FDI increased from $5.8 billion to an estimated $17.2 billion in 2006;<sup>4</sup> while net private bond and bank lending flows decreased from $-0.7 billion to an estimated $-2.5 billion during the same period.<sup>5</sup> Capital outflows from the region have also started reversing in recent years. Workers remittances to Sub-Saharan Africa more than doubled from $4.6 billion in 2000 to $10.3 billion in 2006; and institutional remittances increased from $2.9 billion in 2000 to $6.3 billion in 2006. New donors and investors (for example, China and India) have increased their presence in the region.

The picture is less rosy, however, when Sub-Saharan Africa is compared with the other developing regions. Sub-Saharan Africa continues to depend on official aid for its external financing needs. In 2006, ODA was more than two-and-a-half times the size of private flows received by Sub-Saharan Africa excluding South Africa. The recent increase in ODA appears to be driven by debt relief provided through the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative (IBRD 2007).<sup>6</sup> According to IBRD (2007), debt relief represented close to 70 percent of the increase in bilateral official development assistance (ODA) to Sub-Saharan Africa between 2001 and 2005. The relatively small FDI flows to the region went mostly to enclave investments in oil-exporting countries.<sup>7</sup> Portfolio bond and equity flows were almost non-existent outside South Africa. Private debt flows were small and predominantly relationship-based commercial bank lending,<sup>8</sup> and even these flows were mostly short-term in tenor. Less than half the countries in the region have a sovereign rating from the major credit rating agencies. Of those that are rated, most have below-investment grade ratings. Capital outflows appear to be smaller than in the previous decade, but the stock of flight capital from the region remains high. Migrant remittances appear to be increasing, but much of the flows are believed to be unrecorded as they bypass formal financial channels. In short, there is little room for complacency; efforts to explore new sources and innovative mechanisms for financing development in the region must continue.

The paper suggests several new instruments for improving access to capital of SubSaharan African countries. The analysis of country creditworthiness suggests that many countries

> 4 Although the amount received by Sub-Saharan Africa is tiny compared with the total FDI flows to developing countries, as a share of GDP it is equivalent to 2.4 percent, comparable to the share of FDI in the GDP of other developing regions.

> 5 There is a reporting lag in the transfer items of the balance of payments statistics. Data on official debt flows were unavailable for 2006 as of March 2008.

> 6 Aid effectiveness is hampered by coordination difficulties among donors and by a lack of absorptive capacity among borrowers in the region (see Gelb, Ramachandran, and Turner 2006; IBRD 2006; World Bank 2006).

> 7 Oil exporters in Sub-Saharan Africa comprise nine low- and middle-income countries (Angola, Cameroon, Chad, the Democratic Republic of Congo, the Republic of Congo, Equatorial Guinea, Gabon, Nigeria, and Sudan) with a combined gross domestic product of $255 billion or 37 percent of Sub-Saharan Africa’s gross domestic product in 2006.

> 8 Only one middle-income oil-exporting Sub-Saharan African country, Angola, accounted for virtually all of net bank lending to Sub-Saharan African countries other than South Africa from 2003 to 2005. More recent data on syndicated loans suggests that bank lending has grown since, but mainly in resource rich countries such as Angola, Liberia, Nigeria  and Zambia.

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