The African Development Bank’s Board of Directors has approved a large exposure swap of $1 billion with the Asian Development Bank.
This was revealed in a statement posted on the bank’s website. The major goal of the deal, according to the bank, is to help unleash greater sovereign loan while supporting the African Development Bank (AfDB) capital adequacy standards.
It is the African Development Bank’s second exposure exchange agreement, the first being with the Inter-American Development Bank and the World Bank Group’s international bank for reconstruction and development.
Commenting on the advantages of the currency exchange deal and what it means for African countries. AFDB says, “exposure exchanges between multilateral development banks involve a risk-neutral exchange of sovereign exposures to help address single obligor constraints and portfolio concentration.”
“This new exposure exchange enables the African Development Bank to continue supporting its regional member countries, particularly in the aftermath of the Covid-19 pandemic and the spillover effects of the Russian-Ukraine war, which affected the majority of African countries.”
Max Ndiaye, the bank’s Director for Syndications, Co-financing, and Client Solutions, spoke about the exchange exposure deal, saying “This operation demonstrates the African Development Bank’s and its peer institutions’ relevance in adhering to the G20’s call for the multilateral development bank community to collaborate in adopting innovative approaches and initiatives.” This includes risk transfers to enhance funds for development finance.