IFC and African Development Bank Sign ISDA
Master Agreement to Expand Local Currency Finance
Arusha, June 1, 2012—IFC, a member
of the World Bank Group, and the African Development Bank (AfDB) today
signed an ISDA Master Agreement to enter into cross-currency swap transactions
to facilitate local currency lending and bond issuance in Africa. It is
the first ISDA Master Agreement either institution has signed with another
multilateral financial institution.
The agreement will enable IFC and the AfDB
to collaborate and benefit from each other’s local currency bond issues,
enhancing their local currency funding capacity to support their clients’
Local-currency bond markets provide long-term,
local currency finance for projects, protecting them from foreign exchange
risks. These markets are a vital potential source of finance, particularly
in the wake of the global financial crisis, when foreign capital inflows
to Africa have diminished.
Last year, the Group of 20 called for a concerted
effort to develop and strengthen local currency bond markets in emerging
markets. The agreement is the first step in an initiative for greater collaboration
among multilateral institutions to accelerate local capital market development
and increase local currency financing options.
”Expanding long-term currency initiatives
is a cornerstone of IFC’s strategy to strengthen capital markets in developing
countries,” said IFC Vice President and Treasurer, Jingdong Hua. “Helping
to establish and strengthen such markets allows us to work with regulators
and local institutions to ensure that capital market regulations are effective
and entrepreneurs are able to grow and create jobs.”
AfDB Vice President for Finance Charles Boamah
said: “Promoting the development of local capital markets in Africa is
paramount to successful, sustainable economic development. This agreement
supports our African Financial Markets Initiative, which aims to further
the development of domestic African capital markets, enlarge the investor
base, and reduce African countries’ dependence on foreign currency denominated
In Africa, IFC has issued local currency
bonds in Morocco, the Western CFA zone, and the Central CFA zone, and has
obtained approvals to issue local currency bonds in Kenya and Nigeria.
Under its Pan-African Domestic Medium-Term Note Program, IFC is working
with authorities in Botswana, Ghana, Kenya, South Africa, Uganda, and Zambia
to obtain consent to issue local currency bonds. IFC is also working with
eight members of the West African Economic and Monetary Union to establish
local currency bond programs. Since 2007, IFC has committed more than $650
million in 17 different local African currencies through a combination
of swaps, bonds, and structured finance products.
For its part, since 2005 the AfDB has issued
bonds denominated in or linked to the Botswana pula, Ghanaian cedi, Kenyan
shilling, Nigerian naira, Tanzanian shilling, Ugandan shilling, and Zambian
kwacha. The AfDB is also a regular issuer in South African rand (ZAR),
its third largest lending currency. Since 2005, the AfDB has issued more
than ZAR 25 billion in the ZAR domestic and Euro markets.
The AfDB has also received authorizations
to issue bonds denominated in the currencies of more than 15 African countries
including, Cameroon, Egypt, Gabon, Mauritius and Senegal and is currently
seeking authorizations from several more.
The AfDB is currently in the process of launching
in Uganda an inward listing off its Global Debt Medium Term Note Program.
The Program will provide readily available local currency financing for
the AfDB’s projects in the country. The first issue under the Note Program
is expected in the coming weeks.
IFC, a member of the World Bank Group is
the largest global development institution focused exclusively on the private
sector. We help developing countries achieve sustainable growth by financing
investment, providing advisory services to businesses and governments,
and mobilizing capital in the international financial markets. In fiscal
2011, amid economic uncertainty across the globe, we helped our clients
create jobs, strengthen environmental performance, and contribute to their
local communities—all while driving our investments to an all-time high
of nearly $19 billion. For more information, visit www.ifc.org.
About the African Development Bank (the
The mission of the African Development Bank
is to help reduce poverty and improve living conditions in its regional
member countries, by providing development financing, capacity building
and other technical assistance activities. With a focus on inclusive growth,
infrastructure, regional integration and private sector development, the
AfDB approved more than $7 billion in operations in 2011 alone, and has
since the inception of its lending operations in 1967 approved more than
$90 billion in support of various development projects and programs across
Africa. The AfDB’s role as a knowledge broker and advocate for the continent
is at the heart of the institution’s efforts to attain sustainable economic
growth. For more information, visit www.afdb.org
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