The Arab Petroleum Investments Corporation (Apicorp) has launched a new US$500mn package to support the energy industry in the Middle East, joining other development banks in the region that have deployed finance lines in response to Covid-19 and amid a fragile energy industry.

The package will be used to support “sustainable impact-driven projects”, offering funding and working capital to utilities, renewables, petrochemicals and other energy sub-sectors, according to a statement from the bank.

Sherif Elsayed Ayoub, CFO of Apicorp, tells GTR that the funding is to be immediately disbursed and will be used for project and trade financing, and for both funded and unfunded transactions. “This is not an open-ended US$500mn financing envelope, this is something that we would call an ‘immediate deployment’, aiming to be disbursed in the next few months,” he says.

Apicorp is owned by the member countries of the Organization of Arab Petroleum Exporting Countries (OAPEC) including Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Saudi Arabia, Syria, Qatar and UAE. In April, it announced a large increase in callable capital – the money a lender can call from its shareholders but which has not yet been paid – to US$8.5bn from US$1bn. The bank says the increase was based on a recommendation by Apicorp’s board of directors and boosts its financial resiliency, as well as its ability to invest in the energy sector.

The financing comes as oil, a key commodity for many Middle Eastern economies, has suffered shocks on both the demand and supply side due to Covid-19 and a plunge in prices triggered by the pricing war between Saudi Arabia and Russia, which saw cheap crude flood the market in March.

“The energy sector is a capital-intensive sector where we are observing investment reductions and delays in implementation more than previous downturns,” says Apicorp’s CEO Ahmed Ali Attiga. He adds: “Support for the energy and related sectors, in our member countries and beyond, helps to guarantee energy security and access to finance in these times of crisis.”


Scaling up finance

Apicorp is the latest development bank in the Middle East to deploy financing to mitigate the impact of Covid-19 on trade.

The Islamic Development Bank (IsDB) approved US$2.3bn for the IsDB Covid-19 response programme in early April, scaling up the US$730mn facility announced in mid-March. “Financing will be extended in the form of grants, concessional resources, trade finance, private sector lending and political and risk insurance coverage,” the development bank said at the time. “The IsDB Group will deploy all the available financing instruments to channel the funds in a fast track manner to support its member countries.”

The IsDB has made a contribution of US$1.52bn to the programme, the International Islamic Trade Finance Corporation (ITFC) has provided US$300mn for trade finance purposes, the Islamic Corporation for the Development of the Private Sector (ICD) offered US$250mn, and US$150mn was contributed by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) for trade credit insurance.

“ITFC’s support will enable the revival of trade and sustenance of supply chains in strategically important sectors. ICIEC will provide credit and political risk insurance to sustain imports of strategic commodities, investment protection, and to minimise volatility,” the IsDB added.

Elsewhere, the ITFC this week signed a US$100mn deal with Egypt’s General Authority for Supply Commodities (GASC) to finance essential commodity imports. The Egyptian government will use the money to purchase 240,000 tonnes of wheat and 100,000 tonnes of sugar, enabling GASC to mitigate the “very worst human impacts of the coronavirus pandemic by securing food commodity imports”, says a statement by the ITFC.

The central bank and government of Egypt have also requested financial assistance from the International Monetary Fund (IMF), with the request to be presented to the IMF’s executive board in the next few weeks. The emergency financing would allow the government to address any immediate balance of payments needs and support the most affected sectors.


An “extremely rough” patch

The measures come as many countries in the Middle East face large balance of payments and fiscal gaps, with many also carrying high sovereign-risk premiums, reveals the World Bank in a mid-April briefing. It adds that the region will need international support to help it navigate an “extremely rough” patch as it deals with the repercussions of Covid-19 and a slash in oil prices.

Apicorp’s Ayoub tells GTR that the novel coronavirus will also impact the wider energy industry’s supply and demand dynamics.

“Covid-19 is affecting some of the supply-demand dynamics in the coming period. Our chief economist says that there are different options as to how the region’s economic recovery might look. It could be v-shaped, u-shaped or w-shaped, the debate is evolving,” he says. “And, for the combined effects of Covid-19 and low oil prices, again, it is still too early to tell.”

However, while the World Bank says the negative supply and demand trade shocks associated with Covid-19 are expected to be “dramatic” and affect many sectors and countries in Mena, it also predicts that they will be “relatively short-lived”, providing a glimmer of hope to the region.

“Demand and supply will recover once the pandemic subsides – and how quickly that occurs depends on the length and depth of the disruption,” the briefing adds.