A new financing facility is being set up to raise up to $1bn for investment in infrastructure projects in the Arab World.
International finance institutions and governments in the Arab region have agreed to mobilise support for infrastructure development through a new Arab Financing Facility for Infrastructure (AFFI).
The facility aims to drive economic growth and meet the needs of a young and growing population and act as a catalyst for financing for the $40bn annual funding gap.
The facility brings together the World Bank, the International Finance Corporation (IFC) and the Islamic Development Bank (IsDB).
AFFI will specifically target projects with a regional dimension, linking countries with each other and with the wider world to build pathways of economic integration.
Shamshad Akhtar, World Bank Group vice president for the Middle East and North Africa (MENA), said: “The Arab spring has demonstrated that people want better public services and a cleaner urban environment and that means more efficient, better-designed infrastructure services.
“At the same time, government budgets are under pressure and the private sector perceives risk in the political upheavals, so it’s become harder to finance those necessary infrastructure investments.
“This is where the IFIs can step in to help with financing and mitigating the risks faced by private investors.”
The MENA region needs to invest between $75 and $100 billion a year to sustain the growth rates that have been achieved in recent years, and to boost economic competitiveness.
Currently it is estimated that half of the population in the region does not have adequate access to water and. As the population grows, electricity consumption is also set to increase significantly over the next few years and will require investments of $30 billion a year to meet demand.
Birama Sidibe, vice president of Operations at the Islamic Development Bank, added: “We agreed that the AFFI will initially focus on a few demonstration projects that will act as catalyst for further investments.
“Countries interested in supporting AFFI have started a dialogue with the World Bank and Islamic Development Bank to identify and develop priority projects for AFFI financing.
“At the same time, we are moving ahead to mobilize private sector money for regional projects and are now in the advanced stages of recruiting a Fund Manager to oversee the investment fund vehicle being created.”
World Bank lending to the Middle East and North Africa region for infrastructure, including electricity, transport and water, has exceeded $1 billion a year and is expected to increase further. In addition, over the past four years, IFC has invested more than $1 billion in infrastructure projects in the region.
Follow us on
