After disbursing more than $7bn to fight against Covid-19 and supporting the deployment of the African Continental Free Trade Area (AfCFTA), Afreximbank is preparing to implement a new “boost” to the economy. This time, it seeks to combat the economic consequences associated with the war in Ukraine.
On 31 March, the bank’s board of directors approved the launch of a trade finance programme designed “to assist African countries’ adjustment.” Called “UKAFPA”, for Ukraine Crisis Trade Financing Programme for Africa, this programme – which has been endowed with a sum of $4bn – aims to set up lines of credit for African economies and companies.
On a continent that imports nearly two-thirds of the wheat it consumes, the impact on countries exposed to soaring wheat prices is tangible. In particular because 8.3% of wheat comes from Ukraine and 22% from Russia, with which trade is now likely to become more complicated due to the heavy sanctions in place.
Thanking member states and shareholders who have already paid their subscriptions, Benedict Oramah called on those “who have not acted as urgently” to do so. “For we will learn, once again, that in times of major crisis we can only rely on our own institutions to lead the way before others follow,” he said.
Stabilising export earnings
In detail, the programme proposes several financing solutions. “Export earnings acceleration” lines of credit should help ensure that important projects are completed by facilitating access to foreign currency so that equipment, technology and expertise can be imported.
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On the other hand, in order to help countries cope with sudden increases in import prices – pending an adjustment in domestic demand – the adjustment of import reorganisation costs will be financed. On the same principle, the programme proposes oil and metal buy-back financing to “refinance over-collateralised loans” within the current context of high oil and metal prices. This will free up more cash to meet other urgent needs, such as food and fertiliser imports and increased debt service costs.
The UKAFPA programme also includes commodity export revenue stabilisation “to help countries and companies structure and contract derivatives at current high commodity prices and stabilise future export revenues.” Finally, the programme proposes deficit financing of tourism receipts for central banks in tourism-dependent economies.
$15bn in financing requests
This new Afreximbank programme is a response to its member states’ urgent call for emergency intervention, the institution said in its statement released on 6 April. According to the pan-African institution, requests for funding received – in line with the programme – already exceed $15bn.
Beyond providing funding, Afreximbank plans to work with the United Nations Economic Commission for Africa (UNECA), the African Union Commission (AUC) and the AfCFTA secretariat to launch the Intra-African Supply Chain Coordination Group, which will help align production with consumption needs by ensuring that priority is given to products made in Africa, while drawing on support from various entities in other parts of the world.
For his part, Senegal’s President Macky Sall, who is currently chairing the AU, stressed the UKAFPA programme’s “major role” in “building resilience in nutrition and food security on the African continent.”
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