€230M to ACP countries as cushion

€230M to ACP countries as cushion

by / Comments Off / 18 View / 16th December 2009

The European commission yesterday, Tues 15th December approved finances for eleven African and two Caribbean countries totalling € 230 million, which includes € 215 million under the so-called vulnerability FLEX mechanism (V-FLEX).

This is the first package of financing decisions in the framework of the € 500 million V-FLEX mechanism which was adopted in August ‘09 as a response to the economic crisis for African, Caribbean and Pacific Countries (ACP).

Karel De Gucht, EU commissioner for development and humanitarian aid said: ‘Developing countries were hit hard by the crisis due to their poor resilience to external shocks. This has left funding gaps in many ACP governments’ budgets. The vulnerability FLEX mechanism is the European Union’s swift response to help countries maintain priority spending, thereby assisting the worst affected countries to reduce the social costs of this crisis’.

The V-FLEX is a short-term instrument supporting the most vulnerable ACP countries to cope with the impact of the global financial and economic crisis and to mitigate its social consequences.

The first African countries to benefit from the V-FLEX mechanism are Benin, Burundi, the Central African Republic, the Comoros, Ghana, Guinea Bissau, Malawi, Mauritius, the Seychelles, Sierra Leone and Zambia.

According to the EU, this first tranche will be paid in the form of budget support, which will enable the recipient countries to maintain their level of public spending in priority areas, including in the social sectors, without jeopardising macroeconomic stability. The funds are expected to be paid before the end of this year. Additional allocations will follow in 2010.

The instrument against vulnerability works pre-emptively, based on forecasts of fiscal losses and other vulnerability criteria, helping to ease the impact rather than acting after the damage is done. It provides rapid and targeted grants and is acting as a complement to the loan-based assistance of the World Bank, the international monetary fund and other regional development banks with whose support it was developed.

The EU says the V-Flex is demand-driven and targeted at countries with a high degree of economic, social and political vulnerability, and with the right policies in place to fight the crisis and sufficient absorptive capacity as well as a financing gap in their budgets where EU support can make a difference by closing or significantly reducing this gap.

List of countries and amounts agreed for financing in ’09.

(In Million Euros)  VFLEX       FLEX       Other EDF       Total financing

Benin                           25.00         1.40                                       26.40

Burundi                      13.60                                                          13.60

Central African Republic 7.60                                               7.60

Comoros                    4.70         0.33               2.24                 7.27

Ghana                         35.00                                                          35.00

Grenada                     5.00         0.29                                          5.29

Guinea Bissau          8.00         3.18                                           11.18

Haiti                            30.00                                                          30.00

Malawi                       25.00                                                           25.00

Mauritius                 10.90                                                           10.90

Seychelles                9.00                              7.50                     16.50

Sierra Leone           12.00                                                           12.00

Zambia                     30.00                                                           30.00

Total                         215.80      5.93           9.74                      230.74