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issue 503 | 02 Jul 2023

Africa

African governments, partners express support for Alliance for Green Infrastructure in Africa toward target of mobilising USD500-million

On the sidelines of the Summit for a New Global Financing Pact, held in Paris, African leaders, investors and development partners, including the African Development Bank (AfDB) Group, have highlighted their steadfast support for the Alliance for Green Infrastructure in Africa as it advances toward a first close of USD500-million for green infrastructure projects in Africa. The AfDB president Akinwumi Adesina led a roundtable discussion about the alliance, an initiative of the African Union Commission (AUC), the AfDB, and Africa50 with other partners. “The alliance will mobilise USD100-million in grants for project preparation, USD400-million in blended financing through grants, concessional resources, and commercial investments for project development,” Adesina said, explaining how the initiative will work. The roundtable offered African presidents, investors and partners the opportunity to discuss the initiative and other innovative climate finance mechanisms against a backdrop of high-level discussions to overhaul the global financial architecture to make it fairer for developing countries. These countries are also looking to gain access to financing to adapt swiftly to accelerating climate change as their budgets are constrained. 

Source: AfDB

Africa

Summit for a new global financing pact: AfDB head says MDBs should leverage IMF SDRs to fight climate change and push SDGs

The head of the African Development Bank (AfDB), Dr Akinwumi Adesina has once again underscored the case for multilateral development banks (MDBs) to be allowed to leverage International Monetary Fund (IMF) Special Drawing Rights (SDRs). With an increased allocation, MDBs could crowd in much-needed resources for developing nations to fight climate change and fast-track the United Nations (UN) Sustainable Development Goals (SDGs), he argued. Speaking during a panel session at the Summit For a New Global Financing Pact, held in Paris, Adesina said MDBs could leverage an allocation of USD200-billion, and turn this into USD1-trillion. Adesina said: “The MDBs are leveraging machines. They can leverage the SDRs by three to four times. So that leverage is very important to have.” The AfDB and the Inter-American Development Bank have been championing the re-channeling of SDRs issued by the IMF to multilateral development banks. With the re-allocation, the AfDB can provide greater financing to regional and national development banks across Africa, as part of the Finance in Common, to accelerate achievement of the 2030 UN SDGs.  

Source: AfDB

Angola / Democratic Republic of the Congo

Angola and the DRC to ink Block 14 agreement on 13 July

The Democratic Republic of the Congo’s (DRC) Hydrocarbons Minister Didier Budimbu and his Angolan counterpart Diamantino Pedro Azevedo have agreed to sign the Memorandum of Understanding (MoU) for the development of Block 14 on 13 July in Kinshasa. The signing of the MoU will formalise the block’s ownership, with the DRC and Angola set to take a 30% share while global energy major – and operator of the block – Chevron will own a 40% stake and follows a series of meetings held between the two countries. The signing date was agreed upon during a bilateral meeting held recently, which included representatives from Angola’s national oil company (NOC), Sonangol, and DRC’s NOC, Sonahydroc, whereby the parties discussed contractual terms for the Production Sharing Contract for Block 14. Located in the offshore waters straddling the border of the DRC and Angola, in the maritime zone of common interest, the signing of the block follows several decades of negotiations and is set to kickstart a highly anticipated exploration campaign. 

Source: Energy Capital & Power

Benin

Benin can boost economic transformation by modernising road networks and economic corridors

A renewed effort and increased investment in developing and modernising the roads and ports network in Benin could help transform the country’s economy and the lives of its people, says the World Bank’s first-ever Benin Economic Update. Titled Taking Advantage of Benin’s Strategic Position by Investing in Economic Corridors, the first part of the report analyses the latest economic developments and provides a mid-term outlook for Benin. Annual growth is expected to hover around 6% over the medium term. While the macroeconomic outlook remains robust, there are vulnerabilities related to tighter access to international finance and uncertainty in aggregate demand, underscoring the importance of a credible fiscal consolidation path to ensure medium-term stability. The modernisation of the road network and economic corridors will provide numerous benefits to the country. It will improve transportation links, facilitate the movement of goods and services, reduce travel time, and increase the efficiency of the transportation system. This will lead to lower transportation costs for businesses, increased trade and investment, and improved access to markets that will help stimulate economic growth.  

Source: World Bank

Cabo Verde

IMF Executive Board concludes 2023 Article IV consultation and second review under the ECF arrangement with Cabo Verde

The Executive Board of the International Monetary Fund (IMF) completed the 2023 Article IV Consultation and second review of Cabo Verde’s performance under the 36-month Extended Credit Facility (ECF) that was approved on 15 June 2022. The completion of the review allows the authorities to draw the equivalent of SDR4.50-million (about USD6.00-million). This brings the total IMF financial support disbursements under the arrangement to SDR27.02-million (about USD36.23-million). Cabo Verde’s performance under the programme is strong. The economy rebounded strongly in 2022 growing 17.7%, the primary deficit narrowed to 1.9% of GDP, the debt-to-GDP ratio declined significantly, the current account improved, and international reserves remained adequate to protect the currency peg. Real GDP growth is projected to moderate to 4.4% in 2023 as export growth normalises. Inflation is projected at 5.2% in 2023, as fuel and food prices decline. The current account deficit is expected to widen in 2023 as exports of goods and services, tourism and remittances grow more slowly than imports. The 2023 budget is aligned with the ECF-supported programme.  

Source: IMF

Cameroon

What are the implications of Cameroon being on the FATF grey list?

In its latest update, the Financial Action Task Force (FATF) added Cameroon, along with Croatia and Vietnam to the list of countries to be monitored closely when it comes to money-laundering and terrorist financing (ML/TF). FAFT identified Cameroon as one of the countries "particularly exposed to ML risks linked to the integration into the financial system of proceeds from corruption, embezzlement of public funds, customs and tax fraud, poaching, trafficking in wildlife and protected forest species". According to Désiré Geoffroy Mbock, now that the country is on the grey list, it has been placed under close surveillance by the FATF's International Co-operation Review Group (ICRG), which, following its preliminary assessment, will submit Cameroon to an action plan. If no satisfactory progress is observed, the country's political authorities will be required to make a public, written commitment at the highest governmental level, to take all necessary steps to correct the shortcomings identified throughout the evaluation process, within one year. Failure to comply with this commitment exposes the country to being considered a high-risk country, and therefore to being placed on the blacklist and subject to a public declaration. This means that in the event of an Action Group against Money Laundering in Central Africa (GABAC) member or associate member state being publicly declared by the FATF, foreign banks could suspend all transactions with their correspondents in the countries concerned, Désiré Geoffroy Mbock explained.  

Source: Business in Cameroon

Central African Republic

Fuel subsidy reform offers a path to a resilient, sustainable economy in CAR: World Bank report

The economy of the Central African Republic (CAR) is projected to return to growth this year after stalling in 2022. Heavy flooding and severe shortages of fuel took a heavy toll last year on the economy and people experienced high levels of acute food insecurity, says the latest edition of the World Bank’s Central African Republic (CAR) Economic Update. Released on Tuesday, 27 June, the report notes that floods inflicted significant physical damage last year to homes, transport infrastructure and crops, and displaced over 6 000 people. The floods, together with high energy prices due to fuel shortages provoked by domestic tensions, armed groups activities and continuing fallout from the war in Ukraine, resulted in a zero-growth economy in 2022. Economic activity in CAR may see a modest rebound over the medium term, with growth projected at 3.6% in 2024 and 2025, provided that fuel supply in the domestic market improves and the security gains continue. This outlook is driven by anticipated higher international prices of timber, CAR’s main export, owing to a rebound of global demand, particularly from China. 

Source: World Bank

Kenya

EPRA says Kenya Power monopoly to end

Kenya Power should brace for competition in coming months after the energy regulator revealed that it is working on regulations to allow electricity producers to sell power directly to all consumer groups. The Energy and Petroleum Regulatory Authority (EPRA) says the regulations will set the stage for producers such as KenGen to sell power directly to large consumers like factories. The regulations, if adopted, will operationalise provisions of the Energy Act, 2019 that allows for opening up of the electricity distribution market. The opening up of the sector is expected to hit revenues of the state-owned electricity distributor but is aimed at boosting reliability of electricity amid a growing number of large consumers shifting to alternative power sources due to cost and unreliability of the national grid. Section 136 of the Energy Act compels Kenya Power to allow a non-discriminatory access to its transmission system for use by any licensed distributor upon payment of transmission or wheeling charges. 

Source: Business Daily Africa

Madagascar

IMF Executive Board concludes fourth review under the ECF arrangement for Madagascar

The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of Madagascar’s economic programme under the Extended Credit Facility (ECF). The completion of the review enables the disbursement of SDR24.44-million (about USD32.7-million) to cover external and fiscal financing needs, bringing total disbursements under the arrangement to SDR171.08-million (about USD228.7-million). In completing the review, the executive board approved waivers of nonobservance for two performance criteria at end-December 2022: the floor on the domestic primary balance was missed mostly due to the nonpayment in 2022 of oil customs taxes by oil distributors; and the floor on the central bank’s net foreign assets (NFA) was missed by a small margin in a context of a rapid depreciation of the exchange rate which has since stopped. The waivers of nonobservance were approved based on remedial actions taken by the authorities and the minor nature of the NFA breach, respectively. Madagascar’s growth has decelerated, and inflation remains high. Growth is expected to stabilise at 4.0% and average annual inflation to exceed 10% in 2023.  

Source: IMF

Mali

World Bank boosts access to quality electricity in Mali

The World Bank has approved USD157-million in financing from the International Development Association (IDA) to help Mali improve the reliability and efficiency of the electricity system, increase access to electricity in selected project areas and facilitate the integration of renewable energy. The Electricity System Reinforcement and Access Expansion Project (Yelen Sira, which means “the path of light” in Bambara) will finance key grid infrastructure and new connections through the upgrading and expansion of the transmission and distribution grids in certain areas, including Bamako and its surroundings. The investments will increase the power flow capacity of the transmission grid in Bamako by at least 100 megawatts (MW), thereby enabling Energie du Mali - SA (EDM-SA) to achieve economies of scale through optimised management of its generation systems and grid, while reducing its reliance on small, polluting and expensive rental power plants. Losses on Bamako’s main transmission grid are expected to decline from a projected level of 8.5% in 2024 (before the proposed grid reinforcements) to 4.5% by 2028, once these reinforcements have been completed. 

Source: World Bank

Mauritius

National Biomass Framework launched to promote production of energy from biomass

The National Biomass Framework, which had been established under the aegis of the Ministry of Agro-Industry and Food Security with a view to promoting the production of energy from biomass, was recently launched at the Mauritius Cane Industry Authority in Réduit. The framework is in line with government's objective of phasing out the use of coal in electricity generation by 2030 and achieving a target of 60% of the country's energy needs from green/renewable sources in the energy mix. The objectives of the National Biomass Framework are thus to increase bioelectricity production by promoting and implementing projects for more efficient use of sugarcane bagasse, more trash collection, introduction of higher fibre cane varieties, cultivation of other energy crops, and biomass import. In their address, the Minister of Energy and Public Utilities, Mr Georges Pierre Lesjongard, the Minister of Environment, Solid Waste Management and Climate Change, Mr Kavydass Ramano, and the Attorney General, Minister of Agro-Industry and Food Security, Mr Maneesh Gobin underlined the critical role of the sugar cane industry not only as a source of export earning but also in the preservation of the environment and now in green electricity production. 

Source: Government of Mauritius

Nigeria

Afreximbank and UTM Offshore to develop Floating LNG project in Nigeria

The African Export-Import Bank (Afreximbank) and UTM Offshore Limited signed a Project Preparation Facility Agreement to develop, design, and construct Nigeria’s first indigenously owned Floating LNG facility with a nameplate production capacity of 1.2 million metric tonnes per annum in Akwa Ibom State, Nigeria. The agreement was signed during the 30th Afreximbank Annual Meetings (AAM2023) by Mr Denys Denya, executive vice president, Finance, Administration and Banking Services, and Mr Julius Rone, CEO of UTM Offshore Limited, and witnessed by Professor Benedict Oramah, president and chairman of the Board of Directors of Afreximbank. Under the agreement, Afreximbank is to part-finance project preparatory activities that will de-risk the project and advance it to bankability in a timely manner. The bank is leveraging its diverse product suite to provide end-to-end solutions to the project. In this regard, besides availing the project preparatory facility, Afreximbank as lead financier has been appointed as the financial advisor and is to be appointed mandated lead arranger once the project attains bankability.  

Source: Afreximbank

Nigeria

Nigeria can seize the opportunity to realise its growth potential

The new administration has initiated critical reforms to address macroeconomic imbalances. This window of opportunity could have a transformative impact on the lives of millions of Nigerians and establish a solid foundation for sustainable and inclusive growth. The removal of the petrol subsidy and foreign exchange management reforms are crucial measures to begin to rebuild fiscal space and restore macroeconomic stability, and the opportunity should be seized to take further, necessary policy reform steps, says the latest Nigeria Development Update (NDU). The June 2023 edition of the NDU, titled Seizing the Opportunity, adds that it is critical to implement a comprehensive reform package that encompasses a range of complementary measures, including a new social compact to protect the poor and most vulnerable, to maximise the collective impact on growth, job creation, and poverty reduction. With the petrol subsidy removal, government is projected to achieve fiscal savings of approximately NGN2-trillion in 2023, equivalent to 0.9% of GDP. These savings are expected to reach over NGN11-trillion by the end of 2025.

Source: World Bank

Rwanda

Rwanda, team Europe and partners pioneer an additional EUR300-million financing to crowd in private investment and build climate resilience following RSF arrangement with the IMF

Building on the Resilience and Sustainability Facility (RSF) with the International Monetary Fund (IMF), the Government of Rwanda, together with the Agence Française de Développement (AFD), European Investment Bank (EIB), Cassa Depositi e Prestiti (CDP), and the International Finance Corporation (IFC), have announced a cooperative approach to facilitate public-private partnership (PPP), scale-up climate finance and crowd in private climate investment that will mobilise an additional EUR300-million to build climate resilience in Rwanda. The new support complements and builds on the USD319-million in financing accessed by the Government of Rwanda through the RSF arrangement with the IMF. The ground-breaking partnership, which was unveiled at the Summit for a New Global Financing Pact, held in Paris, is part of ongoing efforts by the international community to reshape the global climate finance architecture, including by moving beyond small-scale projects to significant long-term investments that leverage existing mechanisms to facilitate PPPs and attract private sector investments. 

Source: IMF

Rwanda

RwandAir launches direct flights to Paris

The Rwanda national carrier RwandAir has launched direct flights between Kigali and Paris as demand for booking picks up ahead of summer. RwandAir will be using its newly delivered Airbus A330-300 aircraft on the route, flying three times a week on Tuesdays, Thursdays, and Saturdays. The carrier joins Kenya Airways and Ethiopian Airlines with direct flights to France. Earlier in June, Air France launched direct flights from Paris to Dar es Salaam, ending a 28-year hiatus. The airline seeks to tap the huge Rwandan diaspora living in France as well as Belgium. "Passengers travelling from Rwanda will now be able to reach Paris in 8 hours and 30 minutes," RwandAir said in a recent tweet. The carrier has been expanding its operations over the last two years. The latest Airbus acquisition makes it a total of 13 aircraft serving 28 destinations across East, Central, West, and Southern Africa, the Middle East, Europe, and Asia. Its capacity is expected to double when it concludes negotiations with Qatar Airways on the acquisition of a 49% stake in the Rwandan airline. The planned investment is valued at least USD28-million, according to financial statements submitted to the United States (US) Department of Transportation in 2021. 

Source: The EastAfrican

Senegal

IMF Executive Board approves USD1.51-billion under the EFF and ECF, and USD324-million under the RSF for Senegal

The Executive Board of the International Monetary Fund (IMF) has approved a 36-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) of SDR1.132-billion (about USD1.51-billion) with Senegal. The executive board also approved an arrangement under the Resilience and Sustainability Facility (RSF) of about SDR242.7-million (about USD324-million). The EFF/ECF-supported programme will provide critical help to address macroeconomic imbalances by reducing debt vulnerabilities, strengthening governance, and delivering a more inclusive and job-rich growth. The RSF arrangement aims to tackle longer-term structural challenges related to climate change through the implementation of appropriate climate policies. The executive board’s decision enables an immediate disbursement equivalent to SDR161.8-million (about USD216-million) under the EFF/ECF.  

Source: IMF

Senegal

Senegal inks USD2.7-billion climate financing deal with G7 nations, EU

Senegal has taken an important step towards its energy transformation ambitions by signing a USD2.7-billion Just Energy Transition Partnership (JET-P) contract with the Group of Seven (G7) nations and the European Union (EU). The agreement intends to help Senegal achieve its goal of increasing the amount of renewable energy in its energy mix to 40% by 2030. The JET-P will unlock financial support from France, Germany, the EU, the United Kingdom (UK) and Canada, totalling USD2.7-billion over a period of three to five years and starting as early as 2023. Additional financing may be made available at a later date to assist Senegal in meeting and exceeding its renewable energy objectives. Previously, similar agreements were made with South Africa, Indonesia and Vietnam. Under the terms of the JET-P deal, over the next 12 months, Senegal will be required to develop an investment plan identifying avenues for investment that ensure a just and equitable energy transition. This strategy will outline the capital required to assist the country in transitioning to cleaner, more sustainable energy sources. The EU’s JET-P financing for Senegal comes from its EUR300-billion Global Gateway investment initiative, which aims to create a favourable environment for private businesses.  

Source: Energy Capital & Power

Uganda

IMF Executive Board concludes the fourth review under the ECF arrangement with Uganda

The Executive Board of the International Monetary Fund (IMF) has concluded the fourth review of Uganda’s Extended Credit Facility (ECF) arrangement. Further, the executive board granted a waiver of nonobservance of a performance criterion on the ceiling on net credit to the government from the Bank of Uganda (BoU). The completion of the fourth review enables the immediate disbursement of SDR90.25-million (about USD120-million). This brings the aggregate disbursement under the ECF arrangement to SDR541.5-million (about USD750-million). The ECF arrangement for Uganda for a total of SDR722-million (200% of quota) or about USD1-billion was approved by the executive board on 28 June 2021 , aiming to support the near-term response to the COVID-19 pandemic and boost more inclusive private sector-led long-term growth. Reforms focus on creating fiscal space for priority social spending, preserving debt sustainability, strengthening governance and reducing corruption, and enhancing the monetary and financial sector frameworks. 

Source: IMF

Uganda / Mauritius

Uganda, Mauritius reach new deal on double taxation

Uganda and Mauritius have agreed on changes to their 2015 bilateral double taxation agreement (DTA) after months of talks. Among the changes are exclusive taxing rights for all hydrocarbon-based transactions in favour of Uganda, according to Uganda’s Finance Ministry. “The changes are awaiting ratification by the partner states,” said Moses Kaggwa, Director for Economic Affairs at the Ministry of Finance, Planning and Economic Development. However, talks over a double taxation treaty with the Netherlands failed over technical services with the latter suggesting 5% withholding tax while Kampala insists on 10%. The 2006 DTA between the two countries does not provide for taxation of technical services, accounting, property valuation, engineering and information and communications technology consultancy.  

Source: The EastAfrican

Zambia

IMF managing director welcomes debt treatment agreement reached by Zambia and its official creditors under the G20 Common Framework

Following the announcement of an agreement being reached by Zambia and its official creditors under the Group of 20 (G20) Common Framework, Ms Kristalina Georgieva, managing director of the International Monetary Fund (IMF), issued the following statement in part: “I warmly welcome Minister of Finance Situmbeko Musokotwane’s announcement that the Zambian authorities have reached an agreement with their official creditors on a debt treatment, consistent with the objectives of the IMF-supported programme. This unique and innovative agreement specifies both a baseline and a contingent treatment that would be automatically triggered if the assessment of Zambia’s economic performance and policies improves. I want to thank the official creditor committee, especially co-chairs China and France and vice-chair South Africa, for all their work to reach this agreement. This is a significant milestone for the G20 Common Framework under which China, India, Saudi Arabia and Paris Club creditors joined forces to agree deep debt relief for Zambia. This agreement paves the way for the completion of the first review of Zambia’s three-year Extended Credit Facility (ECF) arrangement, which is helping put Zambia on a path toward sustainable economic growth and poverty reduction.” 

Source: IMF