OPEC Fund Annual Report 2023

2023 ANNUAL REPORT

Invested in Development

2023 ANNUAL REPORT

Table of Contents

THE OPEC FUND FOR INTERNATIONAL DEVELOPMENT ANNUAL REPORT 2023

THE HIGHLIGHTS

At a Glance

Foreword by the President

The Inaugural OPEC Fund Bond

Climate Action Plan

Private Sector @25

Development Effectiveness

Strategic Framework 2030 Update

THE OUTLOOK

Economic Outlook

Development Finance Architecture

THE RESULTS

Operational Highlights

Delivery by Sectors

Nourishing Zimbabwe

Recasting education in China

Ramping up renewables across Uzbekistan

Channeling on-lending across Albania

Modernizing healthcare in the Caribbean

Reconnecting the Kyrgyz Republic

Quenching thirst across Mauritania

Other Funding

Powering the energy transition with IRENA

Driving green growth across Botswana

Keeping staple imports flowing to Egypt

THE ORGANIZATION

About the OPEC Fund

Our Members

Our Governance

Our Partners

Our Staff

Our New Headquarters

ANNEX

THE HIGHLIGHTS 01

01 | THE HIGHLIGHTS – AT A GLANCE

AT A GLANCE

Results

The OPEC Fund posted a record US$1.7 billion in new commitments across 55 projects, providing funding to develop infrastructure, create equitable economic op- portunities and develop human capital and institutional capacity in response to the growing needs of our partner countries. Measuring impact, we find that in the period from July 2022 to June 2023 all 43 projects approved by the OPEC Fund during that time contributed to at least one Sustainable Development Goal (SDG), with a majority (60 percent) contributing to two or more.

Inaugural bond

The OPEC Fund issued its inaugural benchmark bond at the beginning of 2023. The 3-year fixed-rate bond raised US$1 billion and the new funds are financing or refinancing key sustainable development pro- jects. The bond with a 4.5 percent coupon attracted strong interest from investors globally and was almost 1.5 times oversubscribed.

Geographic spread

Sub-Saharan Africa received 42 percent of new commitments, the Middle East, North Africa, Eastern Europe & Central Asia accounted for 20 percent, Latin America & the Caribbean attracted 20 percent of new commitments, followed by Asia & the Pacific with 18 percent of public and private sector lending, trade finance and grants operations.

MENA, Eastern Europe & Central Asia

Public sector

20%

Sub- Saharan Africa

The OPEC Fund committed US$1.1 billion through 26 projects in the public sector in 2023 (excluding trade finance). Investments covered a wide range of areas, spanning agriculture to transport. Supporting structural reform programs, policy-based lending is rapidly grow- ing in importance and last year accounted for US$532 million for 6 new commitments worldwide.

Latin America & the Caribbean

20%

42%

18%

Asia & the Pacific

01 | THE HIGHLIGHTS – AT A GLANCE

Private sector

The OPEC Fund provided US$317.9 million through 10 projects in the private sector in 2023. Private sector loans played an important role in the delivery of the Climate Action Plan. Meanwhile, loans to commercial banks were provided for on-lending to local small businesses, often led by women.

Trade finance

The OPEC Fund provided US$272.6 million via 8 trans- actions to beneficiaries in Africa and Asia. Addressing global food supply chain disruptions and securing access to energy were among the main priorities.

Partnerships

Climate Action Plan

Leveraging its own commitments, the OPEC Fund continued its efforts to catalyze joint and coordinated action from its partners. In 2023, we joined forces with the Arab Coor- dination Group (ACG) to pledge a total of US$50 billion to support African countries by 2030. We also jointly announced with the ACG a US$10 billion strategic initiative for an inclusive, affordable and equita- ble energy transition in developing countries to be deployed by 2030.

The OPEC Fund has set itself the target of commit- ting 25 percent of all new financing to climate action by 2025 and 40 percent by 2030. Delivery is ahead of schedule and target: In 2022 (according to latest availa- ble numbers), climate finance accounted for 33 percent of total approvals. Recent examples include financing for a solar plant in Niger and wind farms in Azerbaijan and Uzbekistan.

Visibility

Recognition

The second edition of the OPEC Fund Development Forum in June 2023 established the event as an internationally recognized platform for discussing development through a South-South lens. The OPEC Fund also participated in various annual meetings, conferences and events of its development partners around the world, raising the institution’s recognition and visibility.

The OPEC Fund won international acclaim on multiple fronts. The financing of a 584 MW power plant in Bang- ladesh won “Best Infrastructure Deal” and “Best Project Finance Deal in South Asia”; we were also honored with the “Top Partner Award” from the Islamic Trade Finance Corporation; and President Abdulhamid Alkhalifa ac- cepted the “Abdul Latif Youssef Al-Hamad Development Award” for our role as co-financier of the 1.95 GW South Helwan power plant in Egypt.

01 | THE HIGHLIGHTS – FOREWORD BY THE PRESIDENT

FOREWORD BY THE PRESIDENT

Dear Reader,

The world is facing a polycrisis, driven by grave geopolit- ical tensions, global economic uncertainty and deepen- ing climate change. The reasons are complex and the impacts manifold. Despite this challenging global environment, the OPEC Fund for International Development succeeded in ex- panding its new commitments to US$1.7 billion across 55 operations over the last year. While the energy sector recorded the strongest performance, we established projects in all economic segments across a considerable portion of the world. We examined the impact of our projects in our latest “Development Effectiveness Report”, published simul- taneously with our Annual Report. Examining the period from July 2022 to June 2023 it finds that all 43 projects approved by the OPEC Fund during that time contribut- ed to at least one Sustainable Development Goal (SDG), with a majority (60 percent) contributing to two or more. The ability of the OPEC Fund to fulfil its long-term stra- tegic objectives and swiftly respond to new emergencies was strengthened with the successful placement of our inaugural bond in January 2023. Attracting premi- um investors from around the world, our offering was significantly oversubscribed and raised US$1 billion for sustainable development projects in line with our Envi- ronmental, Social and Governance (ESG) policy. Climate change remains a major concern that the OPEC Fund is tackling through its dedicated Climate Action Plan, which we adopted in September 2022. In its first full year of implementation we have demonstrated our strong commitment to climate action with around a third of all our 2022 approvals linked to climate finance. This trend is expected to continue and we are well on track to meet our 2030 target of having climate investment account for at least 40 percent of all new projects.

The OPEC Fund’s support for the energy transition derives from our commitment to SDG 7 – Clean and Affordable Energy. Delivery of the 17 SDGs at the half- way point was the subject of a major UN conference in New York in September, attended by a senior OPEC Fund delegation. The findings were sobering with just 12 percent of SDGs on target and more than 30 percent stagnating or backsliding. In line with our strategy and mandate, our projects dove- tail with the 2030 Agenda for Sustainable Development. All our projects contributed to the delivery of the SDGs, for example supporting agriculture in Benin, solar energy in Niger, healthcare in Saint Vincent and the Grenadines and transportation in India. Our capacity to deliver on our mandate, while expanding operations in line with growing demand, has strength- ened in recent years thanks to our Strategic Framework 2030. Strategic enablers and activities across key areas will further support the delivery of our Business Plan 2024-2026. Deepening our impact, we continued to work closely with peer multilateral development banks and other develop- ment agencies including fellow members of the Arab Co- ordination Group (ACG). We joined forces in a pledge for a US$50 billion support package for Africa and worked together at the UN Climate Change Conference (COP28) in our member country, the United Arab Emirates, to progress delivery of the US$24 billion ACG climate pledge through US$10 billion worth of concrete projects. We also initiated new forms of collaboration with the Asian Devel- opment Bank, the International Atomic Energy Agency, the United Nations Industrial Development Organization, the World Food Programme and others.

Our cooperation with other institutions as well as with public and private sector actors is benefiting from the

01 | THE HIGHLIGHTS – FOREWORD BY THE PRESIDENT

ABDULHAMID ALKHALIFA OPEC Fund President

increased public profile the OPEC Fund is working to attract. Key to this endeavor is our Development Forum hosted annually in Vienna in June — now a fixture on the international conference circuit for discussing and driv- ing South-South cooperation. As 2023 started with our successful debut on the capital market, it was only fitting that it ended with encouraging news on a similar front: Late in December the interna- tional ratings agency S&P Global Ratings upgraded our credit rating to AA+, with a stable outlook. This upgrade, driven by our increasing development impact and reach, will position the OPEC Fund to mobilize even more re- sources for the benefit of our partner countries.

our dedicated staff drives us from strength to strength. Indeed, the well-being of our staff — in many ways the OPEC Fund’s most valuable asset — remains at the heart of my considerations. I would like to thank our member countries for their steadfast support, our partner countries for their excel- lent cooperation, our host country for our outstanding relationship, our business partners for their effective collaboration and our staff for their continuous commit- ment and dedication. Without all these contributions, our success in 2023 would not have been possible. I am proud and honored to lead the OPEC Fund and I look forward to what we will accomplish together in the years ahead — particularly on the road to 2030.

This well captures our commitment and capacity as

01 | THE HIGHLIGHTS – THE INAUGURAL OPEC FUND BOND

THE INAUGURAL OPEC FUND BOND

Several years of painstaking preparation came to fruition when the OPEC Fund for International Development issued its inaugural benchmark bond at the beginning of 2023. The 3-year fixed-rate bond raised US$1 billion in new funds, which are financing or refinancing key sustaina- ble development projects in line with the OPEC Fund’s mission and contributing to the Sustainable Develop- ment Goals (SDGs). The bond with a 4.5 percent coupon attracted strong interest from investors globally with over 40 investors in the book and was almost 1.5 times oversubscribed. Investor interest was highest in Europe, Middle East and Africa with 52 percent, followed by Asia & the Pacific with 27 percent and North America with 21 percent. While central banks and official institutions accounted for 62 percent of investors, banks came second with 19 percent, followed by asset managers with 9 percent and insurance/pension funds with 8 percent. Since its establishment in 1976, the OPEC Fund has been entirely equity funded. The plan to enter the capital markets to diversify its funding base is a central facet of the OPEC Fund 2030 Strategic Framework, which aims to expand the institution’s operations and deepen its impact in response to growing demand for its support. The benchmark was issued as a sustainability bond using the OPEC Fund’s SDG Bond Framework, which complies with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021 and Social Bond Principles 2021 pub- lished by the International Capital Market Association. The proceeds will be used to finance and refinance eligi- ble projects in partner countries in OPEC Fund priority

areas such as food security, healthcare, infrastructure, education, employment and renewable energy.

The successful bond issuance establishes access to global capital markets and allows the OPEC Fund to enhance its support to partner countries.

Our progress has not gone unnoticed by the internation- al credit rating agencies: in December, S&P Global Rat- ings assigned the OPEC Fund’s long-term issuer credit rating an upgrade from AA to AA+ (outlook stable). In July, Fitch Ratings affirmed the OPEC Fund’s long-term rating of AA+, outlook stable. With its inaugural bond issuance, the OPEC Fund joined fellow multilateral development banks in the capital markets. To meet the sharp rise in demand for develop- ment financing driven by the impacts of rising interest rates amid heightened needs around the globe, the OPEC Fund has tapped new sustainable and prudent sources of funding. Underlining its commitment to investors, the OPEC Fund listed its bond on the Main Market of the London Stock Exchange. The bond was simultaneously dis- played on the Sustainable Bond Market. The Main Market is world-leading in the admission and trading of equity, debt and other securities and represents a badge of quality for every company admitted to trading. It is home to more than 1,000 firms from 100 countries, including many of the world’s largest, most successful and dynamic companies. The US$1 billion bond is part of a wider borrowing pro- gram of up to US$3.5 billion in long-term debt between 2023 and 2025. The OPEC Fund is constantly monitor- ing market developments and is ready to act swiftly when new opportunities arise.

01 | THE HIGHLIGHTS – THE INAUGURAL OPEC FUND BOND

The listing of the OPEC Fund debut bond on the London Stock Exchange Main Market was marked at a Market Open event in March 2023

01 | THE HIGHLIGHTS – CLIMATE ACTION PLAN

CLIMATE ACTION PLAN

While “affordable and clean energy” (Sustainable Development Goal 7) has al- ways been a focus for the OPEC Fund for International Development the mat- ter was promoted to the highest level with the adoption of the Climate Action Plan in September 2022. Since then climate action has become a cross-cut- ting theme that encompasses all sectoral activities of the OPEC Fund. The plan sets the ambitious target of dedicating 25 percent of all new financ- ing to climate action by 2025 and 40 percent by 2030. Delivery is ahead of schedule: In 2022, climate finance accounted for 33 percent of the total approvals. For example, last year the OPEC Fund supported a solar plant in Niger and wind farms in Azerbaijan and Uzbekistan. Another significant climate intervention was launched in Colombia. The country is particularly vulnerable to climate change and the government has been developing a climate mitigation and adaptation response that includes ambitious emission reduction targets. The country aims to cut greenhouse gas emissions by 51 percent by 2030. The comprehensive plan seeks to balance sustainable development with economic growth. The OPEC Fund is supporting Colombia’s Climate Action and Energy Tran- sition Program with a US$150 million policy-based loan. The main goals are to reduce greenhouse gas emissions by 40 percent by 2030 compared to 2014 levels, reduce deforestation by 30 percent, double the land area with systems for sustainable production and conservation to 1.4 million hectares, transition to sustainable transportation and implement the national strategy on the circular economy to increase solid waste recycling and water reuse. With the adoption of its Climate Action Plan, the OPEC Fund joined the large number of development finance institutions and multilateral development banks (MDBs) that contribute to the global agenda for climate financing and measure their contributions. Creating greater synergies through the appli- cation of standardized methodologies has improved the effectiveness of measuring climate finance and the deployment of resources. This is all the more urgent as public funds are increasingly scarce due to huge pressures on national budgets. In a situation in which governments have less capacity for action, while at the same time global challenges such as climate change are becoming ever more important, expectations for MDBs to expand their activities are growing.

51 % by 2030 Colombia aims to cut greenhouse gas emissions by

01 | THE HIGHLIGHTS – CLIMATE ACTION PLAN

The OPEC Fund is support- ing Colombia to balance sustainable development with economic growth

For the OPEC Fund the new focus resulted in significant changes in its approach. The Climate Action Plan covers three key areas of intervention in partner countries, namely, supporting policy diagnostics, promoting trans- formative technologies (supporting climate resilience, adaptation and mitiga- tion) and driving innovative climate finance solutions for the private sector. As a cross-cutting theme climate finance can make an important contri- bution across all sectors. In 2022 (latest available numbers), 25 out of all approved projects (67.6 percent of the total number of investments in the analyzed portfolio) addressed climate finance: Five projects (13.5 percent) involved adaptation finance, 10 projects (27 percent) involved mitigation finance and 10 projects (27 percent) were a mix of both. In terms of approvals in 2022, our climate change adaptation financing stood at US$146.6 million, our climate change mitigation financing amounted to US$368.8 million, so total OPEC Fund climate financing was US$515.4 million – equaling 33.4 percent of approved funds.

Total OPEC Fund climate finance approvals:

US$ 515.4 MN

01 | THE HIGHLIGHTS – PRIVATE SECTOR @25

PRIVATE SECTOR @25

The OPEC Fund launched its private sector operations in 1998 with its first transaction in 1999, complementing its long-standing engagement with the public sector in its partner countries. While public sector operations often aim to create the infrastructure and enable an environment for a successful economy, it is the private sector that produces and trades essential goods and services. The private sector drives economic growth, the generation of employment and the creation of wealth. Support to the private sector perfectly complements the OPEC Fund’s development mandate. Trade finance provides essential funding to keep the wheels of the

economy turning and allows importers and exporters to benefit from the advantages of mutual exchange and burden-sharing. To date, the OPEC Fund has approved more than 600 private sector, trade finance and equity transactions totaling a commitment of more than US$10.5 billion, including roll-overs, of which about US$10 billion came in the form of loans. The OPEC Fund’s private sector efforts have directly boosted the economies of more than 70 countries globally through its funding channels. Since 2006, the Private Sector and Trade Finance De- partment has provided over 11,000 unfunded guaran- tees globally for more than US$12 billion.

SUPPORTING MICROFINANCE INVESTMENTS GLOBALLY

TAFILA WIND POWER PLANT

Country Global

Type Equity

1 st transaction 2009

Country Jordan

Type Project Finance

1 st transaction 2013

The Microfinance Enhancement Facility (MEF) was cre- ated in 2009 by the International Finance Corporation, KfW Development Bank and the Development Bank of Austria in response to the financial crisis and liquidity challenges faced by microfinance institutions worldwide. The OPEC Fund invested US$20 million in 2009, fol- lowed by an additional US$20 million in 2014. Between 2009 and 2022, MEF invested US$2.9 billion across 312 microfinance institutions in 64 countries, reaching 740,000 end borrowers — of which 78 percent were women and 69 percent were living in rural areas.

The OPEC Fund co-financed the construction of a 117 MW wind power plant and associated facilities on a build-own-operate basis in Tafila, Jordan. The plant helped the country to diversify its energy mix and reduce its reliance on gas-fired power plants. Developed by the power developer and operator Masdar, Tafila is the first commercial utility scale wind power plant in the country. The plant generates some 390 GWh of electricity annually, powering around 83,000 homes while cutting nearly 235,000 tonnes of CO 2 emissions.

OPEC Fund total commitment: US$40 million

OPEC Fund total commitment: US$20 million

Operation Implementation: Completed

01 | THE HIGHLIGHTS – PRIVATE SECTOR @25

ETC GROUP FACILITY

BANQUE POPULAIRE DE MAURITANIE

Country Africa & Global

Type Trade & Corporate

1 st transaction 2009

Country Mauritania

Type Financial Institution & Equity

1 st transaction 1999

Since its establishment in Kenya in 1967, ETC Group has developed into one of the largest independent agricultural commodity supply chain managers in Africa. It owns more than 300 warehouses and oper- ates over 70 processing plants. Several OPEC Fund loans, with the first US$30 million facility provided in 2009, have helped ETC expand its infrastructure and processing capacity. More than 350,000 smallholder farmers have benefitted and over half the funds have gone to Least Developed Countries.

The partnership began in 1999 when the OPEC Fund became a founding shareholder in Mauritanie Leasing, the predecessor to Banque Populaire de Mauritanie (BPM). Following the successful introduc- tion of leasing operations, BPM has since evolved into a universal bank focusing predominantly on SME financing. To date, the OPEC Fund has approved four lines of credit to BPM for on-lending to SMEs, supporting the development of new businesses and helping to create over 25,000 permanent jobs.

OPEC Fund total commitment: US$65 million

OPEC Fund total commitment: US$13 million

Operation Implementation: Completed

BANCO PROMERICA EL SALVADOR

Country El Salvador

Type Financial Institution

1 st transaction 2014

The OPEC Fund has supported Banco Promerica’s activities, particularly focusing on on-lending to small and medium enterprises (SMEs) and addressing the demand for short, medium and long-term financing. The OPEC Fund has provided the bank with three loans totalling US$48 million, supporting job creation and bolstering economic growth. Banco Promerica has extended its sup- port to SMEs in various economic sectors, includ- ing manufacturing, agribusiness and commercial services.

OPEC Fund total commitment: US$48 million

Operation Implementation: Completed

01 | THE HIGHLIGHTS – DEVELOPMENT EFFECTIVENESS

DEVELOPMENT EFFECTIVENESS

The OPEC Fund for International Development has in recent years put particular emphasis on enhancing the impact of its support to partner countries and clients by measuring, monitoring and evaluating its activities with a dedicated results framework and a comprehensive pro- ject-level development effectiveness toolkit. The OPEC Fund releases its findings in the form of a Development Effectiveness Report (DER), published alongside its Annual Report. The latest DER shows the OPEC Fund’s progress towards its vision of “a world where sustainable development is a reality for all.” Examining the period from July 2022 to June 2023 it finds that all 43 projects approved by the OPEC Fund during that time contributed to at least one Sustainable Development Goal (SDG), with a majority (60 percent) contributing to two or more. On average, each approved project contributed to 2.7 SDGs, with a maximum of 10 SDGs (out of 17) achieved by one project, a policy-based loan in Armenia. A majority of the examined projects contributed to SDG 8 - Decent Work and Economic Growth - through a variety of channels, for instance providing support to increase access to finance for micro, small and medi- um-sized enterprises (MSMEs) and to policy reforms to foster sustainable economic growth. The frontrun- ner was followed by SDG 9 – Industry, Innovation and Infrastructure and SDG 1 – No Poverty. As most projects address multiple goals, our work is clearly more than the sum of its parts — similar to the 2030 Agenda itself.

results. Based on the review of all OPEC Fund operations having reached completion or early operating maturity during the mid-2022 to mid-2023 period, it finds that, for example, projects in the health sector benefited an estimated 15.7 million people in their catchment area, more than 1 GW of renewable energy was added for clean energy generation, and more than 300,000 farm- ers, 120,000 students and 4,600 MSMEs benefited from OPEC Fund-supported projects. The path the OPEC Fund has chosen through its Stra- tegic Framework 2030 is to increase operations and deepen impact to address the rising demand for South- South development cooperation. The Development Effectiveness Unit is supporting the operations teams in preparing and implementing projects that maximize development results. In addition to taking stock of the OPEC Fund’s devel- opment effectiveness, the new edition of the DER also examines the issue of food security as a key challenge for the international community. The latest global trends are cause for concern: after years of steady progress, the number of people going hungry today is higher than in 2015 – when the Sustainability Agenda was adopted. The reasons for this reversal are numerous and can be found in recent geopolitical events and the impact of the COVID-19 pandemic, which have exacerbated develop- ing countries’ existing barriers to agricultural self-suffi- ciency. The causes are as complex as the impacts. But for the OPEC Fund as a development institution one simple truth stands above all else: If people go hungry, progress on all other development goals is impossible.

In addition to tallying up the expected SDG alignment of new projects, the report also looks back at actual project

01 | THE HIGHLIGHTS – DEVELOPMENT EFFECTIVENESS

Number of projects per SDG

185

139

7 6

Note: The analysis covered the 270 projects approved 2018-Q3 2022. Numbers sum to more than the total number of projects because most projects contribute to more than one SDG.

01 | THE HIGHLIGHTS – STRATEGIC FRAMEWORK 2030 UPDATE

STRATEGIC FRAMEWORK 2030 UPDATE

The OPEC Fund for International Development made significant progress last year in the implementation of its Strategic Framework 2030 (SF 2030).

development institution with sound financial fundamen- tals and a wide-reaching vision was demonstrated at the beginning of the year with the successful launch of our inaugural benchmark bond. In December, the OPEC Fund was assigned a credit rating upgrade to “AA+” by S&P Global Ratings. Another important aim of the OPEC Fund’s transfor- mation under the SF 2030 is to enhance its alignment and engagement with the community of multilater- al development banks, while also raising its profile. Stronger and more effective partnerships are key to successful delivery and the OPEC Fund has taken steps to increase cooperation, co-financing opportunities and knowledge transfer. Increased visibility through the OPEC Fund Development Forum and more active participation in global events such as the UN Sustain- able Development Goals Summit in New York and the UN Climate Change Conference (COP28) in Dubai were important contributions to this effort. In order to consolidate the successes of the SF 2030’s implementation and to ensure the fulfilment of its long-term goals, the OPEC Fund has embarked on a mid-term review and update of the strategy for its final phase covering the 2025-2030 period. The update to the SF 2030 will aim to build on implementation pro- gress and reflect external and internal developments since its initial approval in 2019, sharpening the OPEC Fund’s focus and capabilities to deliver on its mandate.

Approved in 2019, the strategy focuses on delivering enhanced support and financing to partner countries as well as bolstering the OPEC Fund’s profile and impact. SF 2030 comprises three stages: Phase 1 – Enhancing operational and financial capacity; Phase 2 – Transforma- tional growth; and Phase 3 – Becoming a larger and ever more relevant multilateral development bank (MDB). As demonstrated by the rise in business activity in 2023, the OPEC Fund has successfully increased support to partner countries worldwide. We have made particular- ly good progress in the delivery of the action plans on climate and food security, which continue to drive our support across these two thematic areas of operations. At the same time, the OPEC Fund successfully lever- aged its convening power, for instance in the framework of the Arab Coordination Group (ACG), which unveiled a US$10 billion energy transition initiative in December. Underlining its strong commitment to Africa the OPEC Fund also facilitated a US$50 billion pledge by the ACG to the continent in support of energy security and tran- sition, regional integration, connectivity and trade.

The OPEC Fund’s increased recognition as a growing

01 | THE HIGHLIGHTS – STRATEGIC FRAMEWORK 2030 UPDATE

With its strategy the OPEC Fund aims to enhance its alignment and engagement with the community of multi- lateral development banks

Underlining its strong commitment to Africa the OPEC Fund facilitated a

US$ 50 BN

The strategy review and update will focus on implementation, taking into account external and internal developments

pledge by the ACG to the continent in support of energy security & transition, regional integration, connectivity and trade.

THE OUTLOOK 02

02 | THE OUTLOOK – ECONOMIC OUTLOOK

ECONOMIC OUTLOOK

Uncertainty clouds the economic outlook for 2024 and the next few years – probably more so than at any other time in recent memory. In this challenging global environment, there is an array of difficulties to overcome, however there is also hope that adversity can inspire positive change and new tech- nology can deliver lasting solutions. Most of the OPEC Fund’s partner countries are caught in the middle of rapidly changing global economic and financial conditions – ones that they have little influence over and cannot realistically change in their favor.

What happens in the future depends on the interaction and combination of how the driving forces continue to operate, when and how shocks develop, and which risks materialize. The fragilities connected to these factors can amplify the shocks. Four of which are of particular concern: • Environmental: As the global economy grows, its adverse impact on the environment is likely to increase – as has been detailed in UN Climate Change Conferences over the years 1 .

• Financial: Public and private debt is at very high levels 2 , and any widespread default could led to economic depression.

Given this backdrop, the macroeconomic outlook for 2024 and beyond will likely be influenced by five long term driving forces:

• Domestic politics: The rules-based order of global co- operation is at heightened risk of being undermined 3 with questions over economic integration and the increasing primacy of narrow self-interest. • International politics: There are no signs of a broad- based retreat from globalization 4 but fault lines are emerging. This raises serious questions for the global economy in a more fragmented world, including the ongoing and potential implications of armed conflict. A failure to manage these fragilities would make sig- nificant shocks more likely and more difficult to deal with. One can make a strong argument that the world is more unpredictable and complex than at any point in the past 30 years. Therefore, the OPEC Fund is striving

• Demography • Climate change • Technology • Global spread of knowledge • Economic growth

Together, these forces will both shape the global econo- my and the outlook for the OPEC Fund partner countries this year as well as over the medium term. These forces are all subject to shocks (a realized risk), risks (their like- lihood and severity are unknown) and fragilities (which increase the likelihood and/or the severity of a shock), which underscores the significant uncertainty over what the coming years hold.

02 | THE OUTLOOK – ECONOMIC OUTLOOK

to help reduce those fragilities, manage shocks, plan for risks and understand the driving forces in order to ensure positive development outcomes are delivered for partner countries. Taking the above four fragilities into account — how will the uncertain outlook affect development in OPEC Fund partner countries? There are several important issues to consider, chief among them geopolitical developments. While it is too early to predict detailed moves, a fresh wave of disruptions to global supply chains would result from a return to trade barriers aiming to protect the do- mestic industries of major countries. The US administra- tion seeks to address disruptions via diversifying supply chains, strengthening domestic capacity, and monitoring supply-chain health and resilience 5 . Additional restrictions on investment and the flow of capital would be damaging to global growth prospects. For example, the World Investment Report 2023 6 by the United Nations Conference on Trade and Development reveals a widening annual investment deficit that devel- oping countries face as they work to achieve the Sus- tainable Development Goals (SDGs) by 2030 — the gap is now about US$4 trillion per year — up from US$2.5 trillion in 2015 when the SDGs were adopted. Another issue that is becoming increasingly pressing for a growing number of OPEC Fund partner countries is the low-income countries (LICs) debt crisis. Despite the post-COVID-19 economic growth rebound from 2020 and much higher-than-expected inflation, public debt

has remained stubbornly high, particularly in vulnerable countries. The reasons for this include large, sustained fiscal deficits and price subsidies. There are also external pressures: rising US interest rates have increased new borrowing costs, strained fiscal balance, and raised de- fault risks. Meanwhile, the G20 Common Framework has not been able to provide a blanket solution. The debt problem in LICs is growing (while, positively, it may be receding for middle-income countries as US bond yields decline and global commodity prices fall) and could potentially worsen in 2024. The uncer- tainties around the implementation of the common framework may limit the policy options that LICs have to tackle debt pressures. Meanwhile, constraints within the IMF-World Bank’s debt sustainability framework suggest that as the financing landscape for most LICs has changed significantly since a 2017 review, a compre- hensive overhaul of the framework is required to help prevent the crisis from worsening 7 . 1 https://unfccc.int 2 https://www.imf.org/en/Blogs/Articles/2023/09/13/global-debt-is-return- ing-to-its-rising-trend 3 https://carnegieendowment.org/2023/09/12/rules-of-order-assessing-state- of-global-governance-pub-90517 4 https://blogs.worldbank.org/trade/globalization-retreat-here-what-new- study-shows 5 https://www.whitehouse.gov/cea/written-materials/2023/11/30/is- sue-brief-supply-chain-resilience/ 6 https://unctad.org/publication/world-investment-report-2023 7 https://www.brookings.edu/articles/to-fix-the-debt-crisis-in-low-income- countries-first-fix-the-debt-sustainability-framework/

02 | THE OUTLOOK – DEVELOPMENT FINANCE ARCHITECTURE

DEVELOPMENT FINANCE ARCHITECTURE

Within the many different opinions about how to reform the global development financial architecture, there is growing consensus that a root-and-branch reform of the existing system can no longer be post- poned. Indeed, the challenges are so diverse and the required funds so large that a broad reorganization of global development finance is already taking shape. After all, this is one of the most important pre requisites for securing the future, particularly if the Sustainable Development Goals (SDGs) are to be met by 2030. Over the past few years, the global development financial architecture has transformed significantly and now comprises six main elements, according to the United Nations Secretariat 8 . Each part contains its own complexities and connections to the other elements: • Development banks and other official creditors; • Sovereign borrowing and debt sustainability; • Global financial safety net; • Global economic governance; • Global financial system rules and regulations; and • Global tax cooperation. Recognizing that reform is crucial if sustainable devel- opment is to be delivered, major country groupings such as the G7 have embarked on several processes to bring about change. In September 2023, African leaders unanimously adopt- ed the “Nairobi Declaration”, for the first time reaching a joint position on climate change and climate policy and calling for the reform of the global financial system,

noting that the cost of borrowing is eight times higher in Africa than in Europe.

As the sponsor of the 2030 Agenda for Sustainable Development, the United Nations also highlighted the high cost of borrowing. A policy brief published in May 2023 9 underscores the massive variations in countries’ access to liquidity, vast underinvestment in global public goods and volatile financial markets and capital flows as further “deep rooted” inequities of the existing architecture. In order to overcome these imbalances, developing countries are looking for a substantial increase in de- velopment financing and improved terms of lending in order to be able to adapt to and mitigate climate change in addition to meeting other interconnected develop- ment challenges. A key question here is the “capital adequacy framework” with multilateral development banks (MDBs) tasked with optimizing their frameworks to deliver increased lending, while not jeopardizing their ability to mobilize low cost resources from capital markets, which is facilitated by strong credit ratings. Studying this approach, the G20 published a report in 2022 10 that calls on MDBs to enhance their risk capacity through a combination of reforms that increase their lending capacity and strengthen their risk assessment “to align their risk tolerance with their development priorities.” This was followed by the July 2023 publication of a roadmap 11 which stated that initial measures could yield an estimated additional lending headroom of approximately US$200 billion over the next decade.

02 | THE OUTLOOK – DEVELOPMENT FINANCE ARCHITECTURE

The multilateral development banks have been called upon to increase their lending capacity and strengthen their risk assessment

This would help go some way towards bridging the financing gap: at the UN’s SDG Summit in September 2023, the United Nations Conference on Trade and Development (UNCTAD) estimated that total sustainable development investment costs range from US$5.4 trillion to US$6.4 trillion annually from 2023 to 2030. Another important way that MDBs aim to increase available development resources is the use of “blended finance”, a mechanism that allows them to lend along- side the private sector. By sharing risk, MDBs are able to leverage private capital as well as their own, thereby scaling-up the funding that can be provided. The UN’s May 2023 policy brief offers several recom- mendations. To reform and strengthen global economic governance, it calls for transforming the governance of international financial institutions. To deliver debt relief and lower the cost of sovereign borrowing, it recommends reducing debt risks and enhancing sov- ereign debt markets to support the SDGs. It calls for enhancing debt crisis resolution through a two-step process: a debt workout mechanism to support the G20 common framework and, in the medium term, a sovereign debt authority. While some of these aims are likely to take form in the medium term (such as governance reforms), interest in others (such as a sovereign debt authority) will probably fade because wealthy nations are unlikely to willingly cede sovereignty of debt that is owed to them to multi lateral organizations. This suggests that the reform of the global development financial architecture will remain a work in progress for some years to come.

8 https://sdgs.un.org/sites/default/files/2023-08/our-common-agenda-poli- cy-brief-international-finance-architecture-en.pdf 9 https://sdgs.un.org/sites/default/files/2023-08/our-common-agenda-poli- cy-brief-international-finance-architecture-en.pdf 10 https://www.dt.mef.gov.it/modules/documenti_it/rapporti_finanziari_inter- nazionali/rapporti_finanziari_internazionali/CAF-Review-Report.pdf 11 https://g20sfwg.org/

THE RESULTS 03

03 | THE RESULTS – OPERATIONAL HIGHLIGHTS

OPERATIONAL HIGHLIGHTS (IN US$MN)

By commitments (agreements signed during 2023)

2023

2022

2021

2020

2019

Since inception

By source

OCR

1,379

1,415

1,280

1,203

1,117

25,213

SCR

313

225

203

387

1,158

Grants

653

By category

Sovereign

1,293

1,228

874

1,145

780

20,048

Non-Sovereign

398

412

609

445

337

6,322

Grants

653

Sovereign operations

By sector

Agriculture

220

161

2,494

Transport & Storage 240

173

205

276

175

4,973

Water & Sanitation 61

114

1,513

Energy

2,727

Education

104

1,137

Health

778

Policy-based Lending 532

435

967

Trade Finance

193

249

137

235

275

2,550

Other

111

301

259

2,861

By region

ASP

220

266

225

272

235

4,542

ESA

226

175

140

3,666

LAC

280

143

2,991

MEC

226

469

201

368

174

4,420

WCA

341

251

203

332

149

4,428

ASP: Asia & the Pacific; ESA: Eastern & Southern Africa; LAC: Latin America & the Caribbean; MEC: Middle East, North Africa, Eastern Europe & Central Asia; WCA: West & Central Africa

03 | THE RESULTS – OPERATIONAL HIGHLIGHTS

Non-sovereign operations 2023

2022

2021

2020

2019

Since inception

By sector

Financial Institutions

171

260

441

130

2,127

Energy

147

118

999

Transport & Storage

189

Trade Finance

255

161

2,034

Other

893

By region*

ASP

1,131

ESA

960

LAC

107

973

MEC

112

178

150

127

1,794

WCA

152

187

138

1,233

Grants

By sector

Multisectoral

Agriculture

146

Humanitarian Aid

120

Health

155

Education

Energy

Water & Sanitation

Other

By region

Africa

216

Asia

251

LAC

Europe

Multiregional

141

*Does not include US$137 million in multiregional operations committed since inception

03 | THE RESULTS – OPERATIONAL HIGHLIGHTS

OPERATIONAL & FINANCIAL DATA (IN US$MN)

ORDINARY CAPITAL RESOURCES

SPECIAL CAPITAL RESOURCES

2023

2022

2021

2020 2019 2023

2022

2021

2020

Portfolio

Outstanding Loans

5,499 4,970 4,458 4,282

5,527

1,427

1,396

1,277

1,237

by Operation

Sovereign

4,048 3,586 3,167

3,021

4,432

1,427

1,397

1,277

1,237

Non-Sovereign

1,451

1,384 1,291

1,261

1,095

Disbursements

1,589

1,335

1,133

1,025

1,481

307

381

223

292

by Operation

Sovereign

1,066

906

687

656

1,135

307

381

223

292

Non-Sovereign

475

425

443

361

333

Grants

03 | THE RESULTS – OPERATIONAL HIGHLIGHTS

ORDINARY CAPITAL RESOURCES

SPECIAL CAPITAL RESOURCES

Financial highlights

2023

2022

2021

2020 2019 2023

2022

2021

2020

Selected statement of financial position data

Assets

7,732

6,232 6,085 5,919 7,224 1,867

1,804 1,732

1,666

of which

Sovereign Loans

3,935

3,357

3,040 2,842

3,704 1,332

1,287

1,244 1,203

Non-Sovereign & Trade Finance Loans

1,450 1,494 1,320 1,281

1,338

Liquidity Assets

1,982

1,016

1,358

1,439

1,836

479

436

456

428

Equity Investments

123

110

108

118

Liabilites

1,377

166

194

269

1,785

Equity

6,355 6,066 5,892 5,649 5,438 1,852

1,788

1,720 1,653

of which

Member Country Contributions

2,566 2,507

2,424 2,380 2,324 1,622

1,607

1,581

1,557

Reserves

3,789 3,559 3,468 3,269 3,114

230

182

139

Income Statement Data

Income from Development Financing Income from Liquid Investments Currency Valuation and Other Income

229

164

194

165

148

101

(51)

144

(4)

(0)

Expenses

(74)

(73)

(71)

(72)

(70)

(16)

(12)

(11)

(13)

Net Income

257

153

144

233

A full version of the financial statements is available at https://opecfund.org/publications

03 | THE RESULTS – DELIVERY BY SECTORS

NOURISHING ZIMBABWE

Agriculture has always been vulnerable to flooding and drought, but such disasters are now increas- ing in frequency and intensity as a direct result of climate change. In 2023, the OPEC Fund provided US$59 million to the agriculture and fisheries sectors in partner countries worldwide.

Zimbabwe, a landlocked country in southern Africa between the Limpopo and Zambezi rivers, has been home to humanity for at least 500,000 years. Once known as the “bread basket of Africa”, with its farms produc- ing around 10 percent of African wheat and maize in the 1970s and 1980s, the country has since fallen on troubled times. Driven by years of hyperinflation, hunger and poverty go hand in hand: Between 2017 and 2019 the number of extreme poor rose from 4.5 to 6 million people — well over a third of the population. By 2020, 7 million people needed humanitarian support, according to the UN-sponsored Zimbabwe Humanitarian Response Plan. Several recent disasters linked to extreme variations in rainfall have deepened the problems of the poorest, particularly for women, youth, children and people with disabilities living in the countryside. Fewer than 30 percent of rural households are food secure, compared to around 60 percent of urban households, according to the UN Food and Agricultural Organization (FAO). To address this shortfall, in October 2023 the OPEC Fund signed a US$15 million loan to support the Horticulture Enterprise Enhancement Project (HEEP). Co-financed for a total value of US$66.5 million with the govern- ment, private sector and the International Fund for Agriculture Develop- ment (IFAD), the project is helping to cut poverty across the national and local economies by ramping up horticulture production, creating jobs and climate-proofing public infrastructure. The HEEP project will benefit more than 70,000 smallholder farmer house- holds, including around 2,000 persons with disabilities (identified through local community organizations), as well as a further 50,000 households living in the vicinity of HEEP activities. These vulnerable people will soon enjoy improved road access to district centers, marketplaces and health and education services.

KHALED AL-ZAYER OPEC Fund Director for East and Southern Africa

Through the financing of HEEP, the OPEC Fund will significantly contrib- ute to improving the livelihoods of 71,000 smallholder farmer house- holds in Zimbabwe while further strengthening our cooperation with the country.

Zimbabwe was once known as the “bread basket of Africa”

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