Africa’s portfolio outflows exceed US$5bn
HARARE – Constrained global financial conditions caused by Covid-19 pandemic have led to massive portfolio outflows from Africa, exceeding US$5 billion in the first quarter of 2020, a new continent-wide survey on trade finance has shown.
About US$3.1 billion left the South African market alone, the report found.
Launched on April 15, 2021, the African Trade Finance Survey Report examines how trade finance has evolved during the Covid-19 pandemic and highlights the role it can play in overcoming the social and economic fallout of the disease.
The survey was conducted by African Export-Import Bank (Afreximbank), jointly with the UN Economic Commission for Africa and the African
Bank.
At the launch, Professor Benedict Oramah, president of Afreximbank said a growing number of international banks were becoming even more reluctant to take on payment risks in countries where economic conditions were deteriorating.
“These massive outflows strained banks, most of which recorded sharp drops in net foreign assets, and exacerbated liquidity constraints, with significant implications for trade financing,” said Prof Oramah said.
“The survey results reveal that letters-of-credit business and correspondent banking operations slumped substantially across the continent.
The survey covers the first four months of 2020, including April, when global trade recorded its largest contraction on record.
It aims to inform the design of interventions to address market challenges and effectively engage African financial institutions, trade finance intermediaries, regulatory authorities, and national authorities to accelerate efforts to bridge the region’s trade finance gap.
Development