for this purpose. They reaffirmed their commitment to a realistic and ambitious replenishment level. Many participants expressed support for the central scenarios (with an overall increase in the range of 40% to 60%) while others noted that they would not be able to provide individual contributions matching such an overall increase. It was emphasized that it is the sum of the individual efforts that counts. Participants further emphasized that their final decisions would to a large extent depend on the results that the Fund has delivered during ADF-10 and plans to deliver during ADF-11, which have not yet been adequately set out. They also noted that their contributions would depend on the outcome of the continuing discussion of the set-asides for fragile states and regional operations.

9. There was broad support for a structural or technical gap of no more than 5%. Participants emphasized the need for all donors to provide unqualified commitments for MDRI compensation in a timely manner and many emphasized the importance of doing so by November in order to increase the advance commitment capacity of the Fund and, hence, reduce the need for new donor resources. They requested an update on the MDRI and MDRI compensation at the time of the MTR. Participants supported the proposed grant compensation framework.

Governance Structure of the Fund
10. Participants discussed the paper on Options for a Comprehensive Framework for Enhancing the Governance Structure of the ADF. They expressed broad support for the guiding principles and the approach to develop a specific proposal for review by the Boards of Directors and requested that a final decision be taken at the 2008 annual meeting. Participants emphasized that they should remain involved in the process; specifically, any proposal for change in the replenishment process should be submitted to the participants for review and decision.

Focus on results
11. Participants emphasized the need for the Fund to better demonstrate results, both past and future. They urged the Fund to audit and quantify results in a more systematic and analytical way. They made a number of conceptual and methodological suggestions for how to proceed while acknowledging that this is a challenging subject, that attribution is elusive, and that the development community at large is testing and learning from alternative methodologies. It was noted that the presentation of the Mozambique case had been . 3 helpful in that it focused on both overall country results and how ADF had contributed to these results. Participants generally felt that illustrative examples, such as those presented by Management, were helpful but that it was more important to provide aggregate and thematic perspectives that would tell a story and provide the big picture of ADF achievements and results. Management will submit a new paper on ADF results in October.

12. Participants felt that the proposed Results Monitoring Framework for ADF-11 was a good start on which to build further. They noted that the tier approach is promising and asked for more clarity on the links between the tiers and to ADF contributions at the country level. It was felt that the framework and its indicators should provide a good sense of the connection between resources and results and that intermediate achievements and ultimate results should be measurable and linked to the extent feasible. It was recognized that some indicators would have to be qualitative. Participants suggested that more attention should be given to ADF strategic priorities and to subjects and targets to be discussed at the MTR.

13. Participants offered to work with staff over the coming weeks to help develop the paper on ADF results and the Results Monitoring Framework. Management in turn indicated that it would shortly submit proposals to participants for their review and advice.

Deputies’ Report
14. Participants discussed the first draft of the Deputies Report, which they considered a good start. They felt that the main elements were covered, with results being the main exception; it should be addressed in the text as well as in the proposed annex. They emphasized that the report should be as short and sharp as possible and that it should focus on the policy agreements reached. It should be frank, honest and balanced in its presentation of ADF as an institution, including in the discussion of ADF as a partner of choice. Participants felt that cross-cutting issues and their impact should be better addressed, including climate change, HIV/AIDS, governance and conflict. The need for stronger dialogue with other institutions in sectors from which ADF is withdrawing as it sharpens its selectivity was emphasized. The report should be clearer on the important role of Regional Economic Communities and how ADF would work with them. Participants emphasized that additional resources through a significant replenishment must be accompanied by a strong and independent evaluation unit and a staff evaluation system focused on delivering results and asked that the report address this as well.

15. Several participants indicated that they would provide written suggestions for the Deputies’ Report immediately following the meeting. Management in turn indicated that they would distribute a revised draft report as soon as possible in October, with a view to reaching closure on as many elements of the report as possible before the December meeting through further exchange of views.

Other Matters
16. Participants agreed to hold their fourth and final meeting on December 10-11 in London, UK. They also agreed to plan for a short informal meeting in Washington, DC on or around October 24, during the World Bank and IMF annual meetings, to attempt to reach closure on outstanding policy issues and particularly on the funding envelopes for fragile states and regional operations.

17. Participants expressed their appreciation for the warm hospitality of the Mali authorities and the excellent facilities provided for the meeting.

1. ADF Deputies, joined by Representatives of Regional Member Countries and International Development Institutions, met in Tunis, Tunisia, on 11-12 June 2007. The Minister of Development and International Cooperation of Tunisia, H.E. Mohamed Nurri Jouini, opened the meeting. He underlined the unique pan-African character of the Bank Group, drew attention to the need for increased financing with greater predictability, for greater country ownership of the development process and for the Bank to continue to sharpen its focus on key sectors. The ADB President, Dr. Donald Kaberuka thanked the Government of Tunisia for temporarily hosting the Bank Group and for the warm hospitality extended to delegates. He emphasized the current window of opportunity for Africa’s development and the ability of the Bank Group to meet the demands of its Regional Member Countries. He noted the improved capabilities of the Group and welcomed the renewal of donors’ Gleneagles commitments, while urging donors to avoid establishing new conditions or prescribing new mandates for the Bank Group.

2. The meeting was chaired by Sven Sandström who summarized the overall objective for the meeting as moving towards common ground in three areas: (i) strategic directions; (ii) lending scenarios and financing framework; and (iii) themes to be addressed by the Deputies Report. Participants commended ADF Management and staff for the quality and timeliness of the documentation for the meeting.

Strategic Directions
3. Participants strongly supported the increased selectivity in the proposed areas of focus, namely infrastructure, governance, regional integration and fragile states, which optimize the strengths of the ADF in the wider context of the changing international aid architecture. They noted the important linkages between these focal areas and the Bank’s ongoing work in agriculture and human development and reiterated that cross cutting issues, such as gender and clean energy, should be integrated with the focus areas.

4. To strengthen the case for the strategic directions, and also for the lending scenarios, participants asked for further information in two specific areas: (i) the broader vision for ADF in the medium to long term, including the role of ADF in the overall aid architecture (setting out, inter alia, the complementarity of institutions) and also taking into account the forthcoming recommendations of the High Level Panel, and (ii) results achieved under ADF-10, those expected under ADF-11 and a framework for monitoring and reporting on the latter.

Lending Scenarios and Financing Framework
5. Participants reviewed alternative lending scenarios presented by ADF Management and discussed ambitious but realistic replenishment levels. They agreed that the current scenarios should be supplemented by additional central scenarios. They emphasized the importance of performance based allocation of lending resources and the need for restraint in the use of set-asides.

6. Deputies discussed the structural gap and the interlinked question of burden shares, indicating a range of views reflecting individual circumstances. They agreed to focus first on the overall level of the replenishment and on individual contributions while, second, also considering the emerging burden sharing pattern. Illustrative burden sharing scenarios with only a small technical gap will be prepared for the next meeting.

7. Deputies urged ADB to increase the level of resource transfers to ADF and to reflect such higher transfers in the ADF-11 financing tables to be considered at the next meeting. ADF management will also provide updated information on MDRI and grants compensation for the next meeting. The proposed standard encashment schedule as well as the basis for determining the discount rates for ADF-11 (currency specific CIRR minus 100 basis points) were agreed.

Fragile States
8. Participants broadly supported the proposed revised strategy while requesting further clarifications with regard to a range of issues, including complementarity with other institutions and clearance of arrears. Most Deputies favored the option of a separate facility (Option 3), while others were inclined towards Options 1 or 2. Participants urged close coordination with the MDB Working Group on fragile states. It was agreed that Management would prepare a revised Board paper reflecting the discussion. This paper would be reviewed by the Board in an informal meeting and, on the basis of this discussion, Management would prepare a short note identifying any outstanding issues to be resolved by Participants at their next meeting.

Multi-National Operations / Regional Integration
9. Participants supported an expansion of ADF’s work on regional integration along the lines proposed. They emphasized, however, the need to clarify numbers, simplify and clarify procedures, tighten definitions and outline collaboration with other agencies. They also requested more information on results under ADF-10, those expected under ADF-11 and measures to monitor and report on the latter. It was agreed that Management would prepare a revised paper reflecting the discussion. This paper would be reviewed by the Board in an informal meeting and then submitted to Participants for their next meeting.

Procurement - Rule of Origin
10. Regional member countries and many Deputies supported Management’s proposal to open up procurement to non-members, noting that it would improve the effectiveness and development impact of the Fund’s operations and be consistent with the Paris Declaration. However, some Deputies questioned whether a change was necessary now, and whether it might reduce the incentives for new members to join the Bank. They also noted the need for more information on the costs of the current rule and the benefits of a change. The next step will be for a paper reflecting the discussion and providing the requested additional information to go to the Board of Directors for their consideration.

Deputies Report
11. Participants discussed an annotated draft outline of the Deputies Report and provided comments that will be reflected in a full draft of the report to be considered at the next meeting.

Other Matters
12. Participants decided that the Third meeting should be held on September 20-21 in Bamako, Mali. Participants welcomed the intention to invite members of the High Level Panel to this meeting. The Fourth and final meeting would be held on December 11-12 in London, UK. Participants warmly thanked the Governments of Mali and the UK for offering to host the meetings.

13. Participants agreed on a preliminary list of subjects and papers to be discussed at the upcoming meetings, as set out in the Annex.

14. Participants expressed their appreciation for the warm hospitality and the excellent facilities provided for the meeting.

1. ADF Deputies, joined by Representatives of Beneficiary Countries and International Development Institutions, met for the first meeting of the ADF-XI Replenishment in Dar-es-Salaam, Tanzania, on 14-15 March 2007. The President of Tanzania, H.E. Jakaya Mrisho Kikwete, addressed the participants. He drew attention to the needs of Africa and the importance of the ADF, illustrated by examples of ADF’s positive development impact in Tanzania. President Kikwete saw the Replenishment as an opportunity to scale up assistance in line with donor commitments and to improve predictability and harmonization in order to make faster progress. The African Development Bank President, Dr. Donald Kaberuka, welcomed the participants and thanked the Government of Tanzania for hosting the meeting. He highlighted the mutual accountability of the international community and African countries to deliver on the Millennium Development Goals and emphasized the Bank Group’s growing institutional capacity.

2. The meeting was chaired by Sven Sandström who summarized the objectives for the meeting: (i) for ADF Management to report on progress on institutional reforms and implementation of key initiatives following the pledge made by Management at the Mid-term Review that 2007 would be a year of delivery; (ii) to look forward to the ADF-XI Replenishment by reviewing strategic priorities for ADF; and (iii) to agree on the roadmap for the ADF-XI Replenishment meetings in order to ensure a successful outcome.

Progress Reports
3. Participants discussed progress on internal reforms aimed at improving the operational capability and effectiveness of ADF, including: (i) corporate performance measurement; (ii) improved portfolio management; (iii) strengthening of procurement and financial services; (iv) decentralization; and (v) business and budget process reforms. Participants welcomed the steps being taken.

4. Participants emphasized that responsibility for action in these areas rests with Management and the Board and urged that reforms be implemented more quickly, including much faster progress on budget reform. They observed that several strategic themes require attention as implementation proceeds, including: (i) the over-arching objective of the reforms, which is development effectiveness and the imperative of orienting all ADF activities towards achieving on-the-ground development results; (ii) ADF’s fiduciary responsibility, which should not be compromised as reforms are undertaken in areas such as decentralization and procurement; (iii) harmonization between ADF procedures and those of other institutions; (iv) strengthening of country capacity; (v) incentives to ensure quality of operations and results on the ground; and (vi) gradual delegation of authority to country offices within the context of strong fiduciary controls, as noted above. Participants stressed the importance of business process reform to support country teams and to address cross-cutting issues. They asked for follow-up on previously raised concerns that also help determine the effectiveness of ADF, including the reviews of ADF governance structures and the statutory provisions on rules of origin.

5. Participants discussed the ongoing work on ADB human resources reform. They welcomed the progress being made and urged the Bank to continue to build momentum in this critical area. They appreciated the emerging improvement in diversity, particularly gender balance, and urged continued attention to language, age, geography and gender. They emphasized the urgency of filling the remaining professional level vacancies. They commended the decision to link explicitly the assessment of staff performance to achieving results on the ground. They urged that internal decision-making be speeded up, including the approval of the new comprehensive human resources strategy of the Bank Group.

Long-Term Financial Sustainability of the ADF
6. Participants discussed the paper prepared on long-term financial sustainability of the ADF. They felt that the paper conveyed an optimistic impression of the future finances of ADF without adequate analysis of risks and the sensitivity of the conclusions to key assumptions. They stressed that there was no room for complacency and that the analysis should demonstrate the extent to which the fulfillment of donor commitments will be critical to the longterm sustainability of ADF. In particular, while reaffirming their commitment to compensate ADF dollar for dollar for the MDRI, participants asked that an analysis be undertaken of the financial impact on ADF in case of delays in payment of the MDRI and HIPC compensation. Participants requested that the paper be revised for their next meeting.

7. They also requested that scenarios for the ADF-XI replenishment be prepared on the basis of inter alia country need and capacity, the performance of both beneficiaries and ADF, and the role of ADF vis-à-vis other institutions supporting Africa’s development.

Strategic priorities for ADF-XI
8. Fragile States: Participants welcomed the attention paid to this issue given its importance in Africa. They urged the Board and Management to sharpen their efforts to determine the best approach of ADF. They noted that there is agreement on the basic objective and fundamental principles, such as the need to ensure a performance based approach of ADF, while there are still differences of view on the best modalities, including how broadly to define fragile states, what types of engagement would be most appropriate, what sources of financing to use and, ultimately, whether to mainstream support to fragile states or to split off such support into a separate facility or window. They emphasized that more analysis was required in order to make such a determination. The analysis should include the assessment of alternative scenarios with regard to potential country groupings, financing levels and procedures. This in turn would require more clarity on definitions and criteria in consultation with partners. They therefore welcomed ADF’s active participation in the working group newly established by the Heads of MDBs to examine the issue. Participants asked that a revised paper be prepared for their next meeting, reflecting their comments and suggestions and also reflecting further discussions with the Board.

9. Multi-National Operations and Regional Integration: Participants welcomed the progress made by the Bank Group in financing multi-national and regional integration projects. They noted the significant demand for additional financing and urged the ADF to work closely with partners and to play a catalytic role in meeting this demand. They emphasized that multinational projects should be assessed in their broader context of trade, regional integration and poverty reduction and urged more attention to their development impact. Participants asked Management to address the volume of funding to be provided to multi-national projects in the context of the ADF-XI lending scenarios. They requested that criteria for funding allocations to multi-national projects be formally established and include a link to performance, drawing on the experience of other institutions and lessons from independent evaluations. The latter would specifically include an examination of the benefits of requiring countries to use a meaningful portion of their individual country allocations toward their regional projects as a way of expanding the resources available for multi-national operations and to strengthen country prioritization and the link to country performance

10. Water and Sanitation: Participants welcomed the progress being made but urged that implementation be speeded up, particularly by filling key vacancies and improving coordination with country authorities and with partner institutions. They emphasized the need to ensure alignment between the Rural Water Supply and Sanitation Initiative (RWSSI) and Country Strategy Papers, consistent with country priorities, which in turn would enable a closer alignment between the performance based approach and the RWSSI. In this context, they reaffirmed that earmarking of ADF resources for specific sectors is not appropriate. They asked for greater clarity on the availability of donor and Bank Group resources to meet targets.

11. Overview of strategic priorities: Participants discussed more broadly the strategic priorities for ADF-XI. They welcomed Management proposals addressing operational focus, resource allocation, and institutional reforms. On operational focus and effectiveness, they reiterated their support for ADF’s work with fragile states, multi-national projects and water and sanitation. They expressed strong support for increased selectivity and for the emerging sharper focus of ADF on infrastructure and on catalysing private sector support. They noted the many synergies between these two areas and the potential for significant development impact. Participants suggested that other subjects of concern – such as gender, clean energy and climate change adaptation – be integrated with the focus areas. They asked for greater clarity on ADF’s role in the aid architecture, reflecting its comparative advantages while also ensuring complementarity. They asked for further attention to country-level effectiveness and harmonization, with the ultimate aim of better results on the ground. Participants reiterated their request for a revised paper on the long-term financial sustainability of ADF and for further analysis of country debt sustainability and risks related to free riding, which are issues of strategic concern.

12. On resource allocation, participants reconfirmed the centrality of the PBA system while requesting that further simplification and clarification be considered. They asked that the overall proportion of ADF resources allocated through the PBA system and the flexibility with which it is used be closely monitored and reported.

13. On institutional reform, participants reiterated their strong support noting that the roadmap now is clear and that it is up to ADF Management and Board to move more rapidly on implementation.

Other Matters
14. Participants agreed that 1st April to 30th September 2007 would be the period over which the ADF-XI exchange rates will be averaged and that 2004-2006 would be the applicable period for the inflation rate calculation.

15. Participants reiterated their appreciation for the invitation of the Government of the People’s Republic of China to host the second replenishment meeting in May in Shanghai. However, in view of the heavy agenda planned for the meeting and the need for adequate advance preparation, participants decided that the second meeting should be postponed to June (11-12, tentatively) in Tunis. The third meeting would be held in September / October while a fourth and final meeting would be held in November / December, with specific dates and locations to be decided in due course.

16. Participants agreed on a preliminary list of subjects and papers to be discussed at the upcoming meetings, as set out in the Annex. They emphasized that the following principal themes should be covered: ADF’s role in Africa’s aid architecture, effectiveness on the ground, strategic priorities, financing and allocation, and specific issues (such as ADF governance).

17. Participants expressed their appreciation for the warm hospitality of the Tanzanian authorities and the excellent facilities provided for the meetings.

Copenhagen, 17 December 2004 – The African Development Fund (ADF) Deputies met in Copenhagen, Denmark, on December 16-17, 2004, for the Tenth Replenishment of the African Development Fund. Representatives of borrowing countries (Burundi, Ethiopia, Mali and Zambia) also participated in the replenishment discussions.

In line with commitments made at Monterrey, Johannesburg and the G8 meetings for attaining the Millennium Development Goals (MDGs) and recognizing the increase in the absorptive capacity of a number of ADF countries resulting from wide-ranging reforms implemented over the last decade, the Deputies agreed on a replenishment level of UA 3.7 billion (approximately US$ 5.4 billion) to cover funding of development projects in the poorest African countries for the period 2005 – 2007. The Tenth Replenishment represents an increase of about 43 percent over the actual resources mobilized under ADF-IX. This significant level of replenishment also confirms donors confidence in the reforms undertaken by the Bank over the last ten years to strengthen its operations and better assist its Regional Member countries in their efforts towards poverty reduction. It will also enable the Fund to support its low–income African member countries in their efforts to reach the MDGs. The Deputies agreed that the terms of ADF–X financing will be based on each country’s debt sustainability analysis.

The Tenth Replenishment of the ADF incorporated a number of significant new features.

Established in 1972 to provide development finance to the poorest African member countries on concessional terms, the ADF represents an enduring partnership for development between African countries and ADF donors. It has become an important source of funding and technical assistance for some 40 low-income countries on the continent, making over UA 15 billion (approximately US$ 22 billion) available to these countries. State participants are: Argentina, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, India, Italy, Japan, Korea, Kuwait, Netherlands, Norway, Portugal, Saudi Arabia, South Africa, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, and United States of America.

Mr. Omar Kabbaj, President of the African Development Bank Group, on behalf of the Boards of Directors and the Fund, expressed his sincere appreciation to the Deputies for the sizeable increase in ADF-X resources. President Kabbaj also indicated that the “successful completion of the replenishment is testimony of the ADF Donors commitment to Africa and a recognition of the successful reforms implemented by the Bank Group”.

Participants expressed their deep appreciation to Mr. Sven Sandstrom, Coordinator of ADF-X, and expressed their sincere gratitude to the Government of Denmark for the warm hospitality and excellent meeting facilities.

1. ADF Deputies, joined by representatives of borrowing countries, held their third meeting on the Tenth Replenishment of the African Development Fund (ADF). Mr. Omar Kabbaj, the President of the African Development Bank, welcomed the participants, provided an overview of the main subjects to be discussed. He requested a significant increase in the ADF-X replenishment and urged the conclusion of the consultations by the end of the year.

2. Participants welcomed the Action Plan to strengthen further the operations of the ADF. They noted that the Plan now incorporates Management’s follow-up on key findings of the Independent Evaluation of ADF. They felt that the Plan provides a good basis for the tenth replenishment, subject to some further clarifications and elaborations to be reflected in the final version. They encouraged ADF Management to continue discussions with the ADF Board on the implementation and funding of the Plan and asked to be kept informed.

3. Participants discussed and agreed on the need for a proper debt sustainability framework for deciding on the appropriate financing terms of ADF support to member countries. They asked that further work be done, particularly on the thresholds and incentives of the emerging framework and on its long-term impact on ADF’s finances. They requested ADF to work closely with IDA and IMF to ensure that a common framework is established, which reflects the specific circumstances of ADF and its borrowers.

4. The size, composition and financing of the tenth replenishment were discussed by the participants. They confirmed their strong commitment to support the further strengthening of ADF as a key African development institution, recognizing its central role in assisting its member countries in their efforts to accelerate growth and reduce poverty. Hence, there was broad support for a significant increase in ADF resources and participants asked for further information and analysis as a basis for reaching final decisions.

6. Participants agreed to meet next in Copenhagen in December 2004.

1. The second meeting of the ADF-X Consultations were held in Kampala, Uganda from 27 to 28 of May 2004 under the chairmanship of the Coordinator of the consultations, Mr. Sven Sandstrom. Ministers from Burundi, Ethiopia, and Zambia took part in the meetings representing borrowing countries. They gave their views on the subjects discussed at the meeting and, in particular, supported a significant increase in the ADF-X replenishment level.

2. Mr. Omar Kabbaj, the President of the Bank, welcomed the Deputies and outlined the key issues raised in the papers prepared for the meeting. He also noted the strong support expressed by Governors for the work of the Bank Group at the just-completed Annual Meetings and appealed to the Deputies for a significant increase in the ADF-X replenishment level.

3. The lead consultant of the independent evaluation of ADFVII-IX presented the preliminary findings of the evaluation. The main findings were: (1) the Bank has responded in an impressive manner to the directives given under the three replenishment exercises and other recommendations such as the Knox Report, and (2) there is some unfinished business which could be done incrementally and through further consolidation. The consultant noted that, following this period of institutional revitalization, the Fund is now at a strategic crossroads with respect to its future role on continent. Deputies commended the consultant for the quality of his analysis and presentation.

4. Deputies discussed the Action Plan to Improve the Implementation of ADF Operations. They welcomed the Plan and noted that it was ambitious and comprehensive. They asked that the proposed actions be prioritized, clear indicators to assess results be established, and the time frame for each action be clearly spelt out. They also requested that it be harmonized with the recommendations of the independent evaluation. A revised action plan would be presented at the next meeting, and progress will be reviewed at the mid-term review of ADF-X.

5. Deputies discussed the proposal for the decentralization of Bank operations, with increased delegation of authority, and the plan to accelerate the opening of additional country offices. They welcomed the proposal, emphasizing that a critical element for success is a prudent approach ensuring also that the right personnel are posted in these offices.

6. Deputies discussed the Bank's Rural Water Supply and Sanitation Initiative. They welcomed the proposal but stressed that the Fund's involvement for water and sanitation, at the country level, should be determined through the PRSP process and channeled through the normal ADF country allocation system in coordination with other initiatives in the sector. In addition, Deputies requested Management to develop a more comprehensive plan for the implementation and financing of the Initiative

7. Deputies discussed the Framework for Clearing the Arrears of Post-Conflict countries. They welcomed the proposal and asked management to take into account the comments made by Deputies at the meeting and submit the revised proposal at the next meeting. They also provided a positive initial response to Management's proposal that UA 50-60 million of cancellations under ADF-IX be used as the initial contribution of the Fund to enable it to provide assistance to the early post-conflict countries in advance of the establishment of the Framework. The proposal will be submitted to the ADF Board of Directors. Deputies encouraged management to prepare a joint information note with the other IFIs on their coordinated arrears clearance policies and practices, while noting that this will not be a condition for moving ahead on the Framework.

8. Deputies discussed the proposal for compensating the Fund for the loss of reflows due to higher level of grants under ADF-IX and agreed on the approach to be followed. They also affirmed their commitment to maintain the financial strength of the Fund in the future.

9. Deputies reviewed the Annotated Outline for the Deputies Report and provided guidance on its preparation.

10. Deputies agreed that the third meeting will be held in Tunis, during 16-17 September 2004.

1. The mid-term review of ADF-IX and the first meeting on the consultations for the Tenth Replenishment of the African Development Fund (ADF-X) were held in Geneva, Switzerland on 16 and 17 February 2004 under the chairmanship of Mr. Sven Sandström. At the opening of the meetings the President of the Bank Group, Mr. Omar Kabbaj, thanked the Government of Switzerland for kindly offering to host the meeting. He also expressed his appreciation to Deputies for having agreed to hold the first meeting on ADF-X at this time.

2. Mr. Kabbaj gave an overview of the progress that had been made by the Fund in fulfilling its undertakings under ADF-IX. With respect to the strategic orientation of Fund activities under ADF-X, the President recommended that the Fund’s overarching objectives – that of poverty reduction and promoting sustainable economic growth should be maintained. He also suggested that the priority areas agreed for ADF-IX should be retained. In concluding, Mr. Kabbaj appealed to ADF donors to consider a significant increase in the level of replenishment for ADF-X in the light of the Fund’s progress and the need for higher levels of resources by ADF countries. He also called on Deputies to conclude the negotiations by the end of the year to ensure a smooth transition to ADF-X.

Review of Progress under ADF-IX 3. Implementation of Undertakings. Deputies reviewed the progress the Fund had made under ADF-IX. For this purpose, staff presented the ADF-IX Policy Implementation Matrix, and reports on the Implementation of Operational Priorities, and Enhancing Development Effectiveness. Deputies commended the Fund on the quality of the papers and made the following observations.

4. Deputies agreed that the Fund had indeed made much progress in developing a comprehensive and coherent policy framework to guide its operations. They also welcomed the adherence of the Fund to the priority areas that had been agreed under ADF-IX and the fulfillment of the lending programs in 2002 and 2003, despite difficult circumstances. Deputies further commended the Fund’s work to enhance its development effectiveness and establish a results measurement framework. They also welcomed the enhanced performance-based allocation (PBA) system for Fund operations but some cautioned against too wide a differentiation in per capita allocations. Deputies also asked the Fund to review the relative weight of poverty and governance in the PBA. The need for greater transparency and dialogue with countries was also stressed.

5. Deputies agreed that the major challenge facing the Fund now is implementing its policies, projects and programs, and urged the Fund to become more proactive in 2 the implementation process. In addition, they requested the Fund to: further enhance the quality of CSPs; assist countries assume more ownership of their PRSPs while aligning national budgets to these strategies; pay particular attention to the needs of low income countries under stress (LICUS); consider expanding the Fund’s presence in regional member countries and delegating more authority; strengthen harmonization and coordination; address the skills gap and recruitment; and develop a coherent private sector development strategy.

6. Status of ADF-IX Subscriptions and ADF Liquidity. Management informed Deputies that of the 24 countries that had pledged support, four have yet to deposit their instruments of subscriptions. The Deputy for the United States informed the meeting that US would soon deposit its instruments of subscription. On liquidity levels, Management indicated that levels were satisfactory and comparable to those of IDA.

7. Independent Evaluation of Undertakings under ADF VII–IX. Management informed the Deputies that the independent evaluation is underway and that the final report would be ready by early July 2004. Deputies were also informed that a presentation on the preliminary findings would be made by the consultant at the second meeting of the consultations. The full report, together with management’s response, would be presented at the third meeting in the fall.

8. Use of Grants and Compensation for Loss of Reflows. Deputies agreed that grant resources had been used in line with the agreement reached under ADF-IX. With respect to compensating the Fund for the loss of reflows due to the increase of grants under ADF-IX, a preference for compensating the Fund up front was expressed by a number of Deputies while others preferred the pay-as-you-go option. Final decision was deferred pending the outcome of discussions on the same matter in IDA. Deputies also requested that a technical paper be prepared on how such up front ‘compensation funds’ could be used for development purposes.

9. With respect to grants in the future, many Deputies felt that a more country focused approach may be pursued and that the issue may best be seen in the broader context of ensuring debt sustainability through increased concessionality. Some Deputies noted that the sector approach could, however, still retain its relevance in certain cases. Deputies agreed to take up the issues pertaining to grants, including levels, at the next meeting.

The Strategic Orientation of Fund Activities under ADF-X
10. Deputies discussed Management’s preliminary proposal for the strategic orientation of Fund activities under ADF-X. They supported the broad thrust of the proposal and agreed that poverty reduction and the promotion of sustainable economic growth would remain the overarching objectives of Fund operations. In addition, they agreed to retain the operational priority areas of ADF-IX. With respect to the proposal to give greater weight to certain operational areas, Deputies stressed the importance of selectivity and staying within the agreed priorities, and asked for further clarification in upcoming meetings and in the draft Deputies Report.

11. With respect to providing assistance to post conflict countries, Deputies welcomed the initiative and proactivity of the Fund on the matter. They requested Management to look further into several aspects, including: the moral hazard issue, unbundling arrears clearance and post-conflict assistance, and the links to the HIPC initiative. Many Deputies indicated their preference for moving close to a case-by-case approach within a clear framework. They also requested the Fund to provide further simulations and information on prospective beneficiary countries in order to clarify the initiative. They agreed to revisit the matter in the course of ADF-X consultations.

Other Matters
12. Deputies agreed that 1 April to 30 September 2004 would be the period over which the ADF-X exchange rates will be averaged. They also agreed that borrowers’ representatives from the four sub-regions of the Fund (central, east, west, and south) would take part in the replenishment meetings. Consultations with NGO representatives will also be organized.

13. Deputies agreed that the next meeting of the ADF-X consultations would be held in Kampala on the 28th and 29th of May 2004 after the Annual Meetings. It was also agreed that the third meeting would be held in Tunis in September/October 2004 to be firmed up later, and the fourth and final meeting in Copenhagen in December 2004.

14. Deputies also agreed on the papers and subjects to be taken up at the subsequent meetings as per the attached Annex.

15. Deputies thanked the Government of Switzerland for hosting the meeting and the Government of Denmark for having kindly offered to host the final meeting.