The African Export-Import Bank (Afreximbank) has announced a $3-bn facility, named Pandemic Trade Impact Mitigation Facility (PATIMFA), to support African countries deal with the economic and health impacts of the COVID-19 pandemic.
PATIMFA was approved by the Bank’s Board of Directors during its meeting on 20 March. It will provide financing to assist Afreximbank member countries to adjust in an orderly manner to the financial, economic and health services shocks caused by the COVID-19 pandemic, according to a Wednesday press release by the Bank.
“The facility will support member countries’ central banks, and other financial institutions to meet trade debt payments that fall due and to avert trade payment defaults,” said Afreximbank. “It will also be available to support and stabilise the foreign exchange resources of central banks of member countries, enabling them to support critical imports under emergency conditions.”
Also, PATIMFA will assist member countries whose fiscal revenues are tied to specific export revenues, such as mineral royalties, to manage any sudden fiscal revenue declines as a result of reduced export earnings.
Moreover, it will provide emergency trade finance facilities for import of urgent needs to combat the pandemic, including medicine, medical equipment, hospital refitting, etc.
The facility will be available through direct funding, lines of credit, guarantees, cross-currency swaps and other similar instruments, according to Afreximbank.
Explaining the rationale for the facility, Benedict Oramah, President of Afreximbank, said that the COVID-19 pandemic brought with it considerable suffering and major economic disruptions.
“Besides its worrying effect on human life, the pandemic is projected to cost the global economy up to $1 trillion and to result in a significant 0.4% decline in global GDP growth, which is expected to drop from 2.9% in 2019 to 2.5% in 2020,” Oramah said. “A rapid and impactful financial response is required to avert a major crisis in Africa.”
He pointed out that Africa is exposed in many fronts, including significant declines in tourism earnings, migrant remittances, commodity prices, and disruption of manufacturing supply chains.
Afreximbank had already observed sharp pandemic-induced declines in commodity prices, a sudden significant drop in tourism earnings, disruptions in supply chains, and closure of export manufacturing facilities said the president. The impact on medical supplies and health care systems in many markets had also been unprecedented.
He further added that Afreximbank would work with multilateral development banks that had put in place financial assistance programmes to secure support to assist African countries to deal with adverse external shocks and crises arising from the pandemic.
During the 2015 economic crisis, the Afreximbank introduced a Counter-Cyclical Trade Liquidity Facility under which it disbursed more than $10bn on a revolving basis to enable member countries to adjust to the adverse economic shocks. That facility helped key African economies to manage that crisis and recover swiftly.
