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UNECA Launches Investment Boosting Funding Facility

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By Alois Vinga


THE United Nations Economic Commission for Africa (UNECA) has launched a facility which will assist the continent with a liquidity structure to address specific Eurobond issuance needs.

The LSF is expected to lower governments’ borrowing costs by increasing the demand for their sovereign bonds by making it possible for existing sovereign bondholders to post such instruments as collateral for low-interest loans financed in part by a new issuance of Special Drawing Rights (SDRs).

The resources mobilised through such repurchase agreements will then be used to finance investments in emerging market sovereigns.

The LSF is designed to support emerging markets sovereigns in advancing sustainable development initiatives and, more immediately, facilitate access to liquidity, lending, and investment into these countries.

“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 Sustainable Development Goals (SDGs).

“The LSF will be supported by Citi, who acted as structuring agent and provided expertise in setting up this facility, together with law firms White & Case LLP and Matheson and consultancy firm Eighteen East Capital,” said UNECA in a statement.

A first transaction expected to be funded by Afreximbank, which is expected to be announced in early next year, amounting  US$200 million, is currently in progress and has received interest from a number of large international Asset Managers such as Amundi.

“We are very pleased to be part of the first transaction of the Liquidity and Sustainability Facility” said Dr. Benedict Okey Oramah, President and Chairman of the Board of Directors of Afreximbank, “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.”

“Citi is proud to have advised on the LSF and to provide support in the key structuring aspects of setting-up the facility,” said Jay Collins, Vice Chairman of Banking, Capital Markets and Advisory for Citi. “We are focused on supporting emerging markets through a responsible and inclusive transition and our hope is that in the future this structure can be extended to other emerging markets.”

Launched in the context of the COP 26, the LSF, by enhancing the liquidity of SDG- or climate-linked bonds that are issued by African nations, seeks to dramatically increase the volume of green and blue bond financing, and at more affordable rates.

The share of sustainability-linked bonds issued in Africa and the Middle East accounts for only 1 % of the global total amount, indicating that there is a large potential for growth, and opportunities for SDG investors.

United Nations Under-Secretary- General and Executive Secretary of the UNECA Vera Songwe said Africa currently needs more liquidity than ever before to finance its recovery and to invest in a bold, and sustainable environment.

“The Liquidity and Sustainability Facility is launched today at the COP 26 with the goal of rapidly creating a massive and concrete positive impact, a new asset class, intended to effectively mobilise private capital and support Africa’s economic development,” the top official said.