Kenya made the right decision to join Asian bank

The Cabinet has approved Kenya’s subscription to the Asian Infrastructure Investment Bank (AIIB); paving the way for Nairobi to diversify its development financing options.

Kenya now joins 109 other countries from six continents that have expressed confidence in the China-led AIIB to drive their development aspirations.

Since its founding in January 2016, AIIB has proven attractive to countries, mainly in the global south due to a number of reasons. Its focus on funding sustainable infrastructure and other productive sectors appeals to many countries.

Poor infrastructure remains a major impediment to economic take-off in many developing countries, most of which are based in Africa. The continent’s annual infrastructure financing gap currently stands at US$100 billion, according to the Africa Development Bank.

Secondly, AIIB doesn’t impose political demands and economic pressures on borrowing countries. A key driver of disaffection with multilateral lending institutions such as the World Bank and the International Monetary Fund is the long list of conditions that poor countries are subjected to before accessing development financing such as privatisation, higher taxes and deregulation.

Essentially, when poor countries borrow from Bretton Woods institutions, they are often forced to implement economic programmes designed by the lender; dimming capacity of borrowers to exercise economic sovereignty.

Thirdly, with keen interest to finance climate sensitive regional infrastructure projects, AIIB is galvanising voices of economic integration around the world. The bank has set an ambitious target to dedicate 50 per cent of its funding to go into climate financing by 2025.

For Kenya and other African countries, the impact of climate change is quite detrimental yet the continent accounts for less that 10 per cent of the global carbon emissions. With abundant natural resources that can be tapped to foster green transition, Africa should work closely with AIIB to develop new sources of green energy and industries to sustainably cope with the climate crises.

AIIB’s increasing global influence is also indicative of the collective disillusionment with the current global economic governance structures where poor countries are bearing the brunt of high costs of borrowing coupled with financial exigencies associated with other currencies’ fluctuations against the US dollar.

The move by AIIB to lend in local currencies is an exemplary safety net that will benefit the bank’s clients in the long term. This is particularly critical for countries like Kenya where the depreciation of the shilling has added to the country’s public debt.

Having secured the confidence of developing countries, AIIB must now rise to the occasion and support the development aspirations of the member states. So far, the Bank has supported about nine projects valued at US$1.67 billion in three African countries namely Egypt, Rwanda and Côte d’Ivoire.

Africa is currently implanting the Continental Free Trade Area, that requires significant investments in crosscutting infrastructure. Active partnership between AIIB and Africa can catalyse the continent’s economic transformation.

- Dr Adhere is a scholar of international relations. @Cavinceworld