By Afusat Adeoluwa
The African Export-Import Bank (Afreximbank) has announced a $3-billion facility, named Pandemic Trade Impact Mitigation Facility (PATIMFA), to help African countries deal with the economic and health impacts of the COVID-19 pandemic.
PATIMFA, approved by the Bank’s Board of Directors during its sitting on 20 March, 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 information released by the Bank.
It will support member country 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 stabilize the foreign exchange resources of central banks of member countries, enabling them to support critical imports under emergency conditions.
In addition, 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. It will also 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, Prof. Benedict Oramah, President of Afreximbank, noted 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 per cent decline in global GDP growth, which is expected to drop from 2.9 per cent in 2019 to 2.5 per cent in 2020,” he said.
“A rapid and impactful financial response is required to avert a major crisis in Africa,” he said, pointing 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 seen 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 medical systems in many markets had also been unprecedented.
He said that Afreximbank would work with multilateral development banks that had put in place financial assistance programmes in order to secure support to help African countries deal with adverse external shocks and crises arising from the pandemic.
Afreximbank has a history of providing support to African economies in times of economic crisis. During the 2015 economic crisis, it introduced a Counter-Cyclical Trade Liquidity Facility under which it disbursed more than $10 billion 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.