ECA Establishes Liquidity, Sustainability Facility (LSF) Reaching 30 Bln USD

Addis Ababa, November 4/2021 (ENA) The United Nations Economic Commission for Africa (ECA) announced the establishment of the Liquidity and Sustainability Facility (LSF) that could reach 30 billion USD.

The facility is dedicated to providing African governments with a liquidity structure on par with international standards so as to address the African Continent’s specific Eurobond issuance needs.

A Eurobond is a bond issued offshore by governments or corporates denominated in a currency other than that of the issuer's country.

Launched in the context of the COP 26, the LSF, by enhancing the liquidity of SDG- or climate-linked bonds that are issued by African nations, seeks to dramatically increase the volume of green and blue bond financing, and at more affordable rates.

UNECA Executive Secretary, Vera Songwe said “today Africa needs more liquidity than ever before to finance its recovery and to invest in a bold and sustainable environment.”

She also added that the Liquidity and Sustainability Facility is launched with the goal of rapidly creating a massive and concrete positive impact, a new asset class, intended to effectively mobilize private capital and support Africa’s economic development.

According to a press release sent to ENA, the LSF is also intended to provide international private investors seeking to invest in Africa with a robust framework and diversified range of opportunities in line with SDGs.

The LSF’s mission is intended to be achieved by way of investors’ entry into repo transactions with the LSF collateralized by African Eurobond issuances, it was indicated.

The LSF will be supported by Citi, who acted as structuring agent and provided expertise in setting up this facility, together with law firms White & Case LLP and Matheson and consultancy firm Eighteen East Capital.

African Export-Import Bank (Afreximbank) President, Dr. Benedict Okey Oramah said “we believe it will offer a strong opportunity to design a new financing paradigm for the Continent, one that will stimulate its economic growth and sustained development and attract diversified investments from the international community.”

Vice Chairman of Banking, Capital Markets and Advisory for Citi, Jay Collins said “we are focused on supporting emerging markets through a responsible and inclusive transition and our hope is that in the future this structure can be extended to other emerging markets.”

Whilst the LSF seeks to support all Eurobonds African sovereigns international financing needs, its goal is to also incentivize sustainability-linked investments such as green bonds and SDG bonds.

The LSF is expected to lower the borrowing costs for African sovereigns by turning African sovereign bonds into liquid assets and enhancing African nations’ debt sustainability.