Exim Bank Lines of Credit for East Africa to Boost India’s Exports

 Satyapal Menon | @TheDollarBiz

Mombasa Port in Kenya. Kenya accounts for over 63% of India’s total exports to the EAC.

  The Export Import Bank of India says that Lines of Credit (LOCs) for the East African Community (EAC) is likely to strengthen India’s position as the top exporter to a region considered a virgin territory for investments and infrastructure development, and as a gateway to rest of Africa. The EAC is a regional group comprising the Republics of Burundi, Kenya, Rwanda, Tanzania, and Uganda. It is considered as a single market with around 125 million consumers, and is among the world’s rapidly growing economic regions. During 2002-2012, global trade of EAC surged more than five-fold from $8.9 billion to $49.3 billion, with India accounting for 17.3% of the EAC’s total imports, ahead of China (13.9%), South Africa (5.7%), Switzerland (4.8%), UAE (4.6%), and Japan (4.5%). Within EAC, Kenya is the biggest market for India with export to Kenya valued at $3,892.65 million during FY2013-2014, followed by Tanzania with $3,401.47 million and Uganda with $534.28 million. Rwanda’s and Burundi’s imports from India during the same period were valued at $87.51 million and $30.71 million respectively. Exim Bank says that trade with the EAC is likely to continue to grow in future, and India’s potential lies in exports of petroleum products; pharmaceuticals; machinery and instruments; electrical and electronic equipment; vehicles; cereals; animal, vegetable fats and oils; iron & steel; and plastics. LOCs play a key role in India’s trade with the EAC and create a win-win situation for both the borrowing country and also Indian exporters. Exim Bank says that the LOCs facilitate EAC countries to import from India with Exim Bank paying the eligible value to exporters. These LOCs are allocated to promote exports from India by financing projects like farm mechanization, railways, construction of houses, solar electrification, irrigation and sugar plants. Tanzania is the biggest beneficiary of Exim Bank’s LOCs. The Bank has extended LOCs to the tune of $254.69 million to the country, including $178.13 million for augmentation of water supply schemes, $40 million for export of pumps and tractors and other equipment from India and $36.56 million for purchase of 723 vehicles. Government of Rwanda has been sanctioned cumulative LOCs to the tune of $180.05 million including $120.05 million for export of targeted modern irrigated agriculture project. Government of Burundi has been extended LOC of $84.39 million, including $80 million for financing Kabu Hydro-electric project, and Government of Kenya has been provided a credit of $ 60 million for setting up power transmission lines.