Commission cuts red tape and maximises impact of foreign aid investment

This article is brought to you in association with the European Commission.

The European Commission is increasing the efficiency and firepower of its External Action Guarantee (EAG), a key financial tool under the Global Gateway strategy that offers more affordable loans to unlock investments in partner countries around the world. In an increasingly complex geopolitical context, the EU is reaffirming its role as a global actor by strengthening its strategic and responsive capabilities.

The EAG supports initiatives such as financing green hydrogen production in Namibia, connecting Europe with Africa and Asia digitally through submarine cables, developing vaccine manufacturing facilities in Africa or fostering the absorption of carbon dioxide in Amazonian forests. With today’s proposal, the Commission will strengthen this powerful financing tool—boosting the EU’s capacity to deliver aid while better managing financial risks.

Today’s proposal seeks a more dynamic use of EU resources, without requiring additional budget. This objective can be achieved by making targeted amendments to the current rules on EU’s investments in partner countries. The new rules will enable the EU to redistribute fundings more easily between its financing instruments, so that it can maximise the efficiency of EU’s foreign aid. Specifically, more flexible rules will allow transfers of extra funds between different guarantee funds. At the same time, the EU will leverage extra room for investment by lowering the risk coverage of some European Investment Bank (EIB) loans.

In addition, a series of simplification measures are underway to reduce lengthy procedures, so that access to investment under the EAG can take place more quickly. The new measures will allow the EU’s implementing partners, such as the EIB, the European Bank for Reconstruction and Development (EBRD) and other European development financial institutions, work more efficiently by streamlining procedures. In doing so, the EU seeks to accelerate the delivery of Global Gateway impactful projects in partner countries, while also making it easier for European businesses to engage in international cooperation.

Some of the simplification measures include:

• Consolidated and streamlined reporting requirements, easing compliance and monitoring.
• Fewer negotiations thanks to the wider use of top-ups and umbrella agreements, which simplifies the contracting process and accelerates the time to market.
• Simplified blending processes, particularly in collaboration with the EIB, to accelerate project timelines.

Background

The EU’s Global Gateway strategy provides the framework for the EU’s external action. It is the EU’s positive offer to partner countries aiming to foster sustainable development and resilience through value-driven investments. Global Gateway supports the twin green and digital transitions outside the EU by mobilising public and private sector resources and strengthening strategic connectivity.

The Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI – Global Europe) Regulation, the financial basis of the Global Gateway, provides a unified financial architecture to crowd in private sector investment outside the EU, based on three pillars: the European Fund for Sustainable Development + (EFSD+), the unified budgetary guarantee – the EAG, and financial assistance.

The EFSD+ is the largest financial instrument currently in place to support investments outside the EU, under the Global Gateway initiative.

Established in June 2021, EFSD+ offers EU partner countries better access to financing options such as grants and guarantees, aiming to mobilise additional financial resources for sustainable and inclusive economic development.

Financial guarantees under EFSD+ are legally binding agreements under which the EU agrees to pay the amount due in case of financial loss that lenders might face. This encourages more investment from financial institutions and the private sector.

Through EFSD+, the EU is channelling €39.8 billion in guarantees capacity for the period 2021-2027 globally.