CONDITIONS FOR USE OF INFRASTRUCTURE PROJECT BONDS by Cédric Mbeng Mezui

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1 CONDITIONS FOR USE OF INFRASTRUCTURE PROJECT BONDS by Cédric Mbeng Mezui FINANCING THE FUTURE: INFRASTRUCTURE DEVELOPMENT IN CENTRAL AFRICA Regional Conference Yaoundé, Cameroon, March 10, 2014 African Development Bank

2 International Financial Environment Infrastructure Deficit Project Bonds Main Challenges Role of Stakeholders Multilateral Development Banks 2

3 Goodbye QE 3

4 Hello Tapering 4

5 Impact on emerging economies Sensitivity of domestic yields to external shocks (source, IMF) Capital flight; Higher bond yields; Equity price drops; Exchange rate depreciation against the USD; Etc. 5

6 International Financial Environment Infrastructure Deficit Project Bonds Main Challenges Role of Stakeholders Multilateral Development Banks 6

7 Global Needs 7

8 The 51 PIDA Priority Projects: (Timeframe 2020) ENERGY US$40 BILLION TRANSPORT US$25 BILLION ICTs US$0.5 BILLION WATER US$2 BILLION 8

9 Infrastructure deficit: what are the implications for Africa? US$40 billion in lost annual growth every year 15 million young people entering the labor market every year in the years ahead The annual infrastructure deficit is around US$93 billion 9

10 International Financial Environment Infrastructure Deficit Project Bonds Main Challenges Role of Stakeholders Multilateral Development Banks 10

11 Need for Innovative Solutions Bond Markets Stock Markets Banking Sector Infrastructure Financing Infrastructure Funds, Pension Funds Governments & MDBs FDI 11

12 Opportune time for Project Bonds Issuer Private Corporate issuances Para public Project Bonds Sovereign issuances Public Total Limited None Recourse to sponsor 12

13 Situation in the pioneer markets 13

14 International Financial Environment Infrastructure Deficit Project Bonds Main Challenges Role of Stakeholders Multilateral Development Banks 14

15 Main Challenges 1. Regulatory Framework 1 5. Project Preparation 5 2 Infrastructure 4. Institutional Investors Macroeconomic Stability 3. Bond Markets c.mbengmezui@afdb.org 15

16 International Financial Environment Infrastructure Deficit Project Bonds Main Challenges Role of Stakeholders Multilateral Development Banks 3/9/

17 Participation by all is a must! The banking system; The financial market; Governments; Institutional Investors; Development partners; The private sector Etc. 17

18 International Financial Environment Infrastructure Deficit Project Bonds Main Challenges Role of Stakeholders Multilateral Development Banks 18

19 The MDBs Technical Assistance Loans/Guarantees Development Construction Operations Capital/Consultancy Equity Participation 19

20 The ADB Financial Sector Department African Financial Markets Initiative (AFMI) Africa 50 MFW4A 20

21 Bibliography Article/WP 1. Mbeng Mezui, Cédric Achille (2012), Accessing Local Markets for Infrastructure: Lessons for Africa, Working Paper Series N 153 African Development Bank, Tunis, Tunisia Unlocking infrastructure development in Africa through infrastructure bonds. GREAT Insights, European Centre for Development Policy Management, Volume 2, Issue 4. May-June How Africa can plug Infrastructure Fund Gap. African Banker Magazine, 4 th Quarter 2013, London Holding Excess Foreign Reserves versus Infrastructure Finance: what should Africa do? Working Paper Series No 178 African Development Bank, Tunis, Tunisia. Book: Mbeng Mezui, C.A, and B. Hundal, (2013) Financement structuré-conditions pour les obligations d infrastructure en Afrique, Banque Africaine de développement, Tunis, Tunisie. c.mbengmezui@afdb.org 21

22 MERCI, THANK YOU, AKIBA,OBRIGADO, شكرا CONTACTS: Building today, a better Africa tomorrow Stefan NALLETAMBY, Director Financial Sector Department s.nalletamby@afdb.org Cédric MBENG MEZUI, Coordinator of the African Financial Markets Initiative (AFMI) c.mbengmezui@afdb.org 22

MFW4A: The impact of the global financial crisis on funding needs and borrowing strategies in Africa

MFW4A: The impact of the global financial crisis on funding needs and borrowing strategies in Africa Stefan Nalletamby, Coordinator This presentation covers four sections 1. Impact of the financial crisis