Perspectives 2019 2020 Public Sector

Citi Perspectives 57 New Trends in Official Agency-Backed Financings for Public Sector Borrowers Georgi Yordanov Nazli Edgu The last decade has seen a significant shift in infrastructure spending by the public sector in emerging and developed markets alike, while sustainable lending has become the key driver for multilateral organizations, developmental financial institutions (DFIs) and export credit agencies (ECAs) globally. Public sector borrowers continue to use official agency-supported financing as a major source of funding for projects in infrastructure, energy and other key strategic sectors; but the overall focus of official agencies is gradually moving to sustainable development while supporting global trade flows. Official agency support can come in many forms for sovereign borrowers. While some multilateral organizations like the World Bank provide general budget financing support, most DFIs tend to focus on financing specific infrastructure projects, either by direct lending to public sector borrowers or through guarantee or credit insurance programs to mobilize commercial bank market funds for long- term financing of projects. There are also ECAs that promote their respective countries’ exporters or contractors through guarantee programs they provide on a long-term basis. In addition, there are an increasing number of blended finance packages offered by various governments for developing countries, where export credit is combined with tied aid or concessional offerings. Berne Union statistics show that since 2014 approximately 20-30% of annual export credit insurance business has consistently been allocated to public sector projects. As of the end of 2018, sovereign export credit volumes reached $45 billion, with a significant portion financing power and infrastructure projects.