There are four types of PBOs: general budget support (GBS), sector budget support (SBS), crisis response budget support (CRBS), and import support. The fourth category is markedly different from the others, which provide funds directly to the national treasury. Import support goes to the central bank. Fiduciary and audit standards are also different for import support.

  • General budget support (GBS). A loan or grant that provides non-earmarked financial transfers to the national budget in support of policy and institutional reforms that are established in the country’s national development plan or national poverty reduction strategy and are included in the country’s budget priorities. This financing is accompanied by policy dialogue to support on-going government-led policy reforms in multiple sectors as well as other complementary instruments, where appropriate.
  • Sector budget support (SBS). A loan or grant that involves policy and institutional reforms in a particular sector of AfDB’s operational priorities, supported by unallocated financial transfers to the national budget. This financing is accompanied by policy dialogue in support of a particular sector and other complementary instruments, where appropriate.
  • Crisis response budget support (CRBS). A fast-disbursing loan or grant to mitigate the adverse impact of a crisis or shocks. CRBS is available to the full range of RMCs: middle-income countries (MICs), low-income countries (LICs), and Transition states11Transition States are countries where the main development challenge is fragility(for which a risk assessment must be carried out). The crisis may be political, economic, or humanitarian. CRBS appraisal reports need to justify the decision to use the instrument based on the nature of the crisis. There is limited scope for policy dialogue at times of crisis, but the instrument can be used to open the door for future policy dialogue. AfDB streamlines its processes to fast-track the preparation and disbursement of PBOs as part of CRBS operations.
  • Import support.A loan or grant that involves the transfer of financial resources to the central bank or is used to boost reserves in the case of a balance of payment deficit. Import support is not the strategic focus of AfDB. The instrument is to be used only in exceptional cases as part of a coordinated donor action (e.g., with the International Monetary Fund) to mitigate short-term macroeconomic instability in any RMC.

The 2012 policy makes clear that budget support can be provided either as a stand-alone operation or as programmatic support. The policy highlights the usefulness of a programmatic approach for supporting medium-term policy reforms, while maintaining stand-alone operations as an option. 

  • Stand-alone operations. A single disbursement against the fulfillment of prior actions during the year of approval. Policy dialogue is limited to a 1-year period.
  • Programmatic operations. A series of single-year operations in a multi-year framework. This involves a series of single-tranche operations that are sequentially presented to the AfDB Board of Directors, within a medium-term framework specified at the outset. Indicative triggers are included in an overall multiple-year appraisal report and are adapted to changing circumstances at each phase of the program. At the end of each phase, a streamlined appraisal document is prepared, indicating the prior actions taken in advance of the next loan or grant as well as the triggers for subsequent operations in the series.
  • Programmatic tranching. Single loan operations with a series of tranches set within a multi-year framework, all approved upfront in one appraisal report. Under this model, the conditions precedent for the disbursement of each tranche are identified and approved by the Board at the time of approval. This requires a high degree of certainty on reform actions and timing but has the advantage of reducing transaction costs for both AfDB and the RMC. 

At the AfDB, PBO resources are not subject to earmarking and are not related to the cost of the reforms supported, but rather to country financing requirements and AfDB’s available lending envelope. From 2009 to 2019, PBOs constituted 17%–21% of overall annual approvals.

Within that timeframe, GBS represented 65% of AfDB operations. Following the adoption of the 2012 policy, the share of SBS increased to 26.4%. The CRBS instrument was introduced in 2012 by the policy and represented 8.7% of all PBOs approved during 2012–2017. 

Despite AfDB’s stated preference for programmatic operations, single-standing operations (SSOs), still account for a third of approved projects. Programmatic models are the preferred option for AfDB (as in other multilateral development banks), because: (i) reforms are medium-term in nature, and (ii) they allow development partners more leverage to support reforms. Since 2012, 42% of PBOs have been designed as programmatic operations or programmatic tranching (24%).

The coronavirus disease (COVID-19) pandemic has disrupted African countries’ economies and the livelihoods of millions of people. In response, AfDB has introduced initiatives to support the governments of its RMCs as they take measures to mitigate the human and economic impact of the pandemic. As part of its response, AfDB has used CRBS to respond quickly to crises. This is not the first time AfDB has faced such a major emergency, in 2014 it responded to the Ebola crisis affecting Guinea, Liberia, and Sierra Leone using the PBO instrument to strengthen the countries’ health systems so that they could tackle the outbreak. The use of CRBS is guided by AfDB’s 2014 operational guidelines on the programming, design and management of PBOs and by simplification measures introduced by the $10 billion COVID-19 Rapid Response Facility (CRF)12COVID-19 Response Facility. https://www.afdb.org/en/news-and-events/press-releases/african-development-bank-group-unveils-10-billion-response-facility-curb-covid-19-35174 AfDB launched in April 2020.

In addition to the CRF, a number of measures have been launched as part of the COVID-19 outbreak and its economic consequences, including a $3 billion Fight COVID-1913The Fight Covid-19 Social Bond. https://www.afdb.org/en/news-and-events/press-releases/african-development-bank-launches-record-breaking-3-billion-fight-covid-19-social-bond-34982social bond, and $2 million in emergency assistance to support measures led by the World Health Organization14The emergency assistance for the World Health Organization (WHO) to reinforce its capacity to help African countries contain the COVID-19 pandemic and mitigate its impacts. https://www.afdb.org/en/news-and-events/press-releases/african-development-bank-approves-2-million-emergency-assistance-who-led-measures-curb-covid-19-africa-35054to curb the spread of the disease. Since the approval of the CRF, 28 CRBS operations have been prepared and approved for the benefit of 40 RMCs. Specifically, 26 AfDF countries received support with a total of $1,244 million and 14 African Development Bank countries for a total of $2,364 million.15AfDB. First Quarterly Progress Report Implementation of the COVID-19 Response Facility (2021). The unit of account (UA) is the currency for AfDB projects.

The focus of CRBS operations has been on supporting emergency responses to the health, social, and economic crises brought about by COVID-19. AfDB’s policy dialogue with governments has centered on the formulation and content of COVID-19 response plans, in particular on ensuring that these plans cover not only the health dimensions of the crisis, but also respond to the social and economic fallout. AfDB has accorded high priority to safeguarding the transparency and accountability of COVID-19 expenditures and programs, and has taken the lead in addressing this as part of its policy dialogue with RMCs. In the medium term, the focus of the dialogue will shift to increasing AfDB’s engagement on the reforms required for recovery and on building economic resilience, which can be pursued once the crisis is over.