AfDB Plans $1.1 Billion Loans, Grants to Drought-Hit Countries

South Sudan (Capital Markets in Africa) – The African Development Bank is considering providing $1.1 billion of loans and grants to countries affected by drought and famine.

The funding will be discussed at a meeting of the Abidjan, Ivory Coast-based lender’s board on Wednesday, Gabriel Negatu, the bank’s head for East Africa, said in an interview in the Kenyan capital, Nairobi. The money will be provided to war-torn South Sudan, where a famine was declared in February, as well as Nigeria, Kenya, Ethiopia, Uganda and Somalia, he said.

The AfDB has enabled South Sudan to access as much as $300 million in loans by paying the country’s fees to join the pan-African Trade and Development Bank and the African Trade Insurance Agency, Negatu said.

South Sudan, hit by a drop in oil prices and the effect of a civil war that’s been raging since December 2013, has exhausted its foreign exchange reserves, undermining the government’s ability to import necessities such as food, medicine or spare parts. The government has also sought funds from others, including the African Export-Import Bank and “some development friends,” Deputy Finance Minister Mou Ambrose Thiik said last month.

Because of the fighting, the AfDB has been forced to shelve two projects, including a road linking the Ugandan capital, Kampala, to the South Sudanese capital of Juba and onward to Addis Ababa in Ethiopia, Negatu said. Two others — for power distribution and water and sanitation in the capital, which is relatively secure — will go on, he said.

‘Strong Measures’
The lender is putting in place “very strong measures to make sure that this money goes for the intended purpose,” Negatu said

The conflict in South Sudan has claimed tens of thousands of lives, forced 3.5 million people from their homes and cut oil production, the government’s almost sole source of income, by about a third. The International Monetary Fund expects the economy with sub-Saharan Africa’s third-biggest oil reserves to shrink more than 10 percent this year.

Somalia, another nation in the region devastated by nearly three decades of war, could clear its arrears within two years, enabling it to borrow again, Negatu said.

“Somalia is moving in the right direction,” he said.