Report: export credit financing dropped globally in 2020
by Ben Poole
The Export-Import Bank of the United States (EXIM) has released its 2020 Report to the US Congress on Global Export Credit Competition (Competitiveness Report), which covers the 2020 calendar year.
Fall in export financing
Total volumes of official medium and long-term (MLT) export credit support were down across the globe in 2020, including those provided by the world’s largest export credit provider, China. The COVID-19 pandemic was a prime contributor to both the noticeable drop in MLT activity by global export credit agencies (ECAs) and the significant use of short-term support and increase in working capital support to domestic industries.
In 2020, the top five countries providing official MLT export credit were China (US$18bn), France (US$12.1bn), Germany (US$8.6bn), Italy (US$8.4bn), and Korea (US$5bn). In support of US exports, EXIM authorised US$1.8bn in official MLT export credit financing.
"EXIM is on the pathway back to being a leader in export credit and providing the nature and scale of official MLT export credit needed to give US exporters and US interests a fair shot at trade opportunities in the years ahead," commented James C. Cruse, acting vice president and vice chairman of EXIM. "During a global pandemic, EXIM showed resilience and agility in responding to U.S. exporters and enacting key reforms."
Cruse noted that in 2020, EXIM implemented several reforms from the 2019 congressional reauthorisation package, including expanding support for and engagement with small businesses, renewable-energy projects, and minority- and women-owned businesses. He also noted that the report demonstrates that the US must work to keep pace with other official export credit providers who have fundamentally evolved their philosophies to focus on whole-of-government approaches to export financing.
"This reality will require continued progress on all of EXIM’s strategic priorities and a fresh look at how the steps taken in 2020 can inform the agency’s actions in the future, including examining domestic financing opportunities in support of greater U.S. exports," Cruse added.
Further findings from the EXIM report:
China’s volume of official MLT export credit financing is down but still dominant
In 2020, estimates suggest that China’s official MLT export credit support appeared to decrease from just over US$33bn in 2019 to US$18bn in 2020, but its volumes remain significantly higher than all other major providers.
OECD and non-OECD activity
The MLT export credit volumes of the ECAs of member countries of the Organisation for Economic Cooperation and Development (OECD) and major non-OECD ECAs (such as Brazil, Russia, India, China, and South Africa, known as the BRICS) were down. BRICs official MLT export credit activity decreased by approximately 50% while OECD ECA official MLT export credit activity decreased by only about 20%. Conversely, trade-related (unregulated) support offered by OECD and non-OECD countries increased, reducing the proportion of OECD Arrangement (regulated) activity to roughly 30% of total export and trade-related financing in 2020.
Global COVID-19 impact and expanded ECA roles
The COVID-19 crisis led many governments to call on their ECAs to serve as a tool to help boost economic growth while their economies struggled, for example, by directing ECAs to take steps meant to support broader export promotion in 2020 and expand programmatic offerings beyond traditional export credit support.
Emergence of sustainable finance
An emerging trend and driver in 2020 is the emergence of sustainable finance as a focus of ECA support. As governments around the world strengthen efforts to fight climate change and support companies driving innovation within the global energy transition, many ECAs made efforts to prepare for greener portfolios and to restrict new commitments for carbon-intensive projects.
Importance of a whole-of-government approach
The US export community is placing increasing importance on ECAs and other government agencies working together as part of a whole-of-government approach for individual projects in emerging and developing markets in order to unlock official financing packages involving multiple government agencies and to create more competitive offerings.
EXIM’s Competitiveness Report aggregates input from US exporters and lenders as well as EXIM’s counterparts from other countries and comprehensively analyses official export credit and trade-related finance provided last year by governments around the world. The report includes a worldwide survey of official medium- and long-term (MLT) export credit provided between 1 January and 31 December 2020, and an account of US exporter and lender experiences with EXIM during that period. The report meets the agency’s statutory requirement to report on how well EXIM was able to provide financing that is competitive with other major foreign government providers of export credit and enable US companies to be competitive in global export sales.
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