BUSINESS REPORTER
The African Export-Import Bank (Afreximbank) has unveiled a US$4bn facility to cushion African countries from the impact of the Russia-Ukraine war, a demonstration of the bank’s responsiveness to the needs of African member states and their citizens, president Benedict Oramah has said.
The facility, the Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA), was approved by the bank’s board of directors last week.
It comes as UKAFPA– compliant financing requests received from across Africa already exceeds US$15bn.
Russia’s invasion of Ukraine on February 24 has affected the global economy as the two countries Russia and Ukraine as sources of crude oil and gas, raw materials and grains.
The UKAFPA programme seeks to do Import Re-Order Cost Adjustment Financing to help countries to meet immediate import price increases pending domestic demand adjustments.
It will also cover Oil and Metals Buy-Back Financing to refinance over-collateralised loans in the context of the current high oil and metal prices, and thereby release more free cashflow for use in meeting other urgent needs, for examples food and fertiliser imports and servicing rising cost of debt.
The facility will also provide Commodity Export Revenue Stabilisation to help countries and companies to structure and enter derivative contracts at today’s high commodity prices and stabilise future export earnings
A tourism revenue deficit financing will be extended to Central Banks of tourism dependent economies to cover foreign exchange revenue shortfalls arising from a decline in tourism arrivals from Russia and Ukraine
A National Export Revenue Acceleration Facility will be used to accelerate the completion of impactful export-oriented projects by expediting access to foreign currency for use in importing critical equipment, technology, and expertise, for project completion.
“This initiative will contribute immensely to averting social anxiety and upheaval that may arise from looming food shortages and high costs of fertilizer and petroleum products,” Oramah said.
Afreximbank shareholders approved a US$6.5bn General Capital Increase on 2021 to boost the capacity of the bank to deliver on its mandate, deal with the Covid-19 pandemic, and support AfCFTA implementation following African Union’s endorsement.
Oramah said the bank must now add the “consequences of the ongoing Ukraine crisis to the catalogue of emergencies a strong Afreximbank has to contend with”.
Beyond the financing, Afreximbank plans to work with the UN Economic Commission for Africa, the African Union Commission and the AfCFTA Secretariat to launch the Intra-African Supply Chain Coordination Group whose aim will be to enable alignment of production and consumption ensuring that what is produced in Africa is prioritised to meet African requirements, while reaching out to other entities in other parts of the world to lend support.
Senegal President and African Union chairperson, Macky Sall, thew aid his support for the UKAFPA initiative, welcoming the renewed energy of African institutions that have led our coordinated and successful response to the Covid-19 pandemic.
“Africa now faces the socio-economic challenges posed by a global context of conflict. Afreximbank has once again shown the way forward by enabling the continent to tackle the impact of the crisis head-on through financing solutions tailored to the specific pressure points facing our member countries. I hope that UKAFPA will play a major role in building resilience in nutrition and food security on the African continent, in line with the theme of the 36th AU Summit,” Sall said.
Vera Songwe, United Nations Under Secretary-General and Executive Secretary of the Economic Commission for Africa said the UKAFPA facility was timely and would support countries build resilience as they face yet another exogenous shock.
“The facilities approved by Afreximbank are also core tools needed to continue strengthening the continental financial architecture as countries look to rebuild their economies and take advantage of the African Continental Free Trade Area,” Songwe said.
The facility comes as Jim Barnhart, Assistant to the Administrator in the U.S. Agency for International Development’s Bureau for Resilience and Food Security said on Tuesday that Russia’s invasion of Ukraine has worsened the food security context which was already concerning due to the lasting Covid-19 impacts, ongoing humanitarian emergencies, high global food prices, and high fertiliser prices.
If not mitigated, these price increases could result in significant increases in global poverty, hunger, and malnutrition, particularly in regions like sub-Saharan Africa, Barnhart said.
“And from the last global food crisis in 2007 and 2008, we saw the destabilising effect this can have on international order. During that time, food riots occurred in at least 14 African countries,” he said.
“And even with the release of grain reserves or the cessation of hostilities, the impacts will persist. There will be irreversible effects on food production as farmers lack the resources and inputs to plant their spring and summer crops.”
