On Wednesday, December 4, the Board of the African Development Bank Group approved the Strategic Framework and Operational Guidelines for the African Development Fund Partial Credit Guarantee Instrument. The guidelines seek to address the challenges faced by a well-performing country that can only access the concessional African Development Fund (ADF) resources in its quest to mobilize both domestic and external commercial financing for developmental purposes.
It does so by introducing Partial Credit Guarantees (PCGs) for ADF countries and related State-Owned Enterprise (SOEs) provided they meet some minimum eligibility criteria.
AfDB Treasury Director Pierre Van Peterghen argued that private financing would help to meet large developmental financing needs of these countries, on the proviso that that such borrowings are adequately assessed, prudently managed and sustainable.
The similarity of operational modalities between the two ADF guarantee instruments (Partial Credit Guarantee and Partial Risk Guarantee) such as the common deduction of 25 per cent of the country’s program-based allocation and the requirement of a counterindemnity from the government, argue for a single ceiling for the Fund guarantee instruments. The two instruments will therefore share a combined ceiling of UA 500 million*, allowing for more Partial Risk Guarantee related projects to be pursued outside of the current UA 200 million ceiling exposure, while the ADF Partial Credit Guarantee instrument is fully operationalized.
*As of December 2013, 1 Unit of Account (UA) = 1.53521 United States Dollars (USD)