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OPEC Fund Considers Issuing $1Bn Bonds

OPEC Fund Considers Issuing $1Bn Bonds

Monday, 6 June, 2022 - 07:15
OFID Director-General Abdulhamid al-Khalifa (Asharq Al-Awsat)

OPEC Fund for International Development (OFID) is considering issuing its first financial bonds this year in global markets, amounting to one billion dollars, announced the Director General, Abdulhamid al-Khalifa.

Speaking to Asharq Al-Awsat on the sidelines of the Islamic Development Bank Group (IsDB) meeting in Sharm el-Sheikh, Khalifa explained that the Fund could issue low-interest bonds following last year's high credit rating, but it is waiting for international markets to stabilize.

Khalifa added that the expected value of the first bonds offered by the Fund might be $300 million, $500 million, or $1 billion, in light of the Fund's plans to diversify funding sources.

He indicated that OFID appointed managers for the offering from several countries without naming them.

The OPEC Fund for International Development (the OPEC Fund) is a multilateral development finance institution established in 1976.

The organization cooperates with developing country partners and the international development community to stimulate economic growth and social progress in low- and middle-income countries around the world.

It is a permanent development finance institution agency with private sector and trade finance operations to help improve development impact and strengthen the institution's sustainability.

The OPEC Fund is the only globally mandated development institution that exclusively provides financing from member countries to non-member countries.

Khalifa asserted that the Fund is developmental and targets non-member countries only even though some of its members are developing countries.

Since its establishment, the Fund has been providing development assistance in 125 countries with a total financial cost of $190 billion, said the director, adding that its capital is about $7.5 billion.

At the moment, the Fund doesn't intend to increase its capital or the members' subscriptions.

Khalifa explained that the OFID selects projects that are usually high-risk, which commercial banks typically refuse to finance.

"Development institutions do not compete with commercial banks in financing projects. They were established to take high risks. However, it is necessary to ensure the sustainability of the return on these projects, and that they should be at least able to repay the provided financing to be sustainable for a longer period."

He indicated that OFID usually finances long-term projects, noting that three years ago, the Fund adopted a policy that depends on a speedy response to the requests of developing countries.

The head of the Fund stated that about 50 percent of the financing provided by the Fund is in African countries, including the Arab countries in North Africa and Sudan.

"We have provided funding to other Arab countries, the Caribbean, Eastern Europe, and Asia regions."

He explained that the Fund targets the transport, health, education, and energy sectors, which are among the important sectors, in addition to the agriculture and water sectors.

"The total loans approved in 2021 amounted to about $1.8 billion," said Khalifa, expecting it to increase to $2 billion in 2022.

He pointed out that more than one billion dollars were spent in the health and related sectors during the outbreak of the coronavirus pandemic.

The Fund is now focusing on the food crisis, which is a new crisis that arose in developing countries, said Khalifa.

"We receive many requests for assistance in the food sector, in light of the current food crisis, which is not due to the repercussions of the war only, but to cumulative reasons, such as desertification,” he indicated, noting that the war exacerbated the situation.

The Fund is in talks with other partners from Arab and international development institutions to prepare an aid package for developing countries to help mitigate the impacts of the current food crisis.

Khalifa did not specify the size of the aid, saying it is still under consideration to determine the financial allocation.

The Director concluded his interview with Asharq Al-Awsat by asserting the importance of the OFED Forum, scheduled before the end of this month, to discuss implementing the decisions and recommendations of the Fund to accelerate development results and returns on the countries and projects.

The OPEC Fund will host its inaugural Development Forum in Vienna, Austria, on June 21, 2022. Focusing on climate, energy, and food security, the Forum will gather government leaders, heads of institutions, and expert practitioners from the public and private sectors to share their views on the state of play and future scenarios for international development.

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