AfDB Unveils $3bn COVID-19 Bond
The African Development Bank (AfDB) has raised $3 billion in a three-year bond to help alleviate the economic and social impact the Covid-19 pandemic will have on livelihoods and Africa’s economies.
The Fight Covid-19 Social bond, with a three-year maturity, garnered interest from central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, with bids exceeding $4.6 billion.
This was the largest Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75 per cent.
According to a statement, the AfDB is moving to provide flexible responses aimed at lessening the severe economic and social impact of this pandemic on its regional member countries and Africa’s private sector.
“These are critical times for Africa as it addresses the challenges resulting from the Coronavirus. The African Development Bank is taking bold measures to support African countries. This $3 billion Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced.
“This is indeed the largest social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” AfDB President, Dr. Akinwumi Adesina said.
The order book for this record-breaking bond highlights the scale of investor support, which the African Development Bank enjoys, said the arrangers.
“As the Covid-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
It stated, “The IMF’s revamped Catastrophe Containment and Relief Trust can now provide rapid debt service relief on IMF debt obligations to more of our poorest and most vulnerable members.
“This will help them to channel more of their scarce financial resources to their vital emergency medical and other relief efforts,”
“Furthermore, we are calling on donor countries to replenish the Trust’s resources to help boost our ability to provide additional debt service relief to our poorest member countries.”
In direct response to the COVID-19 crisis the IMF executive board said it had adopted some immediate enhancements to its Catastrophe Containment and Relief Trust to enable the Fund to provide debt service relief for its poorest and most vulnerable members.
In a statement, it said the CCRT enabled the IMF to deliver grants for debt relief benefitting eligible low-income countries in the wake of catastrophic natural disasters and major, fast-spreading public health emergencies.
The COVID-19 outbreak and the associated global economic turmoil created a critical need to support the Fund’s membership, including exceptional balance of payments support for the poorest members especially impacted by the pandemic.
It stated, “Well-targeted support will allow these countries to prioritise medical spending and health-related as well as other immediate needs in the challenging economic environment, characterised by sharp declines in income, lost revenue and higher expenses.
“In that context, the IMF Executive Board has approved changes to the CCRT that expand the qualification criteria to better cover the circumstances created by a global pandemic and to focus on delivering support for the most immediate needs.
“Specifically, the decision will allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for up to two years.
“This would apply when a life-threatening global pandemic is inflicting severe economic disruption across the Fund’s membership and is creating balance of payments needs on such a scale to warrant a concerted international effort to support the poorest and most vulnerable countries.