- Okays $10bn COVID-19 facility for Africa
Obinna Chima and Ugo Aliogo
The Board of the African Development Bank (AfDB) thursday announced deferment of debt repayment for its private sector clients.
It also reiterated its approval of $10 billion for COVID-19 Response Facility for African countries.
The President of AfDB, Dr. Akinwumi Adesina, during an online press conference yesterday, gave a breakdown of the distribution to include $5.5 billion to support the AfDB countries.
“That is countries that can access the window of the bank or the non-concessionary window of the bank,” he explained.
In addition, $3.1 billion would be to support countries he termed the African Development Fund countries.
On the $1.4 billion to be set aside for the private sector, Adesina stated that many private sector operators would need emergency liquidity facility to help them with the liquidity constraints that they face due to the pandemic.
He said: “It is to support and protect the SMEs. As you know, SMEs form 75 per cent or 85 per cent of all the businesses we have in Africa. So, we want to protect these businesses and jobs.
“The third of course is that we are going to be deferring debt payments for the private sector that are our clients and we would be providing trade finance and guarantees to the private sector under this facility.
“These are loan income and fragile state countries that have access to the concessional resources of the bank and basically grants that we give. Also, we would provide $1.4 billion to support the private sector.”
He explained that the $10 billion facility would support countries to have rapid cost-effective and targeted emergency budget support as well as offer liquidity to countries that are facing fiscal and balance of payment challenges so that they can stabilise their economies.
“It would also support the private sector and private support for sustainable efforts to avoid debt burdens for countries.
“It is also not going to add to the debt of countries. We would help Africa to manage this crisis and we would support Africa to mitigate the knock-on economic impact of this health crisis on the rest of the economies and we would save lives. Every single country matters and nobody would be left behind,” he stated.
He stated that if the pandemic was not effectively managed in the continent, it could lead to a food crisis.
“I am actually delighted to let you know that yesterday, the board of the AfDB approved $10 billion for coronavirus response facility for Africa.
“As we look at how countries in the world respond to the coronavirus, it is important that we bear two things in mind: First is that we can have social distancing because we all have to stay indoors as we try to deal with this crisis.
“However, what is not acceptable as far as I am concerned is fiscal distancing. We cannot afford fiscal distancing at this point in time,” he added.
According to him, every country in the world needs support to adequately protect its citizens, protect its economy and to support economic recovery after the pandemic.
He said the timely approval of the facility demonstrated the seriousness with which the AfDB took the pandemic.
“As we talk of numbers in terms of monies, let us also bring to mind what is happening in terms of lives. Every time that I wake up in the morning, the most distressing thing that I see is listening to global news and the number of people that have been affected by the virus and the number of people that have died.
“It is like announcing the number of deaths as if we are announcing some kind of gold medal in an Olympics. It is so sad. Therefore, it is time for serious action.
“We must move massively and aggressively to give Africa maximum support to quickly contain this epidemic,” he said.
He said the latest approval was also to build on what the multilateral institution had done in the past two weeks.
The AfDB recently went to the international capital market to raise a Social Impact Bond of $3 billion called the Fight Coronavirus Bond. Its debt instrument was regarded as the largest social impact bond launched ever in the world, at 0.75 per cent coupon rate.
“So, this is cheap money that we can make available to our clients. I am also happy to announce that the $3 billion bond of the bank has just been listed on the London Stock Exchange and it has been oversubscribed,” he said.
According to Adesina, the pandemic has exposed the poor state of healthcare in Africa.
He added that the bank was planning to build quality healthcare infrastructure for Africa.
“We want to build a quality healthcare infrastructure to support Africa. In essence, Africa needs a healthcare infrastructure defense system. Today, we have the coronavirus, but we need to prepare because there might be another thing that is worse than this. Therefore, we need to be well prepared.
“Today, Africa has only 375 pharmaceutical companies, for a population of 1.3 billion people. China has almost 7,000 pharmaceutical companies, India almost 11,000.
“So, you can see that Africa doesn’t have the capacity to produce pharmaceutical products. We cannot continue importing pharmaceutical companies. As a bank, we are looking at how we can support a big-time effort of building Africa’s pharmaceutical industry to protect lives,” he said.
He estimated that the disruption due to the pandemic would see economies in Africa lose between $22 billion and $88 billion, adding that the global economy is already facing a recession.