The United Nations (UN) Economic Commission for Africa (UNECA), has launched a Liquidity and Sustainability Facility (LSF) to enable African governments access to liquidity structure on par with international standards and also save African governments $11 billion a year in interest costs.
UNECA disclosed this in a statement on Wednesday at the 26th United Nations Climate Change Conference of the Parties (COP 26) in Glasgow where it discussed the continent’s Eurobond issuance needs.
It noted that the first part of the Fund would be issued in the first quarter of 2022, with $200 million support to be funded by the African Export-Import Bank (Afreximbank), and currently receiving interest from large international Asset Managers such as Amundi.
Vera Songwe, Executive Secretary of UNECA stated that “Cash is king, and you don’t get cash very fast from a lot of African bonds.”
“We need to create a repo market,” Songwe said, adding that the LSF will save African countries $11 billion in interest costs over the next five years.
“Today Africa needs more liquidity than ever before to finance its recovery and to invest in a bold, and sustainable environment,” she added.
Dr. Benedict Oramah, President and Chairman of the Board of Directors, Afreximbank, said: “We are very pleased to be part of the first transaction of the Liquidity and Sustainability Facility.
“We believe it will offer a strong opportunity to design a new financing paradigm for the continent, one that will stimulate its economic growth and sustained development and attract diversified investments from the international community.”
UNECA revealed that the LSF seeks to support all Eurobonds African sovereign international financing needs. Its goal is to also incentivise sustainability-linked investments such as green bonds and Sustainable Development Goals (SDGs) bonds.
The LSF is also intended to provide international private investors seeking to invest in Africa with a robust framework and a diversified range of opportunities particularly in line with the UN’s SDGs. The facility would be supported by Citi, acting as a structuring agent and providing expertise in setting up the facility, together with law firms, White & Case LLP and Matheson and consultancy firm Eighteen East Capital