The world economy was struggling to recover from the impacts of the COVID-19 pandemic, and while efforts were being made to respond to the catastrophe, this time another crisis, man-made came up – the Ukraine-Russia war, which started on February 24, is effectively further exacerbating the global economy and as usual impacting Africa.
Russia and Ukraine are both sources of crude oil and gas, raw materials and grains, and as such, the outbreak of the conflict has wider repercussions on a global scale, including adversely affecting African economies, especially those that rely heavily on grain, fertilizer and fuel imports, the Africa Export-Import Bank (Afreximbank) says.
In response to the crisis and its impact on the continent, the Afreximbank has launched a financing programme in direct response to the war to support African countries.
When COVID-19 ravaged the world and African economies were affected, to support African countries to mitigate the impact of the pandemic, the Bank among others implemented the Pandemic Trade Impact Mitigation Facility through which it disbursed over $7 billion in support of African economies. That facility expired in March.
In a press release copied to Ghana Business News Wednesday April 6, 2022, the Bank says its Board of Directors on March 31, 2022 approved the launch of a $4 billion-Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA). The Bank developed credit facilities to manage the impacts of the Ukraine crisis on African economies and businesses.
The programme has the following objectives:
- Import Re-Order Cost Adjustment Financing, to help countries to meet immediate import price increases pending domestic demand adjustments.
- Oil and Metals Buy-Back Financing to refinance over-collateralized 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, eg. food and fertilizer imports and servicing rising cost of debt.
- 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.
- Tourism Revenue Deficit Financing to 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.
- National Export Revenue Acceleration Facility to 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.
According to the Bank, UKAFPA is a response to an urgent call for emergency intervention by member states of the Bank.
“UKAFPA – compliant financing requests received from across Africa already exceeds $15 billion. There is some urgency to meet these requests to avoid catastrophic social conditions across Africa and reduce the risk of their morphing into political challenges,” the Bank said.
It indicates that it intends to work with partner banks and institutions to urgently meet the need of African countries in terms of ensuring static and dynamic food security, adequate fuel supplies and averting fertilizer and agricultural input shortages, against a backdrop of renewed economic nationalism worldwide.
“Beyond the financing, Afreximbank plans to work with the UN Economic Commission for Africa (UNECA), the African Union Commission (AUC) and the African Continental Free Trade Area (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,” it added.
“I am delighted that our Board has approved the introduction of the UKAFPA, once again demonstrating their responsiveness to the needs of African member states and their citizens. 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,” said Prof Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank.
Macky Sall, President of the Republic of Senegal and current Chairperson of the African Union expressed his support for the UKAFPA initiative, saying: ” I welcome 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.”
“The new facility is timely and will 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 (AfCFTA) agreement,” said Dr. Vera Songwe, United Nations Under Secretary-General and Executive Secretary of the Economic Commission for Africa.
By Emmanuel K. Dogbevi
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