The line of credit is to finance FRB’s wide range of projects in local currencies and across Africa.
The line of credit will be drawn in multiple African currencies including the Ghanaian Cedi, Nigerian Naira, the Kenyan Shilling, the Zambian Kwacha, the Mozambican Metical and the Tanzanian Shilling, the AfDB said in a press statement December 12, 2012.
According to the AfDB, it is expected that the local currencies will be mobilized through the establishment of bond issuance programmes in the domestic capital markets and the issuance of local currency denominated bonds to meet the specific local currency requirements of FRB.
It adds, “These programmes are expected to complement existing efforts to develop Africa’s local capital markets thereby providing a strong catalytic and demonstrative effect.”
The Tunis-based lender believes that the line of credit to FRB will contribute to mobilizing significant financial resources in the countries where its proceeds will be deployed, ultimately contributing to economic development and employment opportunities.
The line of credit is also expected to contribute to government revenues, the development of local capital markets as well as African regional integration.
Timothy Turner, Director of the AfDB’s Private Sector Department said, “With this line of credit, the AfDB is introducing a new and innovative form of local currency financing.”
Mr Turner stated that, “this structure” can be replicated by other banks in Africa to gain access to funding in African currencies thereby reducing unnecessary currency mismatches and deepening the local capital markets.
By Ekow Quandzie