The African Export-Import Bank (Afreximbank) is launching a programme providing more than US$3.5bn in trade finance to member countries affected by adverse economic conditions such as the commodity price fall and terrorism-induced shocks.

The counter-cyclical trade liquidity programme allows Afreximbank to deploy up to 40% of its approved annual gross commitment limit to providing trade finance liquidity in the form of unfunded facilities, letters of credit and similar instruments, to central banks and selected commercial banks in eligible countries.

Funded facilities would also be available to eligible commercial banks who are unable to meet payment obligations due to foreign exchange shortages. The programme has an initial life of two years, but Afreximbank’s intention is to attract other lenders and financiers to the programme to more than double the available funding.

“This facility enables us to help our member countries bridge the significant trade financing gap confronting them as a result of current economic shocks, until normal funding conditions are restored,” says Benedict Oramah, Afreximbank president. “It is Afreximbank’s response to the exceptional circumstances that demand urgent and decisive large-scale support to ensure that the continent is not thrown into recession due to a sudden drying up of trade flows.  It also helps us to minimise the potential impact on normal bank operations.”

Afreximbank expects the positive impact of the programme in eligible countries to include minimised risk of trade default; continued supply of raw materials, capital goods and essential goods into the markets; restored confidence of the international market and commodity suppliers in the countries’ banking systems; stabilisation of inflation rates and local currency exchange rates against foreign currencies; and access to finance from the international market under favourable terms.

The bank is expecting to process applications totalling about US$2bn within the next few weeks already, as a result of requests received from a number of central and commercial banks.