(Ecofin Agency) - The European Bank for Reconstruction and Development (EBRD), a multilateral bank that promotes the development of the private sector, signed an MoU with the African Development Bank to promote sustainable private sector development in Africa.

The MoU requires both development finance institutions to help catalyze new sources of financing to bridge the $2.5 trillion annual financing gap needed for development in Africa.

“The new partnership agreement between our two institutions will pave the way for us to do more together, especially in supporting the growth of Africa’s private sector. The impact of Covid-19 on government resources is huge and we need to mobilize more private resources to help African countries build back stronger,” said Dr. Akinwumi A. Adesina, EBRD President and his counterpart, Odile Renaud-Basso.

The UN’s agenda 2030, which applies to all countries, sees most developing economies facing severe challenges in reaching the estimated additional $2.5 trillion annual investment needed. To attain the goal in these markets, multilateral banks seek to partner with private capital to leverage and expand investment.

According to a report by International Bankers, evidence suggests that the private sector is up to task to scale up the level of combined sources of funding needed to bridge the gap. However, it is important to take into consideration the role of different financial instruments and the varying risk appetites of investors.

To recall, the African Development Bank and the EBRD signed a $114 million financing package with participation from OPEC Fund for International Development, the Green Climate Fund, and Arab Bank. This financing was geared towards the construction of the largest private solar plant in Egypt.

Solange Che