|The new Compact offers a big boost to business development initiatives for the Bank’s non-sovereign portfolio in its Portuguese-speaking African member countries|
|The Board of Directors of the African Development Bank (www.AfDB.org) Group on Wednesday approved the Lusophone Compact Guarantee Program (LCGP or the Compact), with a maximum risk exposure of up to EUR400 million. The new Compact offers a big boost to business development initiatives for the Bank’s non-sovereign portfolio in its Portuguese-speaking African member countries.|
The program is designed for new non-sovereign operations (“NSOs”) in the Lusophone countries of Africa, notably Angola, Cabo Verde, Equatorial Guinea, Guinea- Bissau, Mozambique, and São Tomé and Príncipe, ( known as the PALOP), and enables the Bank to manage its risk capital over the next five years 2021-2025, while at the same time diversifying and growing its NSO portfolio over the medium to long-term.
The Bank has been active in the development of specialized risk sharing vehicles, initiatives and programs which can facilitate the use of risk transfer on specific types of Bank portfolios or assets, and this program is expected to increase the number of private sector and Public Private Partnership (PPP) projects in the PALOP as well as trade between stakeholder countries.
“Over the past five years, the Bank has been committed to exploring ways to increase its lending capacity while proactively managing its credit exposures and headroom more efficiently, and mobilizing additional financial resources and investors to the continent’s development,” Bank Vice President for Corporate Services, Mateus Magala, said.
As the anchor member of the Lusophone Compact, the Government of Portugal would act as the guarantor of this program, for exclusive use by the Bank. The LCGP would allow for individual Bank projects to be covered for up to the full maturity of the loan (up to 15 years) and up to a maximum of 85% of the total Bank loan principal amount, in accordance with pre-determined eligibility criteria.
The Guarantee forms a very important pillar of the wider Lusophone Compact aimed at promoting and enhancing the use of financing, risk mitigation and technical assistance instruments, to unlock private sector financing.
The Lusophone Compact initiative is built on a five-year General Memorandum of Understanding (“MOU”) that was signed by the Bank, the Government of the Republic of Portugal (“GOP” or “Guarantor”) and the PALOP countries to attract and unlock private sector investment and trade in, and among PALOP nations. The initiative became effective in December 2018. The PALOP remain the least economically integrated within their respective geographical regions and despite their deep shared history, even among themselves.
This new Guarantee Compact is seen as a valuable tool that will serve as an additional instrument to intensify the Bank’s efforts in the financing of critical transformative NSOs in the African Lusophone countries.
The program complements other Bank initiatives to support member countries to strengthen their investment climates, increase investments and to facilitate pipeline development.
“Given the adverse impacts that the COVID-19 pandemic has had on the African continent and the need to build resilience as fiscal pressures rise, the private sector plays a critical role in the process of economic recovery. Initiatives such as the LCGP will play a strategic role in equipping the Bank through a programmatic guarantee to avail headroom to contribute to boosting economic resurgence in these countries,” Samuel Mugoya, Bank Director, Syndication, Co-financing and Client Solutions, noted.
President Bio calls for urgent action to address Guinea Bissau’s deteriorating political situation
President Dr Julius Maada Bio has called on the Economic Community of West African States (ECOWAS) to take urgent action on the deteriorating political situation in Guinea Bissau and prevent any instability in the region.
He made this call at the Extraordinary Session of the ECOWAS Heads of State and Government convened in Niamey by the Chairman of the Authority of Heads of State and Government and President of the Republic of Niger, His Excellency Mahamadou Issoufou.
Addressing his colleagues, President Bio observed: “Everything we have stood for and all the democratic gains we have made in this region are being tested”. He called for strong condemnation from ECOWAS of the political situation in Guinea Bissau, adding that: “We must be
ready to change the mandate and strength of ECOMIB. Let us translate our words into action. Now is the time to act”.
The actions of President Jose Mario Vaz of Guinea Bissau, including the dismissal of Prime Minister Gomes and the dissolution of the government, received unanimous condemnation by all Heads of State and Government because they were deemed illegal and contrary to the decision of the
Authority during its 55th Ordinary Session.
The Heads of State and Government expressed their deepest regrets at the turn of events, which had plunged the country into crisis and brought on
the threat of civil war.
After hours of closed-door deliberations, the Authority of Heads of State and Government issued a final communique which contains the following: “that the date of 24th November 2019 for the first round of Presidential elections in Guinea Bissau must be complied with; that the Authority condemns President Vaz’s decision to dismiss Prime Minister Gomes and the appointment of a New Prime Minister; that the Authority reaffirms its full support to Prime Minister Gomes and demands the immediate resignation of the newly appointed Prime Minister;
“The Authority directs the President of the Commission to present a list of any individuals who may have undertaken actions to derail the electoral process and upset political stability for immediate sanction; that the Authority decides to strengthen the ECOWAS Mission in Guinea
Bissau (ECOMIB) to position it to respond to all challenges before, during and after the elections and that the Authority decides to dispatch to Bissau a high-level mission of Heads of State and Government led by the Chair of the Authority and the mission will be preceded by a mission of ECOWAS Chiefs of Defence Staff.”
After the reading of the final communique, President Bio was selected by the Chair of the Authority to move the vote of thanks on behalf of the Heads of State and Government.
The President will depart Niamey on Saturday 9 November for Paris, where he will participate in the Paris Peace Forum, the annual international meeting for all actors of global governance initiated by French President Emmanuel Macron.
Angola to Sign Lusophone Country-Specific Compact
On 10 July 2019, The Governments of Angola and Portugal and the African Development Bank, will sign a Country-Specific Compact designed to accelerate the inclusive, sustainable and diversified growth of Angola’s private sector.
The Lusophone Compact is a financing platform, involving the African Development Bank, Portugal, and the six Portuguese-speaking countries of Africa (PALOPs): Angola, Cabo Verde, Equatorial Guinea, Guinea-Bissau, Mozambique and Sao Tome and Principe. It provides risk mitigation, investment products and technical assistance to accelerate private sector development in Lusophone African countries.
The signing of the compact follows a Memorandum of Understanding of a Development Finance Compact for Portuguese-Speaking Africa, signed during the Bank’s 2018 Africa Investment Forum held in Johannesburg, South Africa.
The compact signing ceremony will be a highlight of various events to be held at the Luanda International Fair(https://FILDA.co.ao/), aimed at invigorating Angola’s private sector and promoting economic growth. The event will convene entrepreneurs, development finance institutions and partners, investors, key public and private sector players.
The Bank will be represented by Corporate Services and Human Resources Vice President and Chair of the Lusophone Compact Steering Committee, Mateus Magala, while the Angolan Government will be represented by Hon. Pedro Luís da Fonseca, Minister of Economy and Planning. H.E. Teresa Ribeiro, Secretary of State for Foreign Affairs and Cooperation, will sign for Portugal.
IMF Executive Board approves US$ 4.3 Million Disbursement for Guinea-Bissau
The Executive Board of the International Monetary Fund (IMF) on June 1, 2018, completed the fifth review of Guinea-Bissau’s performance under an economic program supported by an Extended Credit Facility (ECF) arrangement.
The completion of the review enables the release of US$4.3 million, bringing total disbursements under the arrangement to US$24.2 million.
The Executive Board approved the authorities’ request for a one-year extension of the ECF arrangement to July 9, 2019 and an augmentation of access by SDR 5.68 million.
The extension and augmentation will help anchor macroeconomic stability during the upcoming election period, support reforms focused on revenue mobilization and addressing gaps in essential infrastructure, and help meet balance of payments needs. It will bring Guinea-Bissau’s total access under the current arrangement to SDR 22.72 million (about US$32.2 million) or 80 percent of quota.
Guinea-Bissau’s three-year ECF arrangement for SDR 17.04 million (60 percent of quota) was approved by the Executive Board on July 10, 2015.
Program implementation for the fifth review has been good. All performance criteria and indicative targets were met, as were six of eight structural benchmarks, with one of the remaining two benchmarks subsequently completed and the other underway.
Economic activity has remained robust. Real GDP grew by an estimated 5.9 percent in 2017, with consumer price inflation of 1.1 percent, an external current account deficit of 0.5 percent of GDP, and a fiscal deficit (cash basis) of 1.5 percent of GDP. The outlook is broadly positive, with growth projected at 5.3 percent in 2018, but subject to significant risks stemming from the still fragile political environment and adverse terms of trade developments.
Following the Executive Board’s discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, said robust economic growth in Guinea-Bissau, at around six percent for the past three years, has been supported by favorable terms of trade and improved economic management.
“The authorities’ program implementation has been strong, with a notable improvement in fiscal outcomes.
“The outlook is broadly positive, with the recent consensus-based agreement on a new government offering the prospect of greater political stability. At the same time and posing new challenges, the terms of trade gains that supported economic expansion for the past three years have partially reversed.
“Maintaining a strong reform drive will be crucial for continued improvements in outcomes. A further strengthening of tax and customs administration is essential for the domestic revenue mobilization needed to undertake priority infrastructure and social spending. Moreover, planning and execution frameworks will need to be enhanced for scaled-up spending to have the desired results.
“Continued progress toward improving conditions for private enterprise will also be important. Boosting private investment depends on effectively reducing regulatory uncertainty, combatting corruption and rent seeking, and enhancing transparency in public administration. Overcoming the longstanding problems in electricity provision is also essential and requires fundamental reform of the public power utility.
“Strengthening the banking system will be critical for maintaining financial sector stability and expanding financial intermediation. Decisive action toward any bank that remains undercapitalized by the end-June deadline extended by the Banking Commission will be important, and any intervention should minimize the costs to the state and adhere to best international practices, including avoidance of market distortions and conflicts of interest.
“The one-year extension and augmentation of the ECF arrangement will help anchor macroeconomic stability during the upcoming election period, support reforms focused on mobilizing revenue and addressing gaps in essential infrastructure, and help meet balance of payments needs.”
IMF Staff Completes Mission to Guinea-Bissau for ECF Review and Request for Program Extension
An International Monetary Fund (IMF) team led by Tobias Rasmussen visited Guinea-Bissau from March 21 to April 3, 2018, to conduct discussions on the fifth review of Guinea-Bissau’s IMF-supported program under the Extended Credit Facility (ECF) and on the authorities’ request for one-year extension of the arrangement.
The ECF is a lending arrangement that provides sustained program engagement over the medium to long-term in case of protracted balance of payments problems. The three-year arrangement for Guinea-Bissau, in an amount equivalent US$23.5 million, or 60 percent of quota) was approved on July 10, 2015
- Growth has remained strong and the fiscal position has improved markedly.
- The authorities have requested a one-year extension of the ECF-supported program.
- Discussions focused on mobilizing revenue to enable priority spending.
Discussions focused on maintaining fiscal discipline and mobilizing revenue to enable increased investment and other priority spending to support inclusive growth; maintaining debt sustainability; and safeguarding financial sector stability.
At the end of the visit, Mr. Rasmussen issued the following statement:
“The IMF team reached a staff-level agreement with the authorities on the economic policies needed to complete the fifth review of the ECF and to extend the arrangement. To support continuity in the face of the upcoming election period and to fill an emerging balance of payments gap, the authorities have requested a one-year extension of the ECF arrangement. The staff-level agreement is subject to approval by the IMF Executive Board, which is slated to consider the staff report for the fifth ECF review and program extension in early June 2018. Upon approval, drawings of SDR 3.028 million (about US$4.4 million) would become available to Guinea-Bissau.
“Program implementation has been satisfactory. All quantitative performance criteria and indicative targets for the fifth review were met, and structural reforms are advancing albeit with some delay in places. The mission welcomed the authorities’ continued commitment to the program and its objectives of entrenching macroeconomic stability and advancing structural reforms to support strong and broad-based economic growth.
“Economic activity has remained buoyant, supported by high cashew prices, increased investment, and prudent economic management. Real GDP growth for 2017 is estimated at 5.9 percent, with inflation averaging 1.1 percent and an external current account deficit of 0.5 percent of GDP. Moreover, as government revenue grew strongly and expenditure was contained, the overall fiscal deficit on commitment basis narrowed sharply from 4.7 percent of GDP in 2016 to 1.5 percent in 2017. Credit extension has, however, been subdued, with continued high levels of non-performing loans and lingering challenges from the voided bank bailout of 2015.
“The economic outlook is broadly positive. A planned scaling up of public investment should help address gaps in critical infrastructure, including in electricity provision. At the same time Guinea-Bissau’s terms of trade have deteriorated, with higher prices of oil imports and prospects for cashew exports looking less favorable than last year. Moreover, heightened political tensions since the fall of government in January, should they persist, would hamper policy implementation and dent the business climate.
“To help ensure continuation of the positive economic trends it will be important to extend progress made in disciplined economic management. The scaling up of investment will require close coordination among agencies involved and better integration into budget processes. Maintaining a sound financial sector in light of the high level of non-performing loans calls for a strengthening of banking supervision and enforcement of prudential norms. Finally, promoting private sector development, calls for more stable, transparent, and market-driven policies towards business, especially in the dominant cashew sector.”
The team met with President José Mário Vaz, Prime Minister Artur Silva, Minister of Finance João Fadia, Central Bank of West African States (BCEAO) National Director Helena Nosolini Embaló, Deputy Chief of Staff of the Armed Forces Mamadu Turé, other high-level officials, as well as representatives of civil society, the private sector, and the donor community.
The IMF mission wishes to express its gratitude to the authorities for the constructive discussions and for their warm hospitality.
Guinea-Bissau is a tropical country on West Africa’s Atlantic coast that’s known for national parks and wildlife. The forested, sparsely populated Bijagós archipelago is a protected biosphere reserve. Its main island, Bubaque, forms part of the Orango Islands National Park, a habitat for saltwater hippos. On the mainland, the capital, Bissau, is a port with Portuguese colonial buildings in its old city center.
UN, African Union voice concern over protracted political crisis in Guinea-Bissau
The top leaders of the African Union and the United Nations on Saturday expressed concern over the prolonged political crisis in Guinea-Bissau, condemning the recent actions taken by the national authorities to prevent a political party from holding its conference.
“The Chairperson of the African Union Commission, Moussa Faki Mahamat, and the Secretary-General of the United Nations, António Guterres, express concern over the protracted political crisis in Guinea-Bissau despite the multiple opportunities offered to the main political stakeholders to arrive at a consensual arrangement,” said an AU-UN joint statement.
“They condemn the recent actions taken by the national authorities to prevent the African Party for the Independence of Guinea and Cabo Verde (PAIGC) from convening and holding its Party Congress, including the directive given to national security services to evacuate and shutter the party’s headquarters,” it added.
Mr. Faki Mahamat and Mr. Guterres called on all relevant authorities to strictly adhere to international human rights and humanitarian law and to immediately remove all restrictions on the right to peaceful assembly, political participation and freedom of speech.
They fully endorsed the recent decisions on Guinea-Bissau taken by the Economic Community of West African States (ECOWAS) on 27 January and endorsed by the AU on 29 January.
They also supported the measures being taken by ECOWAS against “political obstructionists” in the country, welcoming the communiqué issued by the ECOWAS ministerial mission that visited Guinea-Bissau on 31 January and 1 February.
Further, they reiterated their endorsement of the centrality of the Conakry Agreement of 14 October 2016, which, inter alia, provides for the appointment of a consensual Prime Minister, and called on the main political stakeholders to faithfully and urgently implement this Agreement, as well as the ECOWAS Roadmap to which they have all signed up to.
Mr. Faki Mahamat and Mr. Guterres reaffirmed their commitment to continue to closely follow all political developments and to support ECOWAS in its efforts to ensure a swift resolution of the protracted crisis in Guinea-Bissau, and stand ready to employ additional measures, should the situation warrant it.
According to the UN Department of Political Affairs (DPA), Guinea-Bissau has been plagued by chronic political instability since gaining independence in 1974.
The DPA provides support and oversight to the UN Integrated Peacebuilding Office for Guinea-Bissau (UNIOGBIS), a special political mission first established in 1999 following a two-year civil war in the country. Since mid-2016, the Mission is headed by the Secretary-General’s Representative, Modibo I. Touré.
The main priorities of UNIOGBIS are to support efforts to consolidate constitutional order, further political dialogue and national reconciliation, encourage security sector reform, and promote respect for human rights and the rule of law.
The mission has provided assistance in several national elections, including during the legislative and presidential elections in April and May 2014, and has again been mandated by the Security Council to work closely with national authorities as well as the United Nations country team in support of the timely conduct of legislative and presidential elections in 2018 and 2019, respectively.