Responses: Ministry of Finance, Mauritius

• Flexible Credit Line (FCL) needs to be able to also cover Africa by a stronger focus on strong policies and careful look at vulnerabilities rather than just headline numbers;
• If FCL cannot be modified, perhaps an FCL 2 pitched between FCL and High-Access Precautionary Arrangements (HAPA). An alternative would be for an FCL type instrument at the World Bank;
• EC type V-Flex GRANT operations are needed for MICs to blend grants with market rate borrowing from official sources to keep debt sustainable;
• Accelerating EPAs/open oriented regionalism is one way of fighting the crisis under a proper Aid for Trade programme which could be a means of channeling FCL 2/FCL instrument combined with EC type V-Flex Grants as part of an Aid for Trade package.
• WB may need to review country limits during the crisis and move more forcefully on proposals such as the African Restructuring Facility (ARF) to intervene at micro-level: saving jobs by assisting firms through the restructuring process;
• Main purpose of the African Restructuring Facility (ARF) would be to assist African enterprises hit by a temporary loss of export markets to restructure and retool to save jobs and prepare for the recovery;
• Given that overall purpose, and based on its experience, Mauritius would suggest setting up the following specific schemes aiming at:
• Restructuring debt to cope with temporary fall in export demand,
• Assisting restructuring debt for SMEs
• Enabling SMEs to acquire and modernize their equipment through a new financing arrangement (leasing) at affordable rates and thus enhance their competitiveness;
• Providing an additionality of insurance coverage to those exporting companies in ARF members so as to enable them to secure adequate export financing during the crisis period;
• Sending employees on training to enable them to upgrade their skills for better performance at the enterprise level and also to acquire new skills which may be useful to them in their professional or personal life; the employees concerned will get approved training (in line with existing provisions for the country) in lieu of work for an average of one day, or at most two working days per week;
• Assisting exporters of services including hotels, tourist residences, guesthouses and restaurants to enhance the level of services and competitiveness;
• Rescheduling of loans of SMEs and micro-enterprises in distress due to the crisis;
• Size of ARF: the ARF would initially be capitalized with US$ 100 million and could be increased if there is a good take up.  Financing would come from the resources of the African Development Bank (ADB) currently devoted to private sector financing. The EC and other development partners would offer grants to support some of the operations and reduce the contributions from liquidity constrained low income countries. About US$ 20 million of grants are being sought;
• Set up and location: interested Governments meeting required operational criteria would be asked to offer to facilitate the setting up of the ARF. Interested Governments would contribute to the local set up costs including providing office facilities and provide a reasonable share of the grants mobilized from the international community (e.g. 10 % i.e. US$2 million).  They could also be asked to provide local staff and an initial core staff around which to build the ARF. The relevant regional organization sponsoring the initiative of COMESA, EAC, IOC and SADC (or the combination of them that are interested or the IRCC to the extent that all express support) would work with the development partners interested in financing as well as with the interested Governments to agree on location within a month of a decision to move ahead being taken;
• Operation: inter alia, there are three options for operating the ARF:
  • ADB  staff set up and run the ARF by locating appropriate staff in the designated country of operations;
  • ADB hires professionals on the open market for operations in the designated country, with possible backstopping as necessary by ADB in HQ or a regional office.
  • The Government of the selected host and its Private Sector joint Team operates the ARF on behalf of the ADB with supervision and/or backstopping as required from ADB;
• Scope of operations: the ARF could begin in those countries that are ready to start, such as Mauritius where there already is a pipeline of about a dozen projects amounting to about US$ 5 million.  However, the ARF could offer value added throughout the region and would market its services to gradually expand its membership beyond the founding members;
• Decisions and time frame: in view of the urgency, severity and breadth of the crisis, rapid decisions are required by the ADB Board and Management, ideally by the end of November 2009.  Operations can begin immediately and if necessary the selected host would supply the physical and human resources required to enable immediate start of operations once a decision is taken. To move matters forward, Mauritius would be prepared to host a meeting for the Secretariats of IOC, EAC, SADC and COMESA and the interested member states to attend and to indicate their interest in ARF extending operations to their country.  On a demand driven basis ARF would gradually expand to cover the region. If there is interest in proceeding, a joint team can be set up to begin work on the modalities for both transitional and permanent arrangements.  Incorporation within the selected host country should only take days.