The Board of Directors of African Export-Import Bank (Afreximbank) on 31 March 2022 approved the launch of the Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA), a programme of credit facilities that the Bank has developed to manage the impacts of the Ukraine crisis on African economies and businesses. The programme amounts to US$ 4 billion.
The Russia-Ukraine crisis which escalated on 24 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, fertilizer and fuel imports. The UKAFPA 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 cash flow for use in meeting other urgent needs, eg. food and fertilizer imports and servicing the 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
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$7 billion in support of African economies in their fight against the Covid 19 pandemic. That facility expired in March. Previously, in 2015, the Bank introduced its Countercyclical Trade Liquidity Facility (COTRALF) which provided a platform for the disbursement of over US$10 billion 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 exceed US$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.
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 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.
Speaking after the board meeting held in Abidjan, Cote D’Ivoire, Professor Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank commented:
“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.
“Following African Union’s endorsement, Afreximbank shareholders approved a US$6.5 billion, 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.”
H.E. 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.”
Dr Vera Songwe, United Nations Under-Secretary-General and Executive Secretary of the Economic Commission for Africa welcomed this new initiative and added that:
“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 strengthing the continental financial architecture as countries look to rebuild their economies and take advantage of the African Continental Free Trade Area (AfCFTA) agreement.”