Ukraine War: Afreximbank sets up $4 billion trade fund to cushion shocks in African economies

The African Export-Import Bank (Afreximbank) has launched a $4 billion Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA) to manage the impact of the global crisis on African economies.

Afreximbank’s board of directors approved the credit facility on March 31, the bank said in a statement Wednesday.

The bank said that the fund would extend to areas such as oil and metals buy-back financing, commodity export revenue stabilisation and tourism revenue deficit financing.

Benedict Oramah, president of Afreximbank, after the board meeting held in Cote D’Ivoire, expressed delight at the board’s approval of the introduction of the UKAFPA.

According to him, the board demonstrated its responsiveness to the needs of African member states and their citizens.

“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 bank noted in its statement.

Addressing Social Anxiety

The initiative will contribute immensely to averting social anxiety and upheaval that may arise from looming food shortages and high costs of fertiliser and petroleum products, the bank said.

“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,” Mr Oramah said.

“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 institutions to lead the way before others follow.”

The bank said that the programme includes re-order cost adjustment financing, which would 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 fertiliser imports and servicing rising cost of debt,” the bank said.

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“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.”

In his reaction, Macky Sall, president of the Republic of Senegal and current chairperson of the African Union, explained that 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,” he said.