Coronavirus - Africa: World Bank Provides $425 Million to Support the Provision of Infrastructure Financing in Eastern and Southern Africa
Infrastructure is expected to be a key driver of economic recovery post COVID-19
WASHINGTON D.C., United States of America, July 7, 2020/ -- The World Bank Board of Directors approved today a
total amount of $425 million in International Development Association
(IDA)* financing to support the provision of infrastructure finance in
Eastern and Southern Africa. The Regional Infrastructure Financing
Facility project (RIFF) aims to expand long-term finance to private
firms in selected infrastructure in the power sector, as well as in the
transport, logistics and social sectors. This is the first regional
facility of this kind in Africa.
Eastern and Southern Africa suffers from ailing infrastructure,
especially in the power sector. Effective power generation in the region is less than the installed capacity by 20-30 percent due to drought,
lack of maintenance, and general system losses of electricity in both
transmission and distribution. Such deficits cause about 2 percent loss
of GDP growth in most of the countries, impeding a large number of the
region’s population from access to energy. Heavy public financing of
infrastructure contributes to rising debt vulnerabilities and, before
the outbreak of COVID-19, nearly half of the countries in the region
were in debt distress.
“The COVID-19 pandemic threatens the development gains made over the
past years”, said Ms. Deborah Wetzel, World Bank Director of Regional
Integration for Sub-Saharan Africa, the Middle East, and Northern
Africa. “The new operation will help address the long-term
infrastructure funding gap through a regional approach focused on
private financing, with the objective to mobilize about $975 million of
private finance in addition to the funds provided by IDA. This requires a broader approach, including an enabling environment for private capital mobilization, sound public debt management, bankable projects,
long-term finance, and risk mitigation”.
Through the Trade Development Bank (TDB) –a commercially-driven regional development bank--, the RIFF will provide long-term infrastructure
finance that would contribute to job creation and would present
cross-border benefits in terms of trade and investment flows or
transfers of technology. It will facilitate access to debt financing for SMEs in infrastructure value chains and off-grid, by helping them to
keep running and expanding to underserved markets. In the context of the COVID-19, the RIFF’s focus on off-grid solar solutions will contribute
to preserve households’ livelihoods by supporting micro-entrepreneurial
activities that play a critical role in income generation in poor
communities.
The Project harnesses a regional approach to address the financing needs of private sector infrastructure companies, by building capacity in
regional institutions, TDB and the Common Market for Eastern and
Southern Africa (COMESA), to provide a longer and sustainable source of
infrastructure finance and to support the enabling environment for
infrastructure finance. Infrastructure is expected to be a key driver of economic recovery post COVID-19.
This is the first time IDA and the Multilateral Investment Guarantee
Agency (MIGA) –the political risk insurance and credit enhancement arm
of the World Bank Group— are jointly supporting a regional development
bank. MIGA is providing TDB a first-of-its-kind credit enhancement of
EUR 334.4 million on a ten-year loan from private commercial banks, that will help TDB expand trade finance activities. The two operations are
complementary and cover TDB’s two main business lines (infrastructure
finance and trade finance).
* The World Bank’s International Development Association (IDA),
established in 1960, helps the world’s poorest countries by providing
grants and low to zero-interest loans for projects and programs that
boost economic growth, reduce poverty, and improve poor people’s lives.
IDA is one of the largest sources of assistance for the world’s 76
poorest countries, 39 of which are in Africa. Resources from IDA bring
positive change to the 1.6 billion people who live in IDA countries.
Since 1960, IDA has supported development work in 113 countries. Annual
commitments have averaged about $21 billion over the last three years,
with about 61 percent going to Africa.
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