A world-class repo facility for African Eurobonds
The LSF is part of USAID announcements at COP28 "Liquidity and Sustainability Facility for Green Investments in Africa
“USAID announced it is providing $1.5 million under USAID’s EDGE Fund to support the Liquidity and Sustainability Facility (LSF) to create a repurchase agreement “repo” market to increase liquidity of African Sovereign Eurobonds. LSF aims to improve African sovereign debt sustainability and, through its participation with African governments and private investors, enhance liquidity in the market on par with international standards by enabling African countries to access international markets at lower rates. An improvement in the terms of new issuances of Sustainable Development Goals or climate-linked bonds for African nations could dramatically increase the volume of green and blue bond financing, and at affordable and sustainable rates.”
Extract from USAID press release
11 December 2023
Afreximbank awarded “Sustainable Deal of the Year” for pioneering the Liquidity and Sustainability Facility (LSF) for Africa
Cairo : The African Export-Import Bank (Afreximbank) has been recognised with a much-coveted “Sustainable Deal of the Year” award for its pioneering work in the establishment and development of the Liquidity and Sustainability Facility (LSF), a vehicle that seeks to increase liquidity and demand for Eurobonds issued by African Sovereigns.
Extract from Afreximbank press release
21 November 2023
« To facilitate greater access to MCC Compacts, USAID is supporting the Liquidity and Sustainability Facility to improve the terms of African Sovereign Eurobonds issuances and catalyze Sustainable Development Goal-related investments in clean energy infrastructure in Africa.”
Extract from the White House press release
2 December 2023
ADIA agrees $100m repo facility at COP28 with the Liquidity and Sustainability Facility (LSF) and Afreximbank to incentivise sustainability-linked investments in Africa
The Abu Dhabi Investment Authority (ADIA) today announced that it has agreed a $100 million repo transaction with the Liquidity and Sustainability Facility (LSF) and the African Export-Import Bank (Afreximbank), within BNY Mellon’s Triparty Facility, to increase the liquidity of African Sovereign Eurobonds and incentivise Sustainable Development Goals (SDG)-related investments, such as green bonds, in Africa. An initial $50 million transaction related to a basket of seven African countries under the facility has been closed.
Extract from ADIA press release
4 December 2023
The Liquidity and Sustainability Facility (“LSF”) was designed with the support of the United Nations Economic Commission for Africa and Afreximbank with the dual objective of supporting the liquidity of African Sovereigns Eurobonds and incentivizing SDG-related investments such as SDG and green bonds on the African continent. Its establishment was announced in November 2021 at the COP26 in Glasgow.
Its aim is to improve African Sovereign debt sustainability and, through its participation with African governments and private investors, enhance the liquidity in the market on par with international standards. An improvement in the terms of new issuances of SDG- or climate-linked bonds of African nations could see a dramatic increase in the volume of green and blue bond financing, and at more competitive rates.
Supporting the liquidity of African Sovereigns Eurobonds
African governments have historically faced high costs of borrowing. Compression of liquidity premia and improved sovereign access to Eurobond markets has the potential to save African nations an estimated USD 11 billion on borrowing costs over the next five years. Improved liquidity may have the effect of compressing yields by strengthening the demand and consequently, the price of eligible sovereign bonds. By supporting these objectives, the LSF seeks to support the debt sustainability of African nations.
Incentivising green and SDG-related investments
The LSF aims to support the green and sustainable recovery of African countries. Currently, the share of sustainability-linked bonds issued in Africa and the Middle East accounts for less than 1 per cent of the global total amount, indicating that there is a large potential for growth, and opportunities for SDG investors. The LSF utilises its resources to engage with investors with a special focus on green and SDG linked investments, thus seeking to promote sustainability-linked investments in Africa.
A deep and solid repo market for African Sovereign Eurobonds
Developed countries have long enjoyed the existence of large repo markets for their government bonds, facilitating the creation of stable and additional funding sources. While a modest repo market exists for the bonds of some African nations, a mature repo market, like that which exists in most major economies, has been missing until now.
As a professional market participant with strong stakeholder support, the LSF’s objective is to help the African Sovereign Eurobonds repo market reach the same level of maturity as developed countries.
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A quality counterparty engaging
with quality actors
The LSF engages with counterparties established in recognized jurisdictions and of the highest quality and reputation such as insurance companies, banks, pension funds, asset management firms, and public and private investment funds.
Strong standards of governance
Ellen Johnson Sirleaf
Prof. Benedict Oramah
Board Director & CEO of the LSF Secretariat
The LSF is committed to operate under high standards of governance and the supervision of a high-quality Board. The Board ensures the LSF adheres to its public good mission and to the highest standards of transparency, it is composed of Directors representing the various stakeholders of the LSF.
Wide geographical coverage
The LSF initially focuses on African economies with access to capital markets and with sound economic fundamentals. Currently, there are at least 22 African countries with access to capital markets.
Sound risk management
The LSF intends to deal with selected counterparties of high credit quality and with full recourse. Risk management policies, including margining, are implemented intra-day by our collateral agent. The LSF transacts using industry standard documentation framework for repos.
The LSF acts on own account and not as a market maker and furthermore it does not operate as a deposit taker, a fund or as a provider of investment services. It is not regulated, licensed and / or authorised as a financial service provider in Ireland (where it is incorporated) or elsewhere.
About The Liquidity and Sustainability Facility
The LSF was designed with the support of the United Nations Economic Commission for Africa and Afreximbank with the dual objective of supporting the liquidity of African Sovereigns Eurobonds and incentivizing SDG-related investments such as SDG and green bonds on the African continent.