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[Senate Report 111-51]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 113
111th Congress                                                   Report
                                 SENATE
 1st Session                                                     111-51

======================================================================

 
                       AFRICAN DEVELOPMENT FUND 
                       REPLENISHMENT ACT OF 2009

                                _______
                                

                 July 16, 2009.--Ordered to be printed

          Mr. Kerry, from the Committee on Foreign Relations,
                        submitted the following

                                 REPORT

                         [To accompany S. 955]

    The Committee on Foreign Relations, having had under 
consideration the bill (S. 955), to authorize United States 
participation in, and appropriations for the United States 
contribution to, the African Development Fund and the 
Multilateral Debt Relief Initiative, to require budgetary 
disclosures by multilateral development banks, to encourage 
multilateral development banks to endorse the principles of the 
Extractive Industries Transparency Initiative, and for other 
purposes, reports favorably thereon, and recommends that the 
bill do pass.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Discussion.......................................................1
 IV. Cost Estimate....................................................3
  V. Evaluation of Regulatory Impact..................................6
 VI. Changes in Existing Law..........................................6

                               I. PURPOSE

    The purpose of S. 955 is to authorize United States 
participation in, and appropriations for the United States 
contribution to the eleventh replenishment of the resources of 
the African Development Fund.

                          II. COMMITTEE ACTION

    S. 955 was introduced by Senators Kerry and Lugar on May 1, 
2009. It is cosponsored by Senator Kaufman. On May 5, 2009, the 
committee ordered S. 955 reported favorably by voice vote.

                            III. DISCUSSION

    S. 955, the ``African Development Fund Replenishment Act of 
2009'' authorizes U.S. participation in the eleventh 
replenishment of the resources of the African Development Fund. 
The authorized 3-year appropriation, 2008-2010, of $486.2 
million represents 8.9 percent of the total $8.9 billion 
replenishment.
    The African Development Fund (AfDF or ``Fund'') is a 
concessional lending and grant making facility for low-income 
African member countries of the African Development Bank. The 
African Development Bank includes shareholders from 53 African 
countries and 24 non-African countries. The AfDF was created in 
1972 and began operations in 1974, there are currently 38 AfDF 
borrower countries.
    The AfDF is primarily financed by the non-African countries 
with the U.S. ranked fourth in funding behind the UK, Germany 
and France. Donors negotiate a replenishment agreement every 3 
years. In December 2007, negotiations concluded for the 
eleventh replenishment of AfDF resources (AfDF-VI) that will 
provide financing of $8.9 billion during 2008 to 2011. It 
provides grant financing and loans on highly concessional terms 
to Africa's poorest countries. The AfDF financing supports 
investments in infrastructure, health, education, agriculture, 
water supply and sanitation. In addition, it provides technical 
assistance to facilitate basic economic policy and 
institutional reforms in support of sustainable economic growth 
and development.
    In the previous AfDF replenishment, the Congress 
appropriated $407 million out of a total replenishment of $5.4 
billion. In the latest negotiations, the U.S. emphasized the 
following priorities: Managing for results, fragile states, 
regional operations, and private sector-led growth.

    Managing for Results.  The U.S. pushed for a results-based 
framework, with concrete indicators and objectives, to guide 
Fund operations through 2010. The framework encourages the Fund 
to focus on measurable results rather than merely funding 
priorities. The committee agrees that the Fund should base its 
funding on tangible results and supports this emphasis. The 
committee continues to monitor progress at the African 
Development Bank on anti-corruption efforts in its projects and 
programs and believes that ensuring that development funds are 
not stolen or misused will result in better project and program 
outcomes.

    Fragile States. The Fund has established a special facility 
to provide targeted assistance to countries in transition from 
conflict and economic failure to stability and growth. Such 
assistance will support the elimination of arrears, provide 
resources to secure a peaceful and stable environment, and 
supplement capacity-building efforts. Countries that will 
benefit include post-conflict states such as Liberia. This 
committee believes this is an important sector where the Fund 
can exercise a comparative advantage. As an eminent persons 
group on the African Development Bank (chaired by former 
Mozambican President Juaquim Chissano and former Canadian Prime 
Minister Paul Martin) advised in its final report in fall 2007, 
the ``AfDB has excess capacity and the AfDF has excess 
demand.'' It is critical that fragile states who compose the 
majority of AfDF borrowing countries have access to sufficient 
capital in order to facilitate their reconstruction and 
development. The committee recognizes the increased challenges 
for fragile states, especially in achieving sufficient capacity 
to govern and maintain accountability within government 
institutions. Fund resources in such situations must be managed 
with extraordinary oversight and the tools to build similar 
capacity locally should be a part of any programs implemented.

    Regional Operations. The Fund will provide further 
resources to projects that enhance regional integration and 
cross-border infrastructure. In addition, the Fund will develop 
a results measurement and development impact framework 
specifically for regional projects. The committee believes that 
development in Africa cannot be achieved on a country-by-
country basis. It is vital that regions develop integrated 
strategies that will leverage comparative economic regional 
advantages.

    Private Sector-led Growth. The Fund will increase support 
in this area by promoting macroeconomic, regulatory, and 
financial sector reform, as well as by helping countries 
develop stronger anti-corruption frameworks and improved 
transparency. This includes helping countries implement the 
Extractive Industries Transparency Initiative. Finally, the 
Fund will also emphasize support to the agriculture sector, to 
alleviate the impact of the global food crisis. This represents 
an area of priority for the committee. The committee also 
encourages the Fund to help developing countries link programs 
and projects with private sector partners in order to reduce 
poverty, promote growth, and foster job creation. At the same 
time, it is important that recipient countries manage private 
sector growth in a transparent and consistent manner, 
conforming to global norms and standards, especially with 
regard to extractive industries, international environmental 
standards, and internationally recognized workers rights.

    S. 955 also includes two additional congressional 
priorities. One, the bill directs the Secretary of the Treasury 
to ensure that each multilateral development bank discloses to 
member countries the operating budget of the bank, including 
expenses for staff, consultants, travel, and facilities. This 
level of transparency is important for shareholders, including 
the United States, to understand how the multilateral 
development banks are utilizing their operational funds so that 
they can advocate for efficient use of those funds.
    Second, the bill requires the Secretary of the Treasury to 
direct the United States Executive Director of each 
multilateral development bank to use the voice and vote of the 
United States to ensure that the bank endorses the principles 
of the Extractive Industry Transparency Initiative (EITI) and 
integrates such principles into any project funded by the bank 
that is related to an extractive industry. The World Bank has 
already endorsed EITI and now integrates the EITI principles in 
its extractive industry projects. The other multilateral 
development banks are at varying stages of endorsement and 
implementation.

                            V. COST ESTIMATE

    In accordance with Rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the committee provides this 
estimate of 
the costs of this legislation prepared by the Congressional 
Budget Office.

                            United States Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 11, 2009.

Hon. John F. Kerry.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 955, the African 
Development Fund Replenishment Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John Chin.
          Sincerely,
                                      Douglas W. Elmendorf.

                                ------                                

               Congressional Budget Office Cost Estimate

                                                     June 11, 2009.

                                 S. 955

           African Development Fund Replenishment Act of 2009

            AS ORDERED REPORTED BY THE SENATE COMMITTEE ON 
                    FOREIGN RELATIONS ON MAY 5, 2009

                                SUMMARY

    S. 955 would authorize the appropriation of $468 million 
for the United States' share of the eleventh general 
replenishment of the resources of the African Development Fund 
(AfDF-11). That replenishment covers the three-year period 
ending in December 2010.
    The bill also would authorize the appropriation of up to 
$26 million to meet potential shortfalls in the U.S. commitment 
to compensate the African Development Fund (AfDF) for debts 
cancelled under the Multilateral Debt Relief Initiative (MDRI) 
over the 2006-2054 period. CBO expects that provision would 
have no significant budgetary impact.
    CBO estimates that implementing S. 955 would cost $318 
million over the 2010-2014 period, assuming appropriation of 
that amount. (The Congress has already appropriated $150 
million for fund replenishment in 2009.) Enacting the bill 
would not affect direct spending or revenues.
    S. 955 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of S. 955 is shown in the 
following table. The costs of this legislation fall within 
budget function 150 (international affairs).

                                       Changes in Spending Due to S. 955*
                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                            2010     2011     2012     2013     2014   2010-2014
----------------------------------------------------------------------------------------------------------------
Estimated Authorization Level...........................     159      159        0        0        0        318
Estimated Outlays.......................................      95      159       64        0        0        318
----------------------------------------------------------------------------------------------------------------
* The Congress appropriated $150 million for a contribution to the African Development Fund (AfDF) for fiscal
  year 2009, enacted in the Omnibus Appropriations Act, 2009 (Public Law 111-8) on March 11, 2009. CBO assumes
  there would be no additional funding for the AfDF for this year.

                           BASIS OF ESTIMATE

    For this estimate, CBO assumes that S. 955 will be enacted 
before the end of fiscal year 2009, that the estimated amounts 
necessary to fully fund the U.S. share of the current 
replenishment will be appropriated each fiscal year, and that 
outlays will follow the historical spending patterns for U.S. 
contributions to the fund.

AfDF-11

    S. 955 would authorize the appropriation of $468 million 
for contributions to AfDF-11. The 11th replenishment was agreed 
to in December 2007, committing the United States and other 
donors to contribute a total of $8.9 billion to the fund.
    Based on information from the Department of the Treasury, 
CBO expects that the U.S. commitment to AfDF-11 would be funded 
with appropriations over fiscal years 2009 through 2011. The 
Omnibus Appropriations Act, 2009 (Public Law 111-8) provided 
$150 million for the first installment. CBO further expects 
that the remaining authorized amounts of $318 million would be 
provided in two installments of $159 million in 2010 and 2011.

MDRI

    S. 955 also would authorize the appropriation of up to $26 
million to meet potential shortfalls in the U.S. commitment to 
compensate the AfDF for debts cancelled under the MDRI, which 
was agreed to in September 2006 and covers the 2006-2054 
period.
    The Treasury Department has indicated that it expects to 
fully fund the United States' MDRI commitment of $26 million 
for AfDF-11 by accelerating the encashment (payment) schedule 
for U.S. replenishment payments to AfDF-11. Under the 
department's plan, those payments would be completed in four 
years--by 2012--rather than the 10 years that would otherwise 
be allotted. Based on a formula negotiated with the fund, those 
early payments would earn credits towards the U.S. MDRI 
commitment because of the additional interest that the fund 
would earn. Based on information provided by the Treasury 
Department on this early encashment income, CBO expects that 
additional appropriations to meet the U.S. MDRI commitment 
would not be required for either AfDF-11 (2009-2011) or AfDF-12 
(2012-2014). As a result, CBO estimates that authorizing such 
appropriations would not significantly affect discretionary 
spending over the 2010-2014 period.

              INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

    S. 955 contains no intergovernmental or private-sector 
mandates as defined in UMRA and would not affect the budgets of 
state, local, or tribal governments.

Estimate prepared by:

    Federal Costs: John Chin
    Impact on State, Local, and Tribal Governments: Marin 
Randall
    Impact on the Private Sector: Burke Doherty

Estimate approved by:

    Theresa Gullo, Deputy Assistant Director for Budget 
Analysis.

                   V. EVALUATION OF REGULATORY IMPACT

    Pursuant to Rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VI. CHANGES IN EXISTING LAW

    In compliance with Rule XXVI, paragraph 12 of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 
roman).

                        African Development Fund

    Sec. 201. This title may be cited as the ``African 
Development Fund Act''.
    Sec. 202. The President is hereby authorized to accept 
participation for the United States in the African Development 
Fund (hereinafter referred to as the ``Fund'') provided for by 
the agreement establishing the Fund (hereinafter referred to as 
the ``agreement'') deposited in the archives of the United 
Nations.

           *       *       *       *       *       *       *

SEC. 219. ELEVENTH REPLENISHMENT.

    (a) In General.--The United States Governor of the Fund is 
authorized to contribute on behalf of the United States 
$468,165,000 to the eleventh replenishment of the resources of 
the Fund, subject to obtaining the necessary appropriations.
    (b) Authorization for Appropriations.--In order to pay for 
the United States contribution provided for in subsection (a), 
there are authorized to be appropriated, without fiscal year 
limitiation, $468,165,000 for payment by the Secretary of the 
Treasury.

SEC. 220. MULTILATERAL DEBT RELIEF INITIATIVE.

    (a) In General.--The Secretary of the Treasury is 
authorized to contribute, on behalf of the United States, not 
more than $26,000,000 to the African Development Fund for the 
purpose of funding debt relief under the Multilateral Debt 
Relief Initiative, subject to obtaining the necessary 
appropriations and without prejudice to any funding 
arrangements in existence on the date of the enactment of this 
section.
    (b) Authorization of Appropriations.--In order to pay for 
the United States contribution provided for in subsection (a), 
there are authorized to be appropriated, without fiscal year 
limitation, not more than $26,000,000 for payment by the 
Secretary of the Treasury.
    (c) Multilateral Debt Relief Initiative Defined.--In this 
section, the term ``Multilateral Debt Relief Initiative'' means 
the proposal set out in the G8 Finance Ministers' Joint 
Communique entitled ``Conclusions on Development'', London, 
June 11, 2005, and reaffirmed by G8 Heads of State at the 
Gleneagles Summit on July 8, 2005.

                                  
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