The African Development Bank (AfDB) board of directors has approved a US$500mn investment in the global trade liquidity programme (GTLP) as the second phase of its trade finance initiative (TFI).
The first phase, approved in March 2009, saw the bank contribute US$500mn in lines of credit to support trade finance by African banks, bringing the combined ceiling for both phase 1 and 2 to US$1bn.
The bank is now investing US$500mn in the GTLP as the second phase of its TFI. According to a statement by the bank, this investment is justified by the urgency to alleviate the trade finance constraints being experienced by regional member countries (RMCs).
Channeling this second phase through the GTLP will speed up processing and ensure a timely response to the crisis. This is a critical objective given the urgent need to prevent a full-blown economic crisis in Africa, the statement says.
The investment will make the bank GTLP’s single-largest contributor to African trade finance. The bank’s presence in the transaction will also help to increase the share of GTLP resources targeted for Africa.
GTLP resources for Africa are expected to total US$15bn, supporting African economies and limiting job losses.
“By providing liquidity and sharing risk with African financial institutions, the GTLP will facilitate Africa’s exports and imports at a time when the global financial crisis is cutting off critical funding,” the bank says.
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