Brussels weighs giving private sector direct access to EU budget guarantee

BRUSSELS — The European Commission is considering offering budget guarantees directly to the private sector in order to boost investment in Africa and countries neighboring the European Union, senior officials have told Devex.

Sources said the possible move, which would mean circumventing the development banks that have had privileged access to the guarantee under the European Fund for Sustainable Development until now, has been discussed internally in recent months but that a final decision will be left for the new leadership of the bloc’s executive body, which begins its five-year term Nov. 1.

Under EFSD, launched as part of the EU’s External Investment Plan in 2017, the commission has allocated €1.54 billion in guarantees for projects in areas such as renewable energy and small business loans in aid of the Sustainable Development Goals. The idea is to incentivize projects — proposed and overseen by development finance institutions under the current arrangement — in countries and sectors often deemed too risky by investors. The riskier the proposed program, the less the DFI pays the commission to take advantage of the guarantee from the EU budget, which covers part of the first loss should projects fail.

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