Opec Fund piles up financing for wheat, wind and water

November 30, 2023, 2:47 AM

Harvesting wheat in Sharkia, Egypt. The Opec Fund is backing food security projects in Egypt and Jordan – both big importers of grain — Harvesting wheat in Sharkia, Egypt. Moody's negative outlook reflects the risk that policy actions and external support may prove insufficient to prevent a debt restructuring

Musab Alomar interview
Climate financing rising fast
Focus on Egypt, Jordan, Morocco

The Opec Fund for International Development is on track to meet its pledges to increase grants and loans to climate-related projects, its Middle East and North Africa head has told AGBI.

Musab Alomar, the fund’s director of public sector operations for Mena, said climate financing made up 33 percent of all Opec Fund approvals in 2022.

Last September, the fund promised to increase climate financing to 40 percent of approvals by 2030, from about 20 percent. It set an interim target of 25 percent by 2025.

Opec members are not eligible for funding, so the focus in Mena is on developing countries such as Jordan, Egypt and Morocco, he said. The organisation has awarded more than $24 billion since it was set up in 1976.

Renewable energy projects, food and water initiatives across the region are benefiting from the rise in climate financing, according to Alomar.

“We know very well that Mena is heavily impacted by climate change,” he said. “Temperatures are estimated to be as much as 20 percent higher than the global average, and it’s the region that suffers the most from water scarcity and struggles to cope with extreme weather due to ageing infrastructure.

“We have contributed to a lot of projects that are attempting to address these issues.”

The fund has also financed work in Oman, Lebanon, Mauritania, Sudan, Djibouti and Yemen.

Its biggest Mena projects include the 200 megawatt Kom Ombo solar plant in Egypt, which received an $18 million Opec Fund loan in 2021. The plant is being built by Saudi Arabia’s Acwa Power and is set for completion next year. It will power 130,000 households, Alomar said.

Last year, the fund also provided $10 million of a $200 million syndicated trade finance facility with the International Islamic Trade Finance Corporation to facilitate food imports to Egypt. The North African country is the world’s largest wheat importer and relies heavily on global trade for essential grains.

In Jordan – also a net importer of food – the fund has provided a $100 million loan to the Emergency Food Security Project, which aims to help the country’s 10 million-plus people, including 1.3 million Syrian refugees, as commodity prices rise.

Musab Alomar and the Opec Fund headquarters in Vienna

The money will be used to build 70 grain bunkers to increase Jordan’s storage capacity for wheat and barley, and to procure more grains.

The fund has also co-financed solar and wind energy projects in Jordan, including the 200MW Baynouna solar power plant east of Amman.

Alomar added that the development organisation was in “regular discussions” with Jordan over water scarcity proposals, such as possible additional financing for the country’s massive Aqaba water carrier project.

In Oman, the fund is mainly involved in roads and highways projects as part of the sultanate’s aim to open up its mountainous terrain and develop its logistics industry, he said.

The Opec Fund supported Baynouna solar power park in Jordan

Unemployment and ageing energy infrastructure are the biggest climate challenges facing Mena, according to Alomar. Around a third of young people in the region are out of work, but he believes there is an opportunity to address both concerns together, educating people and modernising infrastructure.

At Cop28, which starts on Thursday in Dubai, the Opec Fund will announce several initiatives. These include the launch of a “nature solutions finance hub” with the Asian Development Bank and a partnership with the International Atomic Energy Agency.

In January, the fund raised $1 billion by selling its first bond, with the money earmarked for sustainable projects in food security, healthcare, infrastructure, renewables, education and employment. Further fundraising on this scale is “likely”, Alomar said.

“The reason we’re doing all of this is because investing in climate actions requires significant resources, which is a major challenge especially for developing countries.

“By increasing our financing, we can encourage our partners to focus on such projects and provide them with the necessary resources to implement them.”