The program through which Portugal provides financial guarantees of 400 million euros for investments in Portuguese-speaking African countries will be signed in July in Mozambique, said the coordinator of the Lusophone Compact, quoted by Lusa.

The Portuguese government will publicly launch the signing of the guarantee. It will be done in Mozambique from July 11 to 13 as part of the Mozambique Portugal summit, in the presence of the Portuguese prime minister, Portuguese news agency Lusa reports, citing Mateus Magala, vice president of the African Development Bank (ADB) for corporate services and human resources, on the sidelines of the ADB annual meetings in Accra.

The Lusophone Compact Guarantee Program, through which Portugal provides financial guarantees of 400 million euros for investments in Portuguese-speaking African Countries (PALOP), was approved by the ADB in December 2020, but Magala says it has only now had the approval of the rating agencies.

According to the news source, at the statutory meeting of the Compacto, which took place during the meetings, Portugal announced that "the guarantee of 400 million euros that was scrutinized by the rating agencies (...) was approved."

"It's a good thing and it's necessary," said the coordinator of the Compact for Development Finance for Portuguese-Speaking African Countries, or Lusophone Compact.

The Lusophone Compact is an initiative launched in late 2017 by ADB and the Portuguese government to finance projects launched in Lusophone countries with the financial support of ADB and with guarantees from the Portuguese state, which thus ensure that the cost of financing is lower and with less risk.

The main objective of the initiative is to increase private sector development in the six Portuguese-speaking African countries - Angola, Guinea-Bissau, Cape Verde, Mozambique, Sao Tome and Principe, and Equatorial Guinea through three instruments: risk mitigation to unlock investment, direct financing of private investment, and technical assistance to enhance private sector growth.

Magala explained that the guarantee given by Portugal allows small and medium companies to have access to financing, because "when a promoter goes to ask for investment, they look at their ability to pay, and these 400 million serve as a guarantee.

"If I have a million, I can ask for a million, but if I have $100,000 they won't give me a million. With those 400 million euros, we may be able to leverage 1.2 billion or more," he explained.

Without giving any figures, Magala also stated that since it was created, and even before the guarantee was signed, the Compact has already enabled projects worth "a few hundred" million Euros in the PALOP.