The Board of Directors of African Export-Import Bank (Afreximbank) has approved the launch of the Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA).
This is a programme of credit facilities that the bank has developed to manage the impacts of the Ukraine crisis on African economies and businesses which amount to US$4billion.
The Russia-Ukraine crisis, which escalated on 24th February, 2022, has had a significant effect on the global economy. Given the importance of both Russia and Ukraine as sources of crude oil and gas, raw materials and grains, the outbreak of the conflict has wider repercussions on a global scale, including adversely affecting African economies, especially those that rely heavily on grain, fertiliser and fuel imports.
The UKAFPA programme has the following objectives The Objectives of the programme include 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-collateralised loans in the context of the current high oil and metal prices, and thereby release freer cash flow for use in meeting other urgent needs, e.g., food and fertiliser imports and servicing rising cost of debt.
Others include, 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; and 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.
Since its establishment, Afreximbank has built a track record and earned a reputation for introducing and implementing various emergency intervention programmes, with embedded strong risk mitigations to respond to various crises on a global scale and impacting Africa.
Recent examples include the Pandemic Trade Impact Mitigation Facility (PATIMFA) through which Afreximbank disbursed over US$7billion in support of African economies in their fight against the COVID-19 pandemic, which expired in March.
Previously, in 2015, the bank introduced its Countercyclical Trade Liquidity Facility (COTRALF), that provided a platform for the disbursement of over US$10billion to African commercial and central banks, making it possible to avert large-scale trade debt payment defaults at the height of the commodity crisis.
Both facilities achieved their respective goals and were deemed vitally important and successful interventions.
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 US$15billion.
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.
Afreximbank looks forward to working 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 fertiliser and agricultural in-put 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.
Speaking after the board meeting held in Abidjan, Côte D’Ivoire, Professor Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, said he was delighted that the board had approved the introduction of the UKAFPA, once again demonstrating their responsiveness to the needs of African member-states and their citizens.
This initiative he said would contribute immensely to averting social anxiety and upheaval that may arise from looming food shortages and high costs of fertiliser and petroleum products.
“Following African Union’s endorsement, Afreximbank shareholders approved a US$6.5billion 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. We must now add the consequences of the ongoing Ukraine crisis to the catalogue of emergencies a strong Afreximbank has to contend with.
“We are very grateful to member-states and shareholders who have already paid in their subscriptions, giving the bank the flexibility to respond swiftly to prevailing challenges. I call upon those who have not acted to do so urgently as we will once again learn that in times of major crises, we can only count on our own institutions to lead the way before others follow,” Prof. Oramah added.
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 which 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”.
Dr. Vera Songwe, United Nations under Secretary-General and Executive Secretary of the Economic Commission for Africa, welcomed this new initiative and added:
“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.”