Page 1 In the past decade Sub-Saharan Africa<sup>has faced an unparalleled economic crisis</sup> that has threatened to reverse the progress<sup>achieved during two earlier decades</sup> of generally higher primary commodity<sup>prices and financial flows. In response,</sup> many countries have adopted stringent<sup>economic reform programs aimed at</sup> stabilizing the decline and putting<sup>in place the policy framework needed to</sup> achieve structural transformation and sustainable growth. A key element<sup>of these</sup> reform programs involves a shifting<sup>of the primary responsibility for</sup> intervention in the economy from<sup>the state to private enterprises. This shift</sup> requires not just support from<sup>the donor community, but also the mobilization</sup> of significantly higher levels of private<sup>financial and management resources--</sup> both domestic and foreign--to stimulate<sup>trade and investment.</sup> Since its peak at more than $4<sup>billion per year in disbursements between 1980-</sup> 82, representing annual net flows in<sup>excess of $2.5 billion, medium and long-</sup> term commercial bank lending to Sub-Saharan<sup>Africa has been declining. Although</sup> the statistics on short-term lending<sup>do not permit a quantitative analysis of</sup> stocks and flows by type of lender,<sup>it also appears that this important form of</sup> commercial bank credit for the region<sup>has been stagnant. The decline is due in</sup> part to the perception by a large number<sup>of banks that lending to the African</sup> market presents high risks that are not justified<sup>by the available returns.</sup> The prospects for a widespread,<sup>appreciable increase in commercial bank lending</sup> in the foreseeable future do not appear<sup>promising. Despite the progress made</sup> under economic adjustment programs,<sup>there is still skepticism among the banks</sup> regarding the ability and willingness<sup>of Sub-Saharan African governments to</sup> continue with the reform measures and the<sup>likelihood that they will result in</sup> a proliferation of viable lending opportunities.<sup>Moreover, the borrowing</sup> countries in partnership with the official<sup>agencies have been unable to restore</sup> the creditwortniness of Sub-Saharan Africa and the abiliLy of<sup>many countries to</sup> service commercial bank debt. At the same<sup>time, the loans of the multilateral</sup> agencies are being serviced to maintain<sup>their own ability to mobilize the bulk</sup> of Africa's external assistance. In<sup>addition, the banks are faced with a more</sup> stringent regulatory environment as<sup>regards lending to Sub-Saharan Africa at a</sup> time when there are emerging opportunities<sup>in other regions of the world.</sup> On the positive side, the portfolio<sup>"clean-up" that has employed commercial</sup> banks' resources for the past three<sup>years should be near4ng a close, making it</sup> possible for them to begin to consider<sup>a resumption o. lending to qualifying</sup> borrowers under specified conditions,<sup>primarily in successfully adjusting</sup> countries that can foresee an end<sup>to their economic and debt crises. Lending</sup> is likely to encompass innovative<sup>new banking products that engage banks,</sup> borrowers and official agencies<sup>in joint partnership arrangements, as well as</sup> traditional but more properly<sup>targeted and structured transactions.</sup> The purpose of this paper is to<sup>identify and examine key issues involved in the</sup> future of long-term commercial bank<sup>lending to Africa. Chapter One and the</sup> Statistical Annex present the historical<sup>record and briefly review the nature</sup>