AfDB, Portugal sign €400m guarantee agreement to underpin Lusophone Compact
The African Development Bank and the Portuguese government have signed a guarantee agreement to be extended to the African Development Bank under the Lusophone Compact. The Compact offers a big boost to business development initiatives for the Bank’s non-sovereign portfolio in its Portuguese-speaking African member countries.
The signing was witnessed by President of the Republic of Mozambique Filipe Nyusi, Prime-Minister of Portugal, António Costa, and other members of their respective delegations, during a business and investment forum organized as part of the 5th Luso-Mozambican Summit, held on Friday 02 September.
Under the agreement, Portugal will provide guarantees of up to €400 million exclusively to African Development Bank-financed projects approved under the arrangement. The Compact targets the private sector in Portuguese-speaking African member countries (Países Africanos de Língua Oficial Portuguesa or the PALOP), notably Angola, Cabo Verde, Equatorial Guinea, Guinea-Bissau, Mozambique, and São Tomé and Príncipe.
The program is designed for new, non-sovereign operations in these Lusophone countries and will enable the Bank to optimize allocation of its risk capital to these countries. The program would allow for individual Bank projects to be covered for up to the full maturity of the loan (up to 15 years) and up to a maximum of 85% of the total bank loan principal amount, in accordance with pre-determined eligibility criteria.
Expressing his pleasure at participating in the opening session of the Forum, President Nyusi said the Portuguese prime minister’s visit, and the important business delegation that accompanied him, reflected the relationship between Mozambique and Portugal at the political and diplomatic level.
“We are moving in the right direction to institutionalize and operate the economic diplomacy as a bilateral corporate and strategic platform that empowers and strengthens economic relations by facilitating and bringing together entrepreneurs in these two countries,” President Nyusi said.
Prime Minister António Costa said: “With this and other agreements that are signed here, the conditions are created for the readiness of the Mozambican and Portuguese governments to strengthen the ability of Portuguese companies to invest and develop Mozambique.”
The program will also see the Bank diversifying and growing its non-sovereign portfolio over the medium-to-long term in countries where its private sector interventions are most needed.
“We are very pleased to sign this guarantee agreement with the African Development Bank, a development partner that is crucial for the Portuguese cooperation policy’s efforts to support our partner countries in achieving their development goals”, said Secretary of State for Foreign Affairs and Cooperation for Portugal, Francisco André.
“Our conviction is that this risk mitigation instrument will contribute to boost the potential for private sector investment in the African Portuguese speaking countries and support inclusive and sustainable private sector growth,” stated Secretary of State for Tax Affairs for Portugal, Mr. António Mendonça Mendes.
“This is another remarkable milestone under the Lusophone Compact initiative to maximize adequate support and enhance the Bank’s existing efforts in Compact member countries. In addition, this guarantee is expected to significantly boost the Bank’s non-sovereign portfolio in Portuguese-speaking member countries of Africa”, said Deputy Director General for West Africa, Dr. Joseph Ribeiro.
Nana Spio-Garbrah, Acting Manager for Client Solutions, for the African Development Bank, said the signing underpinned the Bank’s drive to significantly increase private sector interventions in Portuguese speaking countries, particularly after the economic effects of the COVID-19 pandemic and ongoing implications for Africa of the Ukraine-Russia crisis. “It is wonderful to see our shareholders continue to support the Bank in these innovative ways,” she said.
The Lusophone Compact, a financing platform involving the African Development Bank, Portugal, and the six signatory PALOPs, provides risk mitigation, investment products and technical assistance to accelerate private sector development in the member countries. The initiative became effective in December 2018.
The Portuguese government announced that it aimed to “deepen bilateral relations and sign several cooperation instruments during the Luso-Mozambican Summit.”
The theme of the business summit is “Mozambique and Portugal: Promoting and enabling Opportunities, Investments and Partnerships”
